A Multilevel Examination of Information Technology and Firm Performance: The Interaction of Industry and Firm Effects

Although research on the economic value of IT has predominantly focused on firm-level impacts, recent studies have begun incorporating industry-level variables to examine their impact on the value a firm obtains from its IT investments. This trend originated in the aim to offer better contextualized explanations for the differences in value firms obtained from their IT investments across different industries. We present a multi-level model of IT value, in which industry-level and firm-level factors jointly determine the value a firm obtains from its IT investments. By using a hierarchical linear model to examine industry to firm interactions we are able to control for violations of statistical assumptions that are likely to bias cross-level estimates obtained using conventional methods. Our analysis reveals that all of the industry factors we looked at had significant interaction effects with the link between firmlevel IT and performance. Specifically, industry concentration, industry growth, and industry outsourcing significantly impact firm-level IT value. More interestingly we find these industry-level IT impacts manifest not only as mean differences between industries, but also as significant interactions with firm-level effects. Initial results from this research-in-progress suggest a multilevel perspective could enrich our understanding of the relationship between IT and firm performance.