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Perspectives on the Relationship between IT Investment and Economic Performance: A Firm-Level Critical Literature Review

Author:

Fuqiang Guan

Information Systems and Innovation Group, Department of Management, London School of Economics and Political Science, GB
About Fuqiang
MSc Management Information Systems and Innovation (2012/13)
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Abstract

As a result of competition becoming increasingly fierce, firms are challenged to seek effective ways to improve their performance. Investment in IT is considered as a feasible strategy to influence company performance and preserve competitive advantage. Based on the existing Information Systems literature in this field, this paper reviews the different perspectives on how researchers understand the relationship between IT investment and economic performance. On one hand, several authors view productivity as an indicator of the economic performance of firms, and explore the impacts of IT capital by examining the production process. On the other hand, other works take a more holistic view, highlighting the importance of complementary factors and organisational changes. Another perspective concentrates on researching firm performance, through studying the costs incurred in an economic exchange. They adopt Transaction Cost Theory to analyse the effects of IT on transaction costs, and to find the true costs of IT outsourcing. It is suggested that future research should consider identifying the relationship between IT investment and firm profitability, understanding the timing of payoff from IT investments, and analysing the effects of industry and country differences.

How to Cite: Guan, F., 2013. Perspectives on the Relationship between IT Investment and Economic Performance: A Firm-Level Critical Literature Review. iSCHANNEL, 8(1), pp.12–17.
Published on 24 Sep 2013.
Peer Reviewed

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