Exploring the relationship between information technology investments and firm performance using regression splines analysis

  • Authors:

  • Kweku-Muata Osei-Bryson;Myung Ko

  • Affiliations:

  • Department of Information Systems and The Information Systems Research Institute, Virginia Commonwealth University, Richmond, VA;Department of Information Systems, College of Business, The University of Texas at San Antonio, San Antonio, TX

  • Venue:
  • Information and Management
  • Year:
  • 2004

Quantified Score

Hi-index 0.00

Visualization

Abstract

Identifying the business value of information technology (IT) investments has been a major concern of managers and researchers. Various studies have addressed this issue but have provided contradictory results. Here, we explore the relationship between IT investments and firm performance using a relatively new technique, multivariate adaptive regression splines (MARS), and attempt to answer two questions: (1) do investments in IT have a positive impact on organizational productivity? and (2) for a given level of investment, what portion of the total should be invested in IT to maximize organizational productivity? Our results suggest that depending on the conditions that applied, an unbiased observer could either conclude that investments in IT has a positive statistically significant effect on productivity, or that there is a 'productivity' paradox. This suggests that the relationship between IT investments and organizational performance is much more complex than that found in some other studies. Our results could also provide guidance to managers who are responsible for determining the allocation of organizational resources.