Performance Consequences of Information Technology Investments: Implications of Emphasizing New or Current Information Technologies

Abstract

The dynamic information technology (IT) market—characterized by frequent new releases, designs, and changing options—requires senior IT executives to look closely at new technologies while deriving long-term benefits from the firm’s current technologies. This study focuses on the allocation of IT resources to new or current technologies, which is becoming even more important with tighter IT budgets. The results indicate that a joint consideration of a firm’s core business strategy and organizational commitment to IT provides insights into whether the firm should emphasize new IT or current IT when allocating IT investments. With an increase in organizational commitment to IT, firms pursuing stable products/markets (i.e., Defender(s)) benefit more from current IT, whereas firms seeking new products/markets (i.e., Prospector(s)) benefit more from new IT. Finally, for firms seeking some stable products/markets and some new ones (i.e., Analyzer(s)), organizational commitment to IT does not influence the benefits from emphasizing new or current IT. This study initiates a line of inquiry on the factors influencing the value firms derive from new and current IT. Senior IT executives should carefully examine their firm’s business strategy and organizational commitment to IT when prioritizing investments in new IT relative to the refinement of current IT.