Date of Award
Doctor of Philosophy
Theses & dissertations (College of Business)
Business and Technology
Joey F. George
The business value of information technology (IT), research on testing and showing the positive association between IT and firm performance, has been a critical issue in the information systems (IS) area. The topic provides the reason why companies need to invest in IT systems and motivate employees to use the systems. Additionally, prior studies have suggested several mixed and inconsistent results of whether IT improves firm performance. It is, therefore, important to examine the role of IT in improving firms’ competitiveness. This dissertation explains the role of IT in increasing the competitiveness of firms based on two theoretical lenses: competitive dynamics theory and the resource-based view. This dissertation includes three essays, which have separate research questions and empirical results. The three research questions were suggested based on two theories and were tested using econometrics and text analyses. Through the three essays, this dissertation has answered the following research questions: (1) How IT capability contributes to the supply chain leanness and the profitability of firms? (2) How IT capability and investment support the competitive actions of firms and subsequently improve firm performance? and (3) How IT capability supports the financial performance of firms?
The first essay has examined how IT capability enhances the supply chain leanness (i.e. a type of competitive actions) and firm performance. Especially, IT capability gap, which captures the difference between a focal firm’s IT capability and a rival firm’s IT capability, has been formulated. How IT capability gap improves firm performance has been tested drawing upon the competitive dynamics literature as well as the resource-based view. InformationWeek 500 lists were utilized to identify a firm’s IT capability. Empirical leanness and firm performance were pooled from Compustat. A total of 282 firm-year observations from 2002-2008 were analyzed. The essay demonstrates the positive influence of IT capability gap on the leanness of firms and the mediating effect of the leanness of firms between IT capability gap and financial performance of a firm. According to the result of this essay, measuring the difference between two competing firms’ IT capabilities is critical to show a firm’s superior financial performance through improved leanness.
The second essay has examined the impact of a firm’s IT (i.e., IT capability and IT investment) on its competitive actions drawing upon competitive dynamics literature. This study has sought to answer how competitive actions are associated with a firm’s profitability. In this essay, IT capability was operationalized based on a text-analysis approach. IT investment data were pooled from CI Technology Database. This research makes a first step towards developing a comprehensive view on how IT enhances firm profitability by supporting the exercise of competitive actions based on a large panel data set. Specifically, the results of this essay has supported that IT capability and IT investment increase the competitive actions of a firm. Additionally, competitive actions enhance firm profitability. The results emphasize the need of considering competitive actions as a key factor to examine the value of IT in developing a firm’s competitiveness. In addition, this work complements prior studies, which have focused on the relationship among IT, organizational capabilities, and firm performance.
The third essay presents a conceptual replication on three influential MIS Quarterly papers, which have investigated the association between IT capability and firm performance. Bharadwaj (2000) and Santhanam and Hartono (2003) have confirmed the positive impact of IT capability on firm performance, but Chae et al. (2014) have suggested no significant relationship between IT capability and performance. Understanding what produces contradictory results is a timely and critical issue because a large body of the business value of IS research has employed IT capability as a key construct. Chae et al. (2014) investigated the link between IT capability and firm performance by comparing the performance of an IT leader and that of single matched group from 2001-2004. On the other hand, this study examined the relationship by building multiple comparison groups, which include all firms in the same industry. As a result, this essay indicates that IT capability has a significant impact on a firm’s financial performance contrary to Chae et al. (2014).
IT still has a critical role in enabling firms’ financial performance according to the results of the three essays. IT capability has a positive impact on firm performance, but the relationship is fully mediated by the competitive actions, such as supply chain leanness and the number of competitive actions. In addition, the IT leading groups realize superior financial performance over their rival firms. The results of this dissertation are the paradigmatic examples for showing the relationship of IT with financial performance with the replication study.
Choi, Inmyung, "Information technology, competition, and their impact on firm performance: Theoretical development and empirical analyses" (2017). Graduate Theses and Dissertations. 17163.