Study: Chasing Fashionable IT Doesn't Pay Off

Companies that chase the hottest information technologies gain several benefits, but better financial performance isn't one of them, according to a study published in this month's issue of the journal MIS Quarterly.

Ping Wang, assistant professor at the University of Maryland at College Park, studied a decade's worth of data about 109 Fortune 500 companies. He found that companies that got good press for investing in "fashionable" IT "did not have higher performance, but they had a better reputation and higher executive compensation."

Wang defined an IT fashion as "a transitory collective belief that an information technology is new, efficient, and at the forefront of practice." He cited data warehouses, ERP, customer relationship management and knowledge management systems as examples of popular technologies in the 1990s.

The analysis showed that corporate reputation scores and CEO pay jumped at companies known for implementing hot technologies. However, the IT fashionistas suffered declining financial performance in the year after an investment. "It took them on average three years to absorb the negative impacts, recover from the disruptions, and improve performance," Wang reported.

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