Information technology capability‐enabled performance, future performance, and value

Abstract

PurposeThe purpose of this paper is to simultaneously determine the impact of information technology capabilities on firm performance, future firm performance, and firm value.Design/methodology/approachThe secondary data for 480 matched‐firms are collected from InformationWeek (which provides the IT capabilities ranking) and the Compustat database (which provides financial data).FindingsThe results show that IT capabilities positively and significantly influence all three constructs and that the significance level of firm value is higher than that of firm performance and that of future firm performance. That is, IT capabilities are more relevant to firm value, which represents growth opportunities, intangible assets, and innovation, etc.Practical implicationsBased on these empirical findings that IT contributes more to the long‐term influences than to the short‐term influences, firm managers should pay more attention to the strategic positioning that IT provides for firms rather than only enhancing the operational effectiveness.Originality/valueThis study proposes a complete set of constructs, which includes firm performance, future firm performance, and firm value, to measure the different effects of information technology capabilities on firms and to discuss the corresponding managerial implications. Therefore, these three constructs can be further clarified and considered simultaneously. This has not been attempted by previous studies.