Information technology capability and value creation: Evidence from the US banking industry

Abstract

This paper investigates whether the firm Information technology (IT) capability of a firm can create economic value and competitive advantage. In contrast to past research, which generally assumed that IT investment leads to IT capability that in turn leads to competitive advantage, this study examines IT capability directly. Based on a cross-sectional sample of 155 banking firms, I investigated the main and interactive effects of IT capability and human capital investment on five firm-performance measures. The results of this study indicate that both IT capability and human capital investment contribute directly to the overall value-creation performance of banking firms. Further, the study suggests that IT capability and human capital investment can have a negative interactive effect on the firm's value creation. A firm's IT capability should be seen as an integral tool for creating economic value instead of a business infrastructure that makes business operations efficient. The results of this study support the resource-based view of the firm.