One Question, Two Answers Mixed Findings of Information Technology Capability and Firm Performance and Their Implications

Abstract

This study conducted a conceptual replication on Chae et al. (2014) by utilizing multiple comparison groups of IT leading firms. Empirical testing for the positive association between information technology (IT) capability and firm performance has been a celebrated debate in IS research due to mixed findings; Bharadwaj (2000) and Santhanam and Hartono (2003) confirmed the positive impact of IT capability on firm performance, but Chae et al. (2014) suggested no relationship between the IT capability and performance. Understanding what produces contradictory results is a timely and critical issue because a large body of the business value of IS research has employed IT capability as a key construct. Whereas Chae et al. (2014) investigated the link between IT capability and firm performance by comparing the performance of an IT leader and that of a single matched group from 2001-2004, this study examined the relationship by building multiple comparison groups, which include all firms in the same industry. As a result, contrary to findings by Chae et al. (2014), this research indicated that IT capability has a significant impact on a firm’s financial performance.