The influence of firm specific context on realizing information technology business value in manufacturing industry

An empirical examination of more than 3000 firm years over 1998–2000 from U.S. manufacturing industries reveals that durable goods industry firms and firms with higher level of vertical integration realized higher IT business value in improved labor and administrative productivity.

Abstract

Both rising competitions and the enormous size of information technology (IT) investment have led to serious managerial concerns over the business value of IT. Despite high perceived values of IT, empirical studies have generally reported mixed results when examining the relationship between IT spending and firm productivity. Using contingency theory, we hypothesize that IT business value is influenced by firm specific context. An empirical examination of more than 3000 firm years over 1998–2000 from U.S. manufacturing industries reveals that durable goods industry firms and firms with higher level of vertical integration realized higher IT business value in improved labor and administrative productivity. In addition, the findings support the theoretical claim that IT spending does matter strategically in the right setting.