The Impact of Information Technology Investments and Diversification Strategies on Firm Performance

As companies continue to make large investments in information technology (IT), questions about how and in what contexts such investments pay off have gained importance. We develop a theoretical framework to explain how IT investments could pay off in the economically significant context of corporate diversification, and empirically find that the performance pay off to IT investments is greater for firms with greater levels of diversification. We also find that the performance payoff to IT investments is greater in related diversification than in unrelated diversification. Key words: information technology investments; business strategy; corporate diversification