Investment in Information Technology and Organizational Performance

Abstract:     
Information technology (IT) is essential to many businesses, but there are few guidelines for determiningthe adequate level of investment in IT. The purpose of this paper is to further understanding of themechanism of IT investment. Previous studies on IT investment are briefly presented. The authorsperformed six-mini case studies of large companies in five different industries; these studies addressed thequestions of how firms define IT and how they manage their investment in IT. Our goal was to formulatea model of the relationship between IT investment and organizational performance. We present themodel and pose questions for investigating this important relationship more closely.Findings of interest relate to the definition of IT, the importance of political considerations, the conceptof an industry-based threshold investment, the conversion effectiveness of IT investment, and the conceptof productive capacity. The most important finding relates to the separation of different types of ITinvestment and their logical matching to particular performance measures.

Number of Pages in PDF File: 27

Keywords: Information technology investment, organizational performance, conversion effectiveness, strategy

working papers series