Efficiency or Innovation: How do Industry Environments

4 Firms invest in a variety of information technologies and seek to align their IT asset portfolios 5 with two key performance outcomes: efficiency and innovation. Existing research makes the 6 universalistic assumption that both outcomes will always be realized through firms' IT asset 7 portfolios. There has been limited research on the conditions under which firms' IT asset 8 portfolios should be more oriented toward efficiency or innovation. Here, we argue that the 9 nature of the industry where a firm competes will have a significant moderating effect on the 10 links between firms' IT asset portfolios and efficiency or innovation outcomes. Using panel data 11 that covers a wide range of industry environments, we find that at lower levels of dynamism, 12 munificence and complexity, IT asset portfolios are associated with a greater increase in 13 efficiency. In contrast, in environments with higher levels of complexity, IT asset portfolios are 14 associated with a greater increase in innovation (i.e., development of new products and processes, 15 and exploration of growth opportunities). These results provide insights about how firms could 16 realize strategic alignment by tailoring their IT asset portfolios toward an efficiency or 17 innovation focus. 18 19 20 21