Firm‐level performance impact of IS support for product innovation

This paper seeks to assess the bottom‐line (profitability) impact of information systems support for product innovation at the firm level, based on the current resource‐based view of the competitive role of information systems (IS). The paper also explores the role of firm‐specific information and knowledge that complement IS support for product innovation in moderating the performance impact of the IS support.

Both survey and archival data were used to assess the profitability impact of IS support for product innovation. Data tapping IS support for product innovation and firm‐specific, complementary information and knowledge were collected from a survey of senior IS executives from 760 large companies operating in different industries in the United States. The profitability data were obtained from the Research Insight database. Hierarchical regression analyses were employed to test the research hypotheses.

Providing IS support for product innovation alone did not improve profitability as measured by return on sales and return on assets. Only when complemented by firm‐specific information and knowledge would IS support for product innovation lead to profitability gains. Research limitations/implications – the use of cross‐sectional data collected from single informants and the coarse scales to measure the key variables may limit the usefulness of the research findings.

It is not sufficient for a firm to simply focus on selecting or designing IS that improve the efficiency and effectiveness of its product development process. Rather, the firm and its managers need to pay equal attention to the deployment of firm‐specific information and knowledge resources which would not only facilitate the use and implementation of IS for production innovation, but also make such IS less susceptible to imitation by competitors.

This article provides further evidence for the positive influence of IS‐based product innovation on the bottom‐line performance of firms and uses the resource‐based view of the strategic impact of IS to identify one condition under which such influence may occur. Unlike prior research that gauges the performance effects of IS support for product innovation at the project or department level, this research generates evidence for profitability gains accruing from IS support at the firm level.