IT investment and firm performance in the perspective of organizational slack

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Science Research Management ›› 2011, Vol. 32 ›› Issue (11) : 139-147.

Chen Yuanyuan^1,2, Qi Zhongying¹

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Abstract

How does organizational slack change? What is the relationship between organizational slack and firm performance in the different stages of IT investment? The variety of unabsorbed slack and absorbed slack during the process of IT investment, and the correlation between organizational slack and firm performance are analyzed. The hypotheses are tested using finance data in the period of 1994-2008 from 196 manufacturing listed companies in China. Five of six hypotheses are confirmed. There is higher unabsorbed slack in the early stage of IT investment, and there is higher absorbed slack in the run-in stage of IT investment. The correlation between unabsorbed slack and firm performance is positive in the process of IT investment. In contrast, absorbed slack presents a negative correlation with the firm performance. The results indicate that organizational slack is the medial variable between IT investment and firm performance. It reflects the affection of IT on the management.

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IT investment / firm performance / productivity paradox / unabsorbed slack / absorbed slack

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Chen Yuanyuan, Qi Zhongying. IT investment and firm performance in the perspective of organizational slack[J]. Science Research Management. 2011, 32(11): 139-147

References

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