Abstract

Background: The role of information technology (IT) in influencing business performance has become increasingly pivotal in today’s business environment. While prior research has extensively explored the impact of IT capabilities on firm performance, the results have been mixed and often limited to static measures of IT investment. This study introduces the concept of superior IT capability retention and examines its influence on market performance over an extended period.

Method: We employed a matched sample comparison group method to investigate the relationship between the degree of retaining superior IT capability and its impact on business performance. First, using the Wilcoxon signed-rank test, we compared firms’ market performance with three levels of retaining superior IT capability and their matched control counterparts. Second, to examine how firms’ IT capability influences business performance over time, we employed panel data analysis.

Results: The results suggest partial relationships between the extent of retaining IT capability and market performance. Our findings reveal a nonlinear relationship, with firms exhibiting medium levels of IT capability retention outperforming their counterparts, while those with low or high levels of retention show no significant returns.

Conclusion: This study contributes to the literature by offering new insights into the dynamic nature of IT capabilities and their long-term effects on firm performance, highlighting the critical role of strategic IT management in maximizing organizational outcomes. From a theoretical perspective, this study advances IT capability research by shifting from a static to a dynamic perspective and uncovering a curvilinear relationship that helps reconcile mixed findings in prior literature. On the practical side, our findings suggest that maintaining a moderate yet consistent level of IT investment delivers the strongest market returns, providing clear guidance for strategic allocation of IT resources. These insights can inform strategic IT investment decisions and resource allocation in rapidly evolving technological environments.

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