The Relationship between Information Technology and Diversification: Its Implications for Firm Performance
Year: 2004
Type: article
Abstract: This research examines empirically the relationship between IT and diversification by employing a measure of strategic direction, and the relationship between IT and firm performance as measured by Tobin's q and ROA by considering intangible benefits of diversification, such as improved coordination and better market orientation that can be leveraged by IT.The results indicate that increased IT spending improves firm performance as measured by Tobin's q, but not by ROA.It also finds that firms tend to place their strategic emphasis on related diversification with increased IT spending.Overall, this implies that the intangible benefits of diversification are leveraged by IT.By providing a better means of coordination, IT facilitates the coordination of diverse production activities and leads firms to place their strategic emphasis on related diversification, eventually achieving intangible benefits from this diversification.
Author: Namchul Shin
Institution: Pace University
Language: English
Subfield: Management Information Systems
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1517160128