Information Technology, Customer Satisfaction, and Profit: Theory and Evidence

Information Systems Research, 2016, Forthcoming

Posted: 10 May 2006 Last revised: 3 Feb 2016

See all articles by Sunil Mithas

Sunil Mithas

University of Maryland - Robert H. Smith School of Business

Mayuram S. Krishnan

University of Michigan, Stephen M. Ross School of Business

Claes Fornell

Stephen M. Ross School of Business at the University of Michigan

Date Written: January 14, 2016

Abstract

This paper studies the effect of aggregate IT investments on customer satisfaction and profits at the firm level. Using data on 109 U.S. firms for the 1994-1996 and 1999-2006 periods, we find that aggregate IT investments have a positive association with customer satisfaction. However, the strength of the relationship varied across the 1994-1996 and 1999-2006 periods. Specifically, IT investments had a more positive influence on customer satisfaction for the 1994-1996 period than for the 1999-2006 period. Conversely, IT investments had a positive effect on profits in the 1999-2006 period but a negative effect in the 1994-1996 period. These findings extend prior discourse in the information systems literature on the role of customer satisfaction as a mechanism that explains how IT-enabled benefits are “passed on to consumers” [Rai, A., Patnayakuni, R., and Patnayakuni, N. 1997. "Technology investment and business performance," Communications of the ACM (40:7), p. 90]. Our additional exploratory analyses showing that IT investments had stronger effect on perceived quality than on perceived value provide an explanation for some of the observed effects of IT on customer satisfaction and profits. Together, these contributions and implications provide new insights to assess returns on IT investments by focusing on customer satisfaction, an important intangible and leading measure of firm performance, stock returns and stock risk.

Keywords: Information Technology, Customer Satisfaction, Customer Relationship Management, Firm Performance

JEL Classification: Q39

Suggested Citation

Mithas, Sunil and Krishnan, Mayuram S. and Fornell, Claes, Information Technology, Customer Satisfaction, and Profit: Theory and Evidence (January 14, 2016). Information Systems Research, 2016, Forthcoming. Available at SSRN: https://ssrn.com/abstract=901643 or http://dx.doi.org/10.2139/ssrn.901643

Sunil Mithas (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

​Van Munching Hall
7699 Mowatt Ln
College Park, MD 20742-1815
United States

HOME PAGE: http://sunilmithas.com/

Mayuram S. Krishnan

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734-763-6749 (Phone)

Claes Fornell

Stephen M. Ross School of Business at the University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
7,648
PlumX Metrics