Performance Implications of Internet-based Information Technology in Value Chain Management

Internet-based information technology (I-IT) has become an integral part of the value chain for many firms, increasing the efficiency of existing activities and enabling new modes of doing business. Despite a significant amount of research on I-IT, however, its exact impact on firm performance has yet to be resolved. This study examines multiple issues regarding the relationship between I-IT investment made in support of value chain management and organizational performance as judged by profit and productivity. Conclusions are offered regarding the strength of this type of investment as a performance predictor, the types of firms for which it does improve performance and what modes of I-IT investment produce the greatest results. Data from 165 firms indicate that investment in I-IT can positively impact performance depending on the type of industry and the type of supply chain function being supported. In particular, results indicate that firms in industries such as banking and insurance stand to benefit most from the use of I-IT. This study also provides useful recommendations for how firms should design and deploy their I-IT resources for value chain management that maximizes their return on investment. Due to the importance of the internet in global economic development, the implications of this study are significant.