IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v24y1996i4p399-412.html
   My bibliography  Save this article

Refocusing where and how IT value is realized: An empirical investigation

Author

Listed:
  • Rai, A.
  • Patnayakuni, R.
  • Patnayakuni, N.

Abstract

This study examines the direct and interaction effects of IT investments and IS department efficiency on different facets of firm performance. Specifically, measures for financial, sales, and intermediate firm performance are considered. IS budget is used as a measure of IT investment; asset turnover and labor productivity are used as intermediate performance measures; and sales per IS employee and income per IS employee are used as measures of IS department efficiency. Secondary sources were used to construct a database of 210 firms, which was used for statistical analysis. Our results suggest that; (i) IS budget is not related to financial firm performance, but is positively related to sales performance; (ii) The results for intermediate performance were mixed; (iii) IS efficiency had no impact on the relationship between IS budget and firm performance measures, except market share. Analysis of the results suggest that the effect of IT investments should be assessed simultaneously on both aggregate and intermediate performance. Furthermore, IS departments with 'high' efficiency may be unable to better leverage each additional dollar spent on IT. This has significant implications for organizations considering radical downsizing and elimination of their IS departments, as in the process they could reduce their conversion effectiveness.

Suggested Citation

  • Rai, A. & Patnayakuni, R. & Patnayakuni, N., 1996. "Refocusing where and how IT value is realized: An empirical investigation," Omega, Elsevier, vol. 24(4), pages 399-412, August.
    • Handle: RePEc:eee:jomega:v:24:y:1996:i:4:p:399-412
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/0305-0483(96)00009-6
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Peter Weill, 1992. "The Relationship Between Investment in Information Technology and Firm Performance: A Study of the Valve Manufacturing Sector," Information Systems Research, INFORMS, vol. 3(4), pages 307-333, December.
    2. Brian L. Dos Santos & Ken Peffers, 1995. "Rewards to Investors in Innovative Information Technology Applications: First Movers and Early Followers in ATMs," Organization Science, INFORMS, vol. 6(3), pages 241-259, June.
    3. Gold, Bela, 1987. "Technological innovation and economic performance," Omega, Elsevier, vol. 15(5), pages 361-370.
    4. Eilon, Samuel, 1992. "Key ratios for corporate performance," Omega, Elsevier, vol. 20(3), pages 337-343, May.
    5. Sidney E. Harris & Joseph L. Katz, 1991. "Organizational Performance and Information Technology Investment Intensity in the Insurance Industry," Organization Science, INFORMS, vol. 2(3), pages 263-295, August.
    6. Henry C. Lucas, Jr., 1975. "Performance and the Use of an Information System," Management Science, INFORMS, vol. 21(8), pages 908-919, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sriram, Ven & Stump, Rodney, 2004. "Information technology investments in purchasing: an empirical investigation of communications, relationship and performance outcomes," Omega, Elsevier, vol. 32(1), pages 41-55, February.
    2. Yves-C. Gagnon & Hélène Sicotte & Elisabeth Posada, 2000. "Impact of SME Manager's Behavior on the Adoption of Technology," Entrepreneurship Theory and Practice, , vol. 25(2), pages 43-58, December.
    3. Polák, Petr, 2017. "The productivity paradox: A meta-analysis," Information Economics and Policy, Elsevier, vol. 38(C), pages 38-54.
    4. Rajiv Kohli & Sarv Devaraj, 2003. "Measuring Information Technology Payoff: A Meta-Analysis of Structural Variables in Firm-Level Empirical Research," Information Systems Research, INFORMS, vol. 14(2), pages 127-145, June.
    5. Matt E. Thatcher & David E. Pingry, 2004. "An Economic Model of Product Quality and IT Value," Information Systems Research, INFORMS, vol. 15(3), pages 268-286, September.
    6. Wahyu Agus Winarno & Bambang Tjahjadi, 2017. "The Moderating Effect of Industry Environments on the Relationship between IT Asset Portfolios, Efficiency and Innovation in the ERP Context," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 3-15.
    7. Vincent J. Shea & Kevin E. Dow & Alain Yee-Loong Chong & Eric W. T. Ngai, 0. "An examination of the long-term business value of investments in information technology," Information Systems Frontiers, Springer, vol. 0, pages 1-15.
    8. Winarno, Wahyu Agus & Tjahjadi, Bambang & Irwanto, Andry, 2021. "Time Lag Effects of IT Investment on Firm Performance: Evidence from Indonesia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 89-101.
    9. Stefan Schweikl & Robert Obermaier, 2020. "Lessons from three decades of IT productivity research: towards a better understanding of IT-induced productivity effects," Management Review Quarterly, Springer, vol. 70(4), pages 461-507, November.
    10. Vincent J. Shea & Kevin E. Dow & Alain Yee-Loong Chong & Eric W. T. Ngai, 2019. "An examination of the long-term business value of investments in information technology," Information Systems Frontiers, Springer, vol. 21(1), pages 213-227, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Katherine A. Duliba & Robert J. Kauffman & Henry C. Lucas, 2001. "Appropriating Value from Computerized Reservation System Ownership in the Airline Industry," Organization Science, INFORMS, vol. 12(6), pages 702-728, December.
    2. Hilal Atasoy & Rajiv D. Banker & Paul A. Pavlou, 2016. "On the Longitudinal Effects of IT Use on Firm-Level Employment," Information Systems Research, INFORMS, vol. 27(1), pages 6-26, March.
    3. Byrd, T. A. & Marshall, T. E., 1997. "Relating information technology investment to organizational performance: a causal model analysis," Omega, Elsevier, vol. 25(1), pages 43-56, February.
    4. Ricardo A. Santa & Alejandro Acosta & Silvio Borrero & Annibal Scavarda, 2020. "Corporate, operational, and information systems strategies: Alignment and firm performance," Estudios Gerenciales, Universidad Icesi, vol. 36(157), pages 454-464, December.
    5. Scott, Susan V. & Van Reenen, John & Zachariadis, Markos, 2017. "The long-term effect of digital innovation on bank performance: An empirical study of SWIFT adoption in financial services," Research Policy, Elsevier, vol. 46(5), pages 984-1004.
    6. Mohamad, Amri & Zainuddin, Yuserrie & Alam, Nafis & Kendall, Graham, 2017. "Does decentralized decision making increase company performance through its Information Technology infrastructure investment?," International Journal of Accounting Information Systems, Elsevier, vol. 27(C), pages 1-15.
    7. Sinan Aral & Peter Weill, 2007. "IT Assets, Organizational Capabilities, and Firm Performance: How Resource Allocations and Organizational Differences Explain Performance Variation," Organization Science, INFORMS, vol. 18(5), pages 763-780, October.
    8. Detmar Straub & Peter Weill & Kathy S. Schwaig, 2008. "Strategic dependence on the IT resource and outsourcing: A test of the strategic control model," Information Systems Frontiers, Springer, vol. 10(2), pages 195-210, April.
    9. Shafer, Scott M. & Byrd, Terry A., 2000. "A framework for measuring the efficiency of organizational investments in information technology using data envelopment analysis," Omega, Elsevier, vol. 28(2), pages 125-141, April.
    10. Thompson SH, Teo & Poh Kam, Wong, 1998. "An Empirical Study of the Performance Impact of Computerization in the Retail Industry," Omega, Elsevier, vol. 26(5), pages 611-621, October.
    11. Venugopal Gopalakrishna-Remani & Robert Paul Jones & Kerri M. Camp, 2019. "Levels of EMR Adoption in U.S. Hospitals: An Empirical Examination of Absorptive Capacity, Institutional Pressures, Top Management Beliefs, and Participation," Information Systems Frontiers, Springer, vol. 21(6), pages 1325-1344, December.
    12. Rajiv Kohli & Sarv Devaraj, 2003. "Measuring Information Technology Payoff: A Meta-Analysis of Structural Variables in Firm-Level Empirical Research," Information Systems Research, INFORMS, vol. 14(2), pages 127-145, June.
    13. Ross, Jeanne W. & Beath, Cynthia Mathis, 1944- & Goodhue, Dale L., 1994. "Generating value from infrastructure investments : an examination of client-server teams," Working papers 3674-94., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    14. Sujin Park & Ali Tafti & Galit Shmueli, 2024. "Transporting Causal Effects Across Populations Using Structural Causal Modeling: An Illustration to Work-from-Home Productivity," Information Systems Research, INFORMS, vol. 35(2), pages 686-705, June.
    15. José Benítez-Amado & María Nieves Pérez-Aróstegui, 2007. "A New Classification Of It Resources: A Research Agenda Under The Complementarity Of The Rbv," FEG Working Paper Series 07/06, Faculty of Economics and Business (University of Granada).
    16. Jeffrey L. Furman & Florenta Teodoridis, 2020. "Automation, Research Technology, and Researchers’ Trajectories: Evidence from Computer Science and Electrical Engineering," Organization Science, INFORMS, vol. 31(2), pages 330-354, March.
    17. Martínez-Caro, Eva & Cegarra-Navarro, Juan Gabriel & Alfonso-Ruiz, Francisco Javier, 2020. "Digital technologies and firm performance: The role of digital organisational culture," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
    18. Huang, Jiashun & Li, Weiping & Guo, Lijia & Hall, Jim W., 2022. "Information and communications technology infrastructure and firm growth: An empirical study of China's cities," Telecommunications Policy, Elsevier, vol. 46(3).
    19. Singh, Inderjeet & Lila, Anshu, 2012. "Emerging Structure of Rajasthan Economy in India," MPRA Paper 43522, University Library of Munich, Germany, revised 25 Dec 2012.
    20. H Seol & H Lee & S Kim & Y Park, 2008. "The impact of information technology on organizational efficiency in public services: a DEA-based DT approach," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(2), pages 231-238, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:24:y:1996:i:4:p:399-412. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.