Differences in IT Effectiveness among Firms: An Empirical Investigation
Information is a critical asset and an important source for gaining competitive advantage in firms. The effective maintenance of IT becomes an important task. In order to better understand the determinants of IT effectiveness, this study employs the Industrial Organization (I/O) and Resource Based View (RBV) theories and investigates the industry effect and several major firmspecific factors in relation to their impact on firms- IT effectiveness. The data consist of a panel data of ten-year observations of firms whose IT excellence had been recognized by the CIO Magazine. The non-profit organizations were deliberately excluded, as explained later. The results showed that the effectiveness of IT management varied significantly across industries. Industry also moderated the effects of firm demographic factors such as size and age on IT effectiveness. Surprisingly, R & D investment intensity had negative correlation to IT effectiveness. For managers and practitioners, this study offers some insights for evaluation criteria and expectation for IT project success. Finally, the empirical results indicate that the sustainability of IT effectiveness appears to be short in duration.
[1] Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. Strategic Management:
Competitiveness and Globalization Concepts (5th edition), Thomson-
South Western, Mason, OH, 2002.
[2] Earl, M. J. & Scott, I. A. "What is a Chief Knowledge Officer?" Sloan
Management Review 40(2), 1999, 29-38.
[3] Karahanna, E., Straub, D. W. & Chervany, N. L. "Information
Technology Adoption across Time: Across-Sectional Comparison of
Pre-Adoption and Post-Adoption Beliefs," MIS Quarterly, 23(2), 1999,
183-213.
[4] Kohli, R. & Devaraj, S. "Measuring Information Technology Payoff: A
Meta-Analysis of Structural Variables in Firm-Level Empirical
Research," Information Systems Research, 14(2), 2003, 127-145.
[5] Osei-Bryson, K. & Ko, M. "Exploring the Relationship Between
Information Technology Investments and Firm Performance Using
Regression Splines Analysis," Information & Management, 42(1),
2004, 1-13.
[6] Wade, M. & Hulland, J. "The Resource-Based View and Information
Systems Research: Review, Extension, and Suggestions for Future
Studies," MIS Quarterly, 28(1), 2004, 107-142.
[7] Hawawini, G., Subramanian, V. & Verdin, P. "Is Performance Driven by
Industry or Firm-Specific Factors? A New Look At the Evidence,"
Strategic Management Journal, 24(1), 2003, 1-16.
[8] Chen, M. & Hambrick, "Speed, Stealth, and Selective Attack: How
Small Firms Differ from Large Firms in Competitive Behavior,"
Academy of Management Journal, 38(2), 1995, 453-482.
[9] Hendricks, K. B. & Singhal, V. R. "Firm Characteristics, Total Quality
Management and Financial Performance," Journal of Operations
Management, 19(3), 2001, 269-285.
[10] Kotabe, M., Srinivasan, S. S. & Aulakh, P. S. "Multinationality and Firm
Performance: The Moderating Role of R&D and Marketing
Capabilities," Journal of International Business Studies, 33(1), 2002,
79-97.
[11] Bhattacherjee, A. Hikmet, N., Menachemi, N., Kayhan, V. O., & Brooks,
R. G. "The Differential Performance Effects of Healthcare Information
Technology Adoption," Information Systems Management, 24(1), 2007,
5-14.
[12] Domes, M. E. & Jarmin, R. S. & Klimek, S. D. "Information Technology
Investment and Firm Performance in US Retail Trade," Economics of
Innovation & New Technology, 13(7), 2004, 595-613.
[13] Quan, J., Hu, Q. & Hart, P. J. "Information Technology Investment and
Firms- Performance - A Duopoly Perspective," Journal of
Management Information Systems, 20(3), 2003, 121-158.
[14] Barney, J. "Firm Resources and Sustained Competitive Advantages,"
Journal of Management, 17(1), 1991 99-120.
[15] Conner, K. R. "A Historical Comparison of Resource-Based Theory and
Five Schools of Thought within Industrial Organization Economics: Do
We Have a New Theory of the Firm?" Journal of Management, 17(1),
1991, 121-154
[16] Porter, M. E. "How Competitive Forces Shape Strategies," Harvard
Business Review, 57(2), 1979, 137-145.
[17] Kagan, A., Lau, K. & Nusgart, K. R. "Information Systems Usage within
Small Business Firms," Entrepreneurship Theory and Practice, 14(3),
1990, 25-38.
[18] Fisher, M. L. (1996). "What is the Right Supply Chain for your
Product?" Harvard Business Review, 75, 1996, 105-116.
[19] Mahmood, M. A & Mann, G. J. "Information Technology Investments
and Organizational Productivity and Performance: An Empirical
Investigation," Journal of Organizational Computing & Electronic
Commerce, 15(3), 2005, 185-202.
[20] Matteucci, N., O'Mahony, M., Robinson, C. & Zwick, T. "Productivity,
workplace performance and ICT: Industry and Firm-Level Evidence for
Europe and the US," Scottish Journal of Political Economy, 52(3), 2005,
359-386.
[21] Zhu, K. & Kraemer, K. L. "Post-Adoption Variations in Usage and
Value of E-Business by Organizations," Information System Research,
16(1), 2005, 61-84.
[22] Wernerfelt, B. "A Resource-Based View of the Firm," Strategic
Management Journal, 5(2), 1984, 171-180.
[23] Coombs, J. E. & Bierly, P. E. "Measuring Technological Capability and
Performance," R&D Management, 36(4), 2006, 421-438.
[24] Cohen, W. & Levinthal, D. "Absorptive Capacity: A New Perspective
on Learning and Innovation," Administrative Science Quarterly, 35,
1990, 128-152.
[25] Ravichandran, T. & Lertwongsatien, C. "Effects of Information Systems
Resources and Capabilities on Firm Performance: A Resource-Based
Perspective," Journal of Management Information Systems, 21(4), 2005,
237-276.
[26] Barua, A., Konana, P., Whinston, A. B. & Yin. F. "An Empirical
Investigation of Net-Enabled Business Value," MIS Quarterly, 28(4),
2004, 585-620.
[27] Bruque-Camara, S., Vargas-Sanchez, A. & Hernandez-Ortiz, M. J.
"Organizational Determinants of IT Adoptions in the Pharmaceutical
Distribution Sector," European Journal of Information Systems, 13(2),
2004, 133-146.
[28] Zhu, K., Kraemer, K. L., Xu, S. & Dedrick, J. "Information Technology
Payoff in E-Business Environment: An International Perspective on
Value Creation of E-Business in the Financial Services Industry,"
Journal of Management Information Systems, 21(1), 2004, 17-54.
[29] Prescott, J. E., Kohli, A. K. & Venkataraman, N. "The Market Share-
Profitability Relationship: An Empirical Assessment of Major Assertions
and Contradictions," Strategic Management Journal, 7(4), 1986, 377-
394.
[30] Pil, F. K. & Hoiweg, M. "Exploring Scale: The Advantage of Thinking
Small," The McKinsey Quarterly, 44(2), 2003, 33-39.
[31] Lee, J. "Discriminant Analysis of Technology Adoption Behavior: A
Case of Internet Technologies in Small Businesses," Journal of
Computer Information Systems, 44(4), 2004, 57-66.
[32] Harrison, D., Mykytyn, P. P. & Riemenschneider, C. K. "Executive
Decisions about Adoption of Information Technology in Small
Businesses: Theory and Empirical Tests," Information Systems
Research, 8(2), 1997, 171-195.
[33] Lewis, L. F., Bajwa, D. & Pervan, G. "An Empirical Assessment of the
Assimilation Patterns and the Benefits of Collaborative Information
Technologies," Journal of Computer Information Systems, 44(4), 2004,
16-26.
[34] Tanriverdi, H. "Performance Effects of Information Technology
Synergies in Multibusiness Firms," MIS Quarterly, 30(1), 2006, 57-77.
[35] Huergo, E. & Jaumandreu, J. "How Does Probability of Innovation
Change with Firm Age?" Small Business Economics, 22(3/4), 2004,
193-207.
[36] BarNir, A., Gallaugher, J. M. & Auger, P. "Business Process
Digitalization, Strategy, and the Impact of Firm Age and Size: The Case
of the Magazine Publishing Industry," Journal of Business Venturing,
18(6), 2003, 789-814.
[37] Johansson, D. "Is Small Beautiful? The Case of the Swedish IT
Industry," Entrepreneurship & Regional Development, 16(4), 2004, 271-
287.
[38] Nelson, R. R. "Why Do Firms Differ, and How Does It Matter?"
Strategic Management Journal, Winter Special Issue, 1991, 61-74.
[39] Jensen, M. "Agency Costs of Free Cash Flow, Corporate Finance, and
Takeovers," American Economic Review, 76 (2), 1986, 323-330.
[40] Rumelt, R. P. "How Much Does Industry Matter?" Strategic
Management Journal, 12(3), 1991, 167-185.
[41] McConnell, J. & Muscarella, C. "Corporate Capital Expenditure
Decisions and the Market Value of the Firm," Journal of Financial
Economics, 14 (3), 1985, 399-423.
[42] Yin, X. & Ehud, Z. "Economic Consequences of Limited Technology
Transferability," Australian Economic Papers, 37 (1), 1998, 22-36.
[43] Eisenhardt, K. M. & Martin, J. A. "Dynamic Capabilities: What Are
They?" Strategic Management Journal, 21(10/11), 2000, 1105-1121.
[44] Gupta, A. K. & Govindarajan, V. "Knowledge Management's Social
Dimension: Lessons from Nucor Steel," MIT Sloan Management
Review, 2000, 42(1), 71-80.
[1] Hitt, M. A., Ireland, R. D. & Hoskisson, R. E. Strategic Management:
Competitiveness and Globalization Concepts (5th edition), Thomson-
South Western, Mason, OH, 2002.
[2] Earl, M. J. & Scott, I. A. "What is a Chief Knowledge Officer?" Sloan
Management Review 40(2), 1999, 29-38.
[3] Karahanna, E., Straub, D. W. & Chervany, N. L. "Information
Technology Adoption across Time: Across-Sectional Comparison of
Pre-Adoption and Post-Adoption Beliefs," MIS Quarterly, 23(2), 1999,
183-213.
[4] Kohli, R. & Devaraj, S. "Measuring Information Technology Payoff: A
Meta-Analysis of Structural Variables in Firm-Level Empirical
Research," Information Systems Research, 14(2), 2003, 127-145.
[5] Osei-Bryson, K. & Ko, M. "Exploring the Relationship Between
Information Technology Investments and Firm Performance Using
Regression Splines Analysis," Information & Management, 42(1),
2004, 1-13.
[6] Wade, M. & Hulland, J. "The Resource-Based View and Information
Systems Research: Review, Extension, and Suggestions for Future
Studies," MIS Quarterly, 28(1), 2004, 107-142.
[7] Hawawini, G., Subramanian, V. & Verdin, P. "Is Performance Driven by
Industry or Firm-Specific Factors? A New Look At the Evidence,"
Strategic Management Journal, 24(1), 2003, 1-16.
[8] Chen, M. & Hambrick, "Speed, Stealth, and Selective Attack: How
Small Firms Differ from Large Firms in Competitive Behavior,"
Academy of Management Journal, 38(2), 1995, 453-482.
[9] Hendricks, K. B. & Singhal, V. R. "Firm Characteristics, Total Quality
Management and Financial Performance," Journal of Operations
Management, 19(3), 2001, 269-285.
[10] Kotabe, M., Srinivasan, S. S. & Aulakh, P. S. "Multinationality and Firm
Performance: The Moderating Role of R&D and Marketing
Capabilities," Journal of International Business Studies, 33(1), 2002,
79-97.
[11] Bhattacherjee, A. Hikmet, N., Menachemi, N., Kayhan, V. O., & Brooks,
R. G. "The Differential Performance Effects of Healthcare Information
Technology Adoption," Information Systems Management, 24(1), 2007,
5-14.
[12] Domes, M. E. & Jarmin, R. S. & Klimek, S. D. "Information Technology
Investment and Firm Performance in US Retail Trade," Economics of
Innovation & New Technology, 13(7), 2004, 595-613.
[13] Quan, J., Hu, Q. & Hart, P. J. "Information Technology Investment and
Firms- Performance - A Duopoly Perspective," Journal of
Management Information Systems, 20(3), 2003, 121-158.
[14] Barney, J. "Firm Resources and Sustained Competitive Advantages,"
Journal of Management, 17(1), 1991 99-120.
[15] Conner, K. R. "A Historical Comparison of Resource-Based Theory and
Five Schools of Thought within Industrial Organization Economics: Do
We Have a New Theory of the Firm?" Journal of Management, 17(1),
1991, 121-154
[16] Porter, M. E. "How Competitive Forces Shape Strategies," Harvard
Business Review, 57(2), 1979, 137-145.
[17] Kagan, A., Lau, K. & Nusgart, K. R. "Information Systems Usage within
Small Business Firms," Entrepreneurship Theory and Practice, 14(3),
1990, 25-38.
[18] Fisher, M. L. (1996). "What is the Right Supply Chain for your
Product?" Harvard Business Review, 75, 1996, 105-116.
[19] Mahmood, M. A & Mann, G. J. "Information Technology Investments
and Organizational Productivity and Performance: An Empirical
Investigation," Journal of Organizational Computing & Electronic
Commerce, 15(3), 2005, 185-202.
[20] Matteucci, N., O'Mahony, M., Robinson, C. & Zwick, T. "Productivity,
workplace performance and ICT: Industry and Firm-Level Evidence for
Europe and the US," Scottish Journal of Political Economy, 52(3), 2005,
359-386.
[21] Zhu, K. & Kraemer, K. L. "Post-Adoption Variations in Usage and
Value of E-Business by Organizations," Information System Research,
16(1), 2005, 61-84.
[22] Wernerfelt, B. "A Resource-Based View of the Firm," Strategic
Management Journal, 5(2), 1984, 171-180.
[23] Coombs, J. E. & Bierly, P. E. "Measuring Technological Capability and
Performance," R&D Management, 36(4), 2006, 421-438.
[24] Cohen, W. & Levinthal, D. "Absorptive Capacity: A New Perspective
on Learning and Innovation," Administrative Science Quarterly, 35,
1990, 128-152.
[25] Ravichandran, T. & Lertwongsatien, C. "Effects of Information Systems
Resources and Capabilities on Firm Performance: A Resource-Based
Perspective," Journal of Management Information Systems, 21(4), 2005,
237-276.
[26] Barua, A., Konana, P., Whinston, A. B. & Yin. F. "An Empirical
Investigation of Net-Enabled Business Value," MIS Quarterly, 28(4),
2004, 585-620.
[27] Bruque-Camara, S., Vargas-Sanchez, A. & Hernandez-Ortiz, M. J.
"Organizational Determinants of IT Adoptions in the Pharmaceutical
Distribution Sector," European Journal of Information Systems, 13(2),
2004, 133-146.
[28] Zhu, K., Kraemer, K. L., Xu, S. & Dedrick, J. "Information Technology
Payoff in E-Business Environment: An International Perspective on
Value Creation of E-Business in the Financial Services Industry,"
Journal of Management Information Systems, 21(1), 2004, 17-54.
[29] Prescott, J. E., Kohli, A. K. & Venkataraman, N. "The Market Share-
Profitability Relationship: An Empirical Assessment of Major Assertions
and Contradictions," Strategic Management Journal, 7(4), 1986, 377-
394.
[30] Pil, F. K. & Hoiweg, M. "Exploring Scale: The Advantage of Thinking
Small," The McKinsey Quarterly, 44(2), 2003, 33-39.
[31] Lee, J. "Discriminant Analysis of Technology Adoption Behavior: A
Case of Internet Technologies in Small Businesses," Journal of
Computer Information Systems, 44(4), 2004, 57-66.
[32] Harrison, D., Mykytyn, P. P. & Riemenschneider, C. K. "Executive
Decisions about Adoption of Information Technology in Small
Businesses: Theory and Empirical Tests," Information Systems
Research, 8(2), 1997, 171-195.
[33] Lewis, L. F., Bajwa, D. & Pervan, G. "An Empirical Assessment of the
Assimilation Patterns and the Benefits of Collaborative Information
Technologies," Journal of Computer Information Systems, 44(4), 2004,
16-26.
[34] Tanriverdi, H. "Performance Effects of Information Technology
Synergies in Multibusiness Firms," MIS Quarterly, 30(1), 2006, 57-77.
[35] Huergo, E. & Jaumandreu, J. "How Does Probability of Innovation
Change with Firm Age?" Small Business Economics, 22(3/4), 2004,
193-207.
[36] BarNir, A., Gallaugher, J. M. & Auger, P. "Business Process
Digitalization, Strategy, and the Impact of Firm Age and Size: The Case
of the Magazine Publishing Industry," Journal of Business Venturing,
18(6), 2003, 789-814.
[37] Johansson, D. "Is Small Beautiful? The Case of the Swedish IT
Industry," Entrepreneurship & Regional Development, 16(4), 2004, 271-
287.
[38] Nelson, R. R. "Why Do Firms Differ, and How Does It Matter?"
Strategic Management Journal, Winter Special Issue, 1991, 61-74.
[39] Jensen, M. "Agency Costs of Free Cash Flow, Corporate Finance, and
Takeovers," American Economic Review, 76 (2), 1986, 323-330.
[40] Rumelt, R. P. "How Much Does Industry Matter?" Strategic
Management Journal, 12(3), 1991, 167-185.
[41] McConnell, J. & Muscarella, C. "Corporate Capital Expenditure
Decisions and the Market Value of the Firm," Journal of Financial
Economics, 14 (3), 1985, 399-423.
[42] Yin, X. & Ehud, Z. "Economic Consequences of Limited Technology
Transferability," Australian Economic Papers, 37 (1), 1998, 22-36.
[43] Eisenhardt, K. M. & Martin, J. A. "Dynamic Capabilities: What Are
They?" Strategic Management Journal, 21(10/11), 2000, 1105-1121.
[44] Gupta, A. K. & Govindarajan, V. "Knowledge Management's Social
Dimension: Lessons from Nucor Steel," MIT Sloan Management
Review, 2000, 42(1), 71-80.
@article{"International Journal of Business, Human and Social Sciences:54783", author = "Crystal X. Jiang and Tess Han and George J. Titus and Matthew J. Liberatore", title = "Differences in IT Effectiveness among Firms: An Empirical Investigation", abstract = "Information is a critical asset and an important source for gaining competitive advantage in firms. The effective maintenance of IT becomes an important task. In order to better understand the determinants of IT effectiveness, this study employs the Industrial Organization (I/O) and Resource Based View (RBV) theories and investigates the industry effect and several major firmspecific factors in relation to their impact on firms- IT effectiveness. The data consist of a panel data of ten-year observations of firms whose IT excellence had been recognized by the CIO Magazine. The non-profit organizations were deliberately excluded, as explained later. The results showed that the effectiveness of IT management varied significantly across industries. Industry also moderated the effects of firm demographic factors such as size and age on IT effectiveness. Surprisingly, R & D investment intensity had negative correlation to IT effectiveness. For managers and practitioners, this study offers some insights for evaluation criteria and expectation for IT project success. Finally, the empirical results indicate that the sustainability of IT effectiveness appears to be short in duration.
", keywords = "Firm effect, industry effect, IT effectiveness, sustained IT effectiveness.", volume = "4", number = "7", pages = "1650-10", }
