The impact of information technology on the performance of diversified firms

Diversification may increase economic benefits through more efficient utilization of business resources across multiple markets. However, the benefits of these scope economies are often not realized due to costs of coordinating resources in multiple markets. Information technology (IT) is widely used to achieve more efficient coordination by reducing the costs of coordinating business resources across multiple markets. Because of the need for coordination of business resources across multiple markets, diversification can increase the demand for IT. But does increased use of IT improve the performance of firms that are highly diversified? This research tackles this question by undertaking an empirical study of the impact of IT on the performance resulting from diversification, particularly related diversification. The empirical aspect of this subject has received little attention from previous information systems (IS) and economics research. This research also sheds light on the business value of IT by showing the importance of the complementarity of IT and diversification in firm performance, which has also received limited attention in prior IS research.