Recent research in accounting advocates nonfinancial measures of company performance, such as customer satisfaction and loyalty, as useful indicators of aspects of firm performance. But what are the drivers of customer satisfaction and loyalty? We provide an integrated causal model of company performance in the personal computer (PC) industry that simultaneously tests links between product value attributes resulting from business process performance, customer loyalty, and financial outcomes. Our results extend prior accounting research (e.g., Banker et al. 2000; Ittner and Larcker 1998) in two directions: (1) by explaining the determinants of customer loyalty, and (2) by clarifying the relation between customer loyalty and measures of financial performance. We report that product value attributes directly and differentially impact levels of customer loyalty as well as prevailing average selling prices. Furthermore, measures of customer loyalty explain levels of relative revenue growth and profitability, and relatively high customer loyalty engenders a competitive advantage in the PC industry.

For most firms, the information technology (IT) budget represents a major element in the overall firm budget, and IT budget decisions often have significant operational and strategic impacts on the business processes in the firm’s value chain. In this paper we use a large unique data set to examine the extent to which IT budgets are affected by environmental, organizational, and technological circumstances. We find that our cross-sectional model explains substantial variance in IT budgets, which indicates that contingent environmental, organizational, and technological factors affect managers’ budget decisions. We then examine the extent to which these IT budget levels are related to future firm performance, measured using both broad financial accounting measures, such as operating profit margins and return on assets, and market returns. We find that IT budget levels are positively associated with subsequent firm performance and shareholder returns. We further suggest that IT’s aggregate effect on performance is a weighted average of two very different components: (1) context-driven IT budget levels, which reflect the effects of environmental, organization, and technological factors and the IT budgets resulting from them, and (2) idiosyncratic IT budget levels, which reflect the effect of any marginal firm-specific IT budget expenditures after controlling for these contextual factors. Both components are positively associated with performance, indicating that the specified contextual factors provide an incomplete explanation of firms’ value-relevant IT expenditures. The current study contributes to the accounting information systems and management accounting literatures by assessing the causes and consequences of IT budgets.

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This paper synthesizes recent empirical archival research investigating the link between information technology investment and business value. It examines (1) financial and nonfinancial measures to represent different elements of business value, (2) IT investment measures and links with firm performance, (3) IT and business complementarities that affect firm performance, and (4) the impact of business context and IT alignment with business strategy on resulting performance. The review of prior research is guided by a balanced scorecard framework that places IT in a business context and highlights the role of potential drivers and contextual factors that impact the association between IT and firm value. The paper concludes by proposing several broad avenues of future research that may be of particular interest to archival accounting information systems researchers.

We use meta-analysis techniques to examine research choices that affect findings with respect to the return on IT investment. Recent research has established that IT investment is substantially related to firm financial performance. We find, however, that the relationship between IT investment and performance varies, depending on how both financial performance and IT investment are measured. Despite criticism of accounting measures as indicators of IT payoff, we find that the relationship is often stronger in studies that employ accounting measures rather than market measures of firm performance. This difference is driven by research that focuses on the process-level impacts of IT investment. Furthermore, the relationship is also stronger when IT investment is measured as IT strategy or spending, rather than IT capability. We discuss the practical implications of the results of our meta-analysis and suggest new directions for future theory development and research.