An Investigation of the Effects of It Investment on Firm Performance

Information technology (IT) investments have continued to increase over the last few decades while, concurrently, executives continue to question the value being obtained from these investments. In order to address this issue, scholars have recently introduced the concept of complementarity in order to better understand the manner in which IT investments impact firm performance. However, this concept has been insufficiently developed in the literature and has inherent limitations in its perspective. This study develops and clarifies our understanding of complementarity and applies this elaborated concept to IT performance research. For the theoretical lens, this research employed knowledge-based view of the firm (KBV), which enables one to identify a boundary of critical complementary constructs that are mutually reinforcing in enhancing IT performance. The identified complementary constructs are empirically tested using supply chain management (SCM) and customer relationship management (CRM) technologies. These findings show complementary investments are indeed found to be critical in enhancing firm performance from IT investments.