The effect of IT resource diversity on firm performance

While a wealth of research has examined the relationship between information technology (IT) and firm performance, prior studies have mostly used variables that capture the level of IT investment (i.e., IT intensity or IT capital) to measure the contribution of IT. In this study, we suggest the concept of IT resource diversity, which captures the extent to which a firm's IT resources are diversified based on IT applications deployed within the firm. Then, drawing upon the competitive dynamics literature, we theorize how IT resource diversity can contribute to firm performance directly as well as indirectly (by supporting complex competitive actions). Using firm-level panel data from the United States, we find that while IT resource diversity does not directly contribute to firm performance, it helps firms achieve superior financial performance from complex competitive actions. Further, we find that this moderating effect of IT resource diversity is stronger in industries with higher velocity. Our findings underscore the need to consider IT resource diversity as a key variable for examining the business value of IT in developing a firm's competitiveness.