Operational linkage between diverse dimensions of information technology investments and multifaceted aspects of a firm's economic performance

Abstract

A number of studies have been performed with the aim of examining the impact of information technology (IT) on the performance of firms and have arrived at multifaceted conclusions that have sometimes been conflicting. Very few studies have been performed with the objective of understanding investment in IT and the diverse dimensions of organizational performance with an attempt at using aggregated measures. An exploratory attempt has been made in this paper into understanding the linkage between IT and a firm's economic performance using aggregated measures of accounting-based and market-based performance while considering intervening variables such as firm size, capital intensity, research and development intensity and advertising intensity. The results indicate that various dimensions of IT are significantly and positively linked to a firm's performance irrespective of the different criteria of performance measures. The results also show that IT has a significant effect on aggregated composite measures of accounting-based and market-based performances.