Performance Consequences of Information Technology Investments: Implications of Emphasizing New or Current Information Technologies

Senior executives seek investments in information technology (IT) initiatives that enhance the performance of their firms. They frequently must decide whether to emphasize the adoption of new IT (ENIT) or the maintenance and refinement of current IT (ECIT). This research examines how the combination of ENIT and ECIT with the firm’s business strategy affects firm performance at varying levels of organizational commitment to IT (OCIT). Using the resource-based view, we argue that a firm can benefit from new IT or current IT to a greater extent when it possesses the resources needed for exploration (as is more likely for firms with a Prospector strategy) or exploitation (as is more likely for firms with a Defender strategy), respectively, with these effects increasing as the firm’s OCIT increases. The results, based on an eight-year panel data set developed from multiple secondary sources, support our argument that firms are not homogeneous in the benefits they reap from ENIT and ECIT. Thus, a joint consideration of the core business strategy and OCIT in a firm provides insights into whether the necessary organizational resources are available and leveraged to effectively reap benefits from ENIT or ECIT. For Defenders emphasizing new IT, the marginal benefit decreases with an increase in OCIT, but for Defenders emphasizing current IT, the marginal benefit increases with an increase in OCIT. By contrast, for Prospectors emphasizing new IT, the marginal benefit increases with an increase in OCIT, but for Prospectors emphasizing current IT, the marginal benefit decreases with an increase in OCIT. Theoretical and practical implications of these results are discussed.

The online appendices are available at https://doi.org/10.1287/isre.2018.0798.