Can information technology enable profitable diversification? An empirical examination

Investments in information technology (IT) are now a major part of corporate investment, and the management of IT is essential to performance. In general, IT is expected to have performance effects when it is judiciously used to complement existing corporate capabilities. In this research, we examine how IT can complement diversification strategy. Using hypotheses and measures suggested by information processing theory and the theory of corporate strategy, testable hypotheses are derived to examine how IT can complement diversification. Results suggest that spending on computer technology significantly complements a strategy of unrelated diversification. Implications for theory and practice are discussed.