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dc.contributor.authorAral, Sinan-
dc.contributor.authorWeill, Peter-
dc.date.accessioned2008-11-10T21:37:47Z-
dc.date.available2008-11-10T21:37:47Z-
dc.date.issued2007-09-
dc.identifier.citationVol. 18, No. 5, September-October 2007, pp. 763-780en
dc.identifier.urihttp://hdl.handle.net/2451/27761-
dc.description.abstractDespite evidence of a positive relationship between information technology (IT) investments and firm performance, results still vary across firms and performance measures. We explore two organizational explanations for this variation: differences in firms’ IT investment allocations and their IT capabilities. We develop a theoretical model of IT resources, defined as the combination of specific IT assets and organizational IT capabilities. We argue that investments into different IT assets are guided by firms’ strategies (e.g., cost leadership or innovation) and deliver value along performance dimensions consistent with their strategic purpose. We hypothesize that firms derive additional value per IT dollar through a mutually reinforcing system of organizational IT capabilities built on complementary practices and competencies. Empirically, we test the impact of IT assets, IT capabilities, and their combination on four dimensions of firm performance: market valuation, profitability, cost, and innovation. Our results—based on data on IT investment allocations and IT capabilities in 147 U.S. firms from 1999 to 2002—demonstrate that IT investment allocations and organizational IT capabilities drive differences in firm performance. Firms’ total IT investment is not associated with performance, but investments in specific IT assets explain performance differences along dimensions consistent with their strategic purpose. In addition, a system of organizational IT capabilities strengthens the performance effects of IT assets and broadens their impact beyond their intended purpose. The results help explain variance in returns to IT capital across firms and expand our understanding of alignment between IT and organizations. We illustrate our findings with examples from a case study of 7-Eleven Japanen
dc.description.sponsorshipNYU, Stern School of Business, IOMS department, Center for Digital Economy Researchen
dc.format.extent187093 bytes-
dc.format.mimetypeapplication/pdf-
dc.language.isoen_USen
dc.publisherOrganization Scienceen
dc.relation.ispartofseriesCeDER-PP-2007-12en
dc.subjectBusiness value of information technologyen
dc.subjectinformation technology assetsen
dc.subjectresource-based theoryen
dc.subjectcomplementaritiesen
dc.subjectIT infrastructureen
dc.subjectIT capabilitiesen
dc.subjectIT practicesen
dc.subjectfirm performanceen
dc.titleIT Assets, Organizational Capabilities, and Firm Performance: How Resource Allocations and Organizational Differences Explain Performance Variationen
dc.typeArticleen
Appears in Collections:CeDER Published Papers

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