IT Innovation Capability and Returns on IT Innovation Persistence

Prior studies have shown that the IT innovation capability, a company's ability to innovate systematically with IT, is not easily replicated (persistent), and the persistence tends to be more pronounced during periods when economy-wide IT budgets are declining (hard IT budgets), such the post-Y2K period. Building on resource based view we argue that companies that systematically innovate with IT have a sustained competitive advantage versus their competitors who are adopting an opportunistic approach to IT innovation or choose not to innovate with IT, and the advantage is stronger during periods of hard IT budgets. Both of these arguments were strongly supported when tested on a sample of 1,057 large US firms by indicating increased return on sales, return on assets, and growth..