Effect of Information Technology Investments on Customer Satisfaction: An Empirical Analysis

In this paper, we study the effect of information-technology (IT) investments on firms’ customer-satisfaction performance. Although much of the prior work on the business value of IT at the firm level focused on financial and accounting measures, this paper explores the effect of IT investments on more qualitative outputs, such as improved customization, product variety and customer convenience, as reflected in the overall customer satisfaction for a firm. Our analysis of 125 panel observations on fifty firms for multiple years indicates a positive association between aggregate IT investments and customer satisfaction. Our results also indicate that the effect of IT investments on customer satisfaction may differ across manufacturing and service companies. Besides studying the effect of aggregate IT investments, we also study the effect of customer interfacing IT applications such as customer relationship management systems on customer satisfaction. Our analysis of archival data collected for a broad cross section of firms in the US shows a positive effect of customer interfacing CRM systems on customer knowledge and customer satisfaction. Our results suggest that CRM systems help firms in improving their customer knowledge that in turn leads to more targeted customer experiences thus improving customer satisfaction.