Exploring The Relationships Between IT Investments and Organizational Performance: Preliminary Empirical Evidence

Businesses invested around a trillion dollars in information technology (IT) in the 198Os, and the trend continues into the nineties. Although investments in IT have reached 50 % of capital expenditures, their impact on the bottom line has not been clearly established. The pay-off from information technology (llJ has eluded both managers and researchers. This paper reports some preliminary results of an on-going research effort to better understand the relationship between a firm’s investments in IT and its financial performance. The study covers a period of 5 years, with sporadic IT and financial data on 609 large US companies. The results show a strong inverse relationship between investments in IT and the operating expenses of a firm. They also support the notion that there is a lag between the time IT investments are made by an or;a$zation and when the benefits are derived from 1