IT Investments and Financial Performance, a Review: The Bankruptcy Perspective

Abstract

This study examines whether IT resources and capabilities affect the risk of bankruptcy of SMEs. Drawing on previous literature on bankruptcy and the resource-based view of the firm (RBV), we offer conclusive evidence of the influence of IT resources on financial health, as measured by the odds of filing for bankruptcy within a certain period of time. Flexibility, Internet-related abilities, cooperation/networking, and management skills are consistent with huge reductions in the risk of bankruptcy, implying that they are high value resources. Our results also stress that companies should pay attention to the development of bundles of complementary IT assets and capabilities, to create synergies and leverage IT resources. From a methodological point of view, we reveal new links between organization literature and previous research on bankruptcy; our innovative measure of performance can be a valuable tool for future research in both fields.