Reinvestigating the Relationship between Information Technology Capability and Firm Performance: Focusing On the Impact of the Adoption of Enterprise Systems

Though many information systems researchers have made various attempts to investigate the relationship between information technology capability and firm performance from diverse perspectives, we have not come to a conclusion yet with some mixed results. In this research, focusing on the adoption of Enterprise Resource Planning systems by firms as a proxy measure of information technology capability, we re-examine whether the association is positive or negative. With the sample of Korean firms which have adopted Enterprise Resource Planning (ERP) systems in 2009, we match ERP adopters and non-adopters with propensity score matching, and compare financial performance between them with difference-in-difference estimation between preand post-adoption period. According to our analysis, we find out that there is no positive and significant relationship between information technology capability and firm performance in profit ratios. This research shows that contrary to the era of propriety information systems, standardized information systems make no more competitive advantages against competitors these days.