Evaluating organizational efficiency resulting from information technology investment: an application of data envelopment analysis
Authors: Mahmood, M. A.
Journal: Information Systems Journal (1994)
DOI: 10.1111/j.1365-2575.1994.tb00045.x
<jats:p><jats:bold>Abstract. </jats:bold> Even during this recessionary era, information technology (IT) expenditure in most organizations continues to grow at a high rate. Because of this increased IT expenditure, more and more senior managers are demanding that IT play a greater role in determining their firm's success by helping them increase organizational efficiencies and perhaps even achieve competitive advantage. The existing information systems literature on IT investment and organizational strategic performance, however, provides very little help to senior managers in making before‐the‐fact IT investment decisions. The present research study puts forth some ‘hard’ evidence relating IT investment to organizational strategic and economic performance by using data envelopment analysis (DEA). Eight IT investment measures were used as inputs and 10 organizational strategic and economic performance ratios were used as outputs for the DEA model. The results indicate that two‐thirds of the organizations in this research study are deemed efficient by DEA. A clear distinction exists between the efficient group and the inefficient group in terms of IT investment and organizational s…