Research Note---The Impact of Information Technology Investments and Diversification Strategies on Firm Performance

Authors:
Murali D. R. Chari;Sarv Devaraj;Parthiban David
Affiliations:
School of Business and Economics, Indiana University South Bend, South Bend, Indiana 46634;Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556;Division of Management, Price College of Business, University of Oklahoma, Norman, Oklahoma 73019
Venue:
Management Science
Year:
2008

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Abstract

As companies continue to make large investments in information technology (IT), questions about how and in what contexts such investments pay off have gained importance. We develop a theoretical framework to explain how IT investments could pay off in the economically significant context of corporate diversification, and empirically find that the performance pay off to IT investments is greater for firms with greater levels of diversification. We also find that the performance payoff to IT investments is greater in related diversification than in unrelated diversification.