Analyzing the impact of information technology investments using regression and data mining techniques

Abstract

PurposeMany attempts to justify the business value of increased investments in information technology (IT) have shown mixed results. While findings from earlier studies have been conflicting, recent firm level studies indicate that IT investments have a positive impact on productivity. However, whether IT adds value to organizations is an on going debating issue. Thus, thus it is worth of further investigation.Design/methodology/approachThe paper employs multiple techniques – a regression, regression trees, and regression splines – and integrate the responses provided from each technique.FindingsWhile IT investments have a positive impact on productivity, the impact is conditional and is not uniform but depends on the amounts invested in other related areas, such as non‐IT labor, non‐IT capital, and/or IT investments.Practical implicationsThe IT impact on productivity can be maximized when investments in other related areas are considered together than when they are considered in isolation. Therefore, IT investment decisions should not be made without consideration of the levels of other investments within an organization to avoid any waste in additional investments in IT.Originality/valueWhile most previous studies have studied in terms of its existence or non‐existence of the IT impact, we investigate the conditions under which the IT impact would or would not exist. Thus, our study provides with the opportunity for gaining a deeper understanding of the impact of IT investments on productivity.