Research On The Impact Of It Investment On Firms’ Performance And Industries’ Comparison

The relationship between IT and firms’performance has been a hot concern for scholars. However, the relationship between IT investment and firm’s performance has not formed a consensus conclusion. Studies have shown that industry environment factors affect the relationship between IT investment and firms’performance, but few scholars have focused on the industries study in depth and the specific factors which lead the industry differences. With the continuous growth of China’s IT investments, domestic and foreign scholars, business managers and government policy makers attach great importance to the impact of IT investment on firms’performance. But there is still a lack of empirical studies on the relationship between IT investment and firms’performance, especially on the industry differences.Based on the reasons above, this paper aims to explore the impact of IT investment on firms’performance, which includes productivity and profitability, and the impact mechanism of IT investment and firms’ performance, to find out the varies among different industries and the specific factors leading the industries’difference. The contents and results are shown as follows:1. Based on previous theory, this paper constructs two panel data models of the impact of IT investment on firm’s productivity and firm’s profitability. We add Industry concentration and industry dynamics in these two models as moderators.2. Though the empirical research, this paper verified the overall impact of IT investment on Chinese firms’performance and as well as the path how IT investments impact firms’profitability. We used2705 observations, which is a time-series cross-sectional dataset from825listed companies in15industries and over the period from2004to2010. We found that IT investment has a positive role in promoting the productivity and profitability of Chinese firms. The impact of IT investment on the productivity of Chinese firm is low, there is room for improvement. Besides, we found that IT investments improved firms’ profitability by revenue growth rather than cost saving.3. This paper explore the impact of IT investment on Chinese firms’ performance from the industry level. We found that IT investment has a positive role in promoting firms’productivity in most sectors, especially the impact on the manufacturing sector. But the positive impact of IT investment on firms’ profitability was only found in a few sectors.4. Explore the factors leading to industries’ difference, and verified how the industry environment impact the relationship between IT investment and firms’performance. We have found that higher industry competitiveness is associated with higher IT productivity, but lower IT profitability. We think that in a highly competitive industry, IT helps to enhance resource allocation capabilities and promotes income growth; however, firms will invest a large number of IT resources to enhance their competitiveness, as well as to increase marketing spending to cope with the competition, which may lead to a waste in investing and marketing spending. Besides, we also found that, industry dynamism has nothing to do with the relationship between IT investment and firms’productivity, and lower dynamism is associated with higher IT profitability.4. Based on the conclusions above, this paper proposed some recommendations of IT development.