A great deal of controversy exists about the impact of information technology on firm performance. While some authors have reported positive impacts, others have found negative or no impacts. This study focuses on Electronic Data Interchange (EDI) technology. Many of the problems in this line of research are overcome in this study by conducting a careful analysis of the performance data of the past decade gathered from the assembly centers of Chrysler Corporation. This study estimates the dollar benefits of improved information exchanges between Chrysler and its suppliers that result from using EDI. After controlling for variations in operational complexity arising from mix, volume, parts complexity, model, and engineering changes, the savings per vehicle that result from improved information exchanges are estimated to be about $60. Including the additional savings from electronic document preparation and transmission, the total benefits of EDI per vehicle amount to over $100. System wide, this translates to annual savings of $220 million for the company.

The Quick Response (QR) program is a hierarchical suite of information technologies and applications designed to improve the performance of retailers. Consultants advise retailers to adopt the program wholesale, implying that more and higher levels of technology are better than less technology and lower levels. Academicians, on the other hand, argue that good technology is “appropriate” technology. That is, firms should adopt only those technologies that suit the specific strategic directions pursued by the firm. Who is right? Which approach to investing in IT yields better performance results? Surprisingly, this cross-sectional survey of 80 specialty retailers found more support for the practitioners ’ claims than for the academicians’. Adoption of the QR program at a minimal level was associated with higher performance, although there was no performance impact due to higher levels of QR use. Firms did appear to match their IT usage to their business strategies, but there was no linkage between strategic alignment and firm performance, and there was surprisingly little variation in business or IT strategy. In short, the findings of our study suggest that both practitioners and academicians need to refine their theories and advice about what makes IT investments pay off.

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