INVESTMENT IN INFORMATION TECHNOLOGY AND ORGANIZATIONAL PERFORMANCE

Abstract

Information technology (IT) is essential to many businesses, but there are few guidelines for determining the adequate level of investment in IT. The purpose of this paper is to further understanding of the mechanism of IT investment. Previous studies on IT investment are briefly presented. The authors performed six-mini case studies of large companies in five different industries; these studies addressed the questions of how firms define IT and how they manage their investment in IT. Our goal was to formulate a model of the relationship between IT investment and organizational performance. We present the model and pose questions for investigating this important relationship more closely. Findings of interest relate to the definition of IT, the importance of political considerations, the concept of an industry-based threshold investment, the conversion effectiveness of IT investment, and the concept of productive capacity. The most important finding relates to the separation of different types of IT investment and their logical matching to particular performance measures.