According to resource-based theory the competitive strength of a company is highly dependent on its capabilities and competences (e.g. Prahalad and Hamel, 1990, 1998; Barney, 1991; Drucker, 1994; Davenport et al., 1998; Priem and Butler, 2001). Its central tenet is that every company has unique capabilities and competencies that are valuable, difficult to imitate and cannot be transferred from firm to firm without considerable cost. An organization's strategy should be based especially on the capabilities and competencies that distinguish it from other companies.
A strategic decision maker carries out environmental surveillance. This involves activities of scanning (monitoring) and probing, where the first constitutes a routine measure of pre-defined (or at least known) information sources and their status whilst the latter should be connoted ad-hoc queries in a given decision situation (problem-motivated search).
The two modes of information acquisition introduced above both relate to Simon’s model of decision-making:
Intelligence: Searching the environment for conditions calling for decisions. Raw data is obtained, processed and examined for clues that may identify problems.
Design: Inventing, developing and analyzing possible courses of action. This involves processes to understand the problem, to generate solutions and to test solutions for feasibility.
Choice: Selecting a particular course of action from those available. A choice is made and implemented.
It states that there is no one best way to organise, any way of organising is not equally effective, and the best way to organise depends on the nature of the environment to which the organisation must relate (Galbraith, 1973).
One of the key elements of this environment is technology. It is defined by its complexity/diversity, i.e. the number of different items that must be dealt with by the organisation, its degree of uncertainty/unpredictability and the interdependence of the items involved in the work process.
As technology evolves - with the development of ITs - diversity, uncertainty and interdependence tend to increase, thus posing increasing information processing demands on the organisational structure. The challenge is then to select the structural arrangement appropriate for the information processing requirements of the task to be performed. The underlying assumption of the Contingency paradigm is that organisations with internal features best matching the demands of their environment are more effective, hence more likely to survive.
From the socio-technical point of view enterprises themselves are organisations. This includes the view that any economic activity presupposes decision making which, in turn, requires extensive information processing capabilities (Ginsberg 1987, Huber & McDaniel 1986) which comprise the preconditions, the input (data, information, knowledge), the context of decision making, the phases of decision making processes, and the implementation of decisions.
Recent organisational research begins to acknowledge the dramatic advances of information technology over the past 15-20 years. Results have revealed that computer technology does not only provide an infrastructure for communication and data management, but it also enables implementation of new organisational strategies, and it even actively stimulates the development of completely new organisational solution. This has already changed the internal structures of many existing enterprises, and has resulted in major modifications of worldwide market relationships (Morton 1991).
Organizations that choose to incur higher IT expenses presumably expect compensating benefits, such as the ability to respond more quickly and accurately to changes in their environment or to use less of other resources.