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MANAGEMENT SCIENCE
Vol. 49, No. 3, March 2003, pp. 273-289
DOI: 10.1287/mnsc.49.3.273.12736
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Performance Impacts of Information Technology: Is Actual Usage the Missing Link?

Sarv Devaraj, Rajiv Kohli

Department of Management, Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556
Department of Management, Mendoza College of Business, University of Notre Dame, Notre Dame, Indiana 46556
sdevaraj{at}nd.edu
rkohli{at}nd.edu

The relationship between investment in information technology (IT) and its effect on organizational performance continues to interest academics and practitioners. In many cases, due to the nature of the research design employed, this stream of research has been unable to identify the impact of individual technologies on organizational performance. This study posits that the driver of IT impact is not the investment in the technology, but the actual usage of the technology. This proposition is tested in a longitudinal setting of a healthcare system comprising eight hospitals.

Monthly data for a three–year period on various financial and nonfinancial measures of hospital performance and technology usage were analyzed. The data analysis provides evidence for the technology usage–performance link after controlling for various external factors. Technology usage was positively and significantly associated with measures of hospital revenue and quality, and this effect occurred after time lags. The analysis was triangulated using three measures of technology usage. The general support for the principal proposition of this paper that "actual usage" may be a key variable in explaining the impact of technology on performance suggests that omission of this variable may be a missing link in IT payoff analyses.

Key Words: Information Technology; IT Payoff; IT Usage; Healthcare; Longitudinal Study; Profitability; Quality
History: Received: October 9, 2000;


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