The Moderator Role of Information Technology in Firm Performance: A Conceptual Model and Research Propositions

Debate over the impact that Information Technology (IT) investments have on firm performance continues in the face ofconflicting evidence. Questions about the validity of prior studies, in regard to conceptualizing the role of IT and the methodologies adopted for its testing, have both been raised. In this paper, we present a new conceptualization of the effects of IT on firm performance based on prior theoretical works and case studies of IT. IT is hypothesized to moderate the relationship between strategic business drivers and firm performance. Drawing from studies in industrial organization and manage:nent strategy that explain firm performance in terms of the environment in which a firm operates (industry structure factors), the strategies it adopts (competitive strategy variables), and the resources it utilizes (tirm-specific assets and skills), a comprehensive model of firm performance is presented. Propositions delineating the moderating role of IT on the three sets of variables, namely, industry structure, competitive strategy, and firm-specific assets and skills, are put forth and moderator correlation and regression analysis is proposed as a methodology to test this conceptualization.