Information technology impact on performance: An investigation of investments in automated teller machines
Abstract
The impact of information technology (IT) on firm performance has been repeatedly asserted and is now widely accepted. Firms have found opportunities to use IT in products and processes to reduce costs and increase product value, as well as to affect organizational effectiveness, through improved coordination, communication and control. It is claimed that these uses have allowed firms to gain competitive advantages over other firms. These claims are unsupported by empirical evidence, however, and managers are concerned about whether IT investments actually result in positive value for firms. Rigorous studies are necessary, therefore, to evaluate IT performance impacts. Researchers have proposed models and frameworks to predict the impact of IT innovations. These frameworks suggest that the first firms to exploit new technologies can gain competitive advantages. They also suggest that IT impacts are affected by firm and industry characteristics, such as size, strategy and regulation. We determined if and when each, of our sample of over 3000 banks, first installed an ATM between 1971-1979. We used this data, along with bank level performance and characteristics data, obtained from the FDIC, and industry data, to examine the effect of IT adoption on business performance. Besides overall effects, we also studied how the year of adoption affected performance impacts. Finally, we studied how performance results lagged adoption. ATM adoption resulted in positive effects on market share, efficiency and overall business performance. Large banks gained more market share and income, but not more efficiency, than small banks. The earliest adopters gained more than later early adopters, in terms of all three performance measures. Among this group, the largest banks gained more in market share and income. Only the earliest adopters showed efficiency gains. Performance effects lagged IT adoption by more than four years in the study. The results indicate that a single IT application can affect market share, efficiency and overall business performance for the firm. In addition, firm characteristics help determine whether firms can make use of first mover advantages. The results also suggest that the benefits of adoption may lag adoption by many years.
Degree
Ph.D.
Advisors
Santos, Purdue University.
Subject Area
Business community|Management|Banking
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