Explaining the inconsistent results of the impact of information technology investments on firm performance

Abstract

PurposeThe purpose of this paper is to identify potential reasons for inconsistent results of the economic value of information technology (IT) investments. Furthermore, the study aims to develop framework and propositions to explore future opportunities and directions for research that examine the returns on IT investments.Design/methodology/approachThis study conducted a longitudinal analysis of the literature review concerning the impact of IT investments on firm performance to identify the reasons to the so-called “IT productivity paradox” and to explore future opportunities and directions for future research.FindingsThe study provides and discusses the reasons for the inconsistent results in the prior research that examines IT investments payoff and suggested a framework and propositions for future research. Results of prior studies should be interpreted in the context of research questions raised, data used, level of analysis, IT investment measures, firm performance measures, time horizon and industry characteristics.Practical implicationsIT managers and researchers should align IT investments with the environment in which a firm operates and competes and with firm’s business strategies as important determinants of the return on IT investments.Originality/valueUnderstanding the link between firm performance and IT investments assists researchers and practitioners to understand why firms continue to pour enormous resources into IT and, more importantly, specifies the conditions under which firms are likely to achieve competitive advantages from their IT investments.