IT assets, organizational capabilities, and firm performance: How resource allocations and organizational differences explain performance variation 
Organization Science
, 18
(5) , 749-883. 2007.
Author(s): Sinan Aral. Peter Weill.
Topics: Information systems strategy IT competence
Country: USA
Objective and main results
The study seeks to explain firm level variations in the returns to IT investments and investigates how IT investment allocations and IT capabilities influence performance.
Main findings:
- IT investment allocations and organizational IT capabilities drive differences in firm performance.
- Investments in specific IT assets explain performance differences along dimensions consistent with their strategic purpose.
- a system of organizational IT capabilities strengthens the performance effects of IT assets and broadens their impact beyond their intended purpose.
Summary of practical implications
The authors do not discuss practical implications of the results. However, the study shows that the total expenditure on IT is not associated with firm performance, but that different IT assets are associated with different performance benefits. Organizations should therefore make IT investment decisions based on their business strategies. All types of IT investments should be accompanied with a focus on organizational factors that strengthen and broaden the performance impacts of IT assets. This includes improvement of both competencies and routines in the organization.
- It is important that senior management commits to IT projects and that business units are involved in IT decisions.
- Development of both technical and business skills of IT staff is important, as well as the IT skills of end users.
- Organizations should build competencies and routines for use of electronic media for internal communication as well as communication with suppliers.
