IT Capability as Moderator Between IT Investment and Firm Performance

Abstract

Conflicting results from previous research relating information technology (IT) investments and firm performance suggest that there is no direct relationship between IT investments and firm performance. The resource-based view (RBV) of the firm is introduced as a research tool to examine how IT resources and capabilities affect firm performance. A theoretical rationale model is then used to investigate the relationship between IT investment and firm performance. The IT capability is assumed to be an important moderator variable rather than a mediator variable linking IT investments to firm performance, while the time period, the firm size, and the industry type, all recognized as factors influencing performance, are treated as control variables. The model and hypotheses are verified by sample data from leading IT firms in China. The data confirms the moderating effect of the IT capability.