Information technology and small firm performance

This study utilised both mail questionnaire and case study approaches to investigate propositions related to information technology (IT) in small firms. The major proposition investigated IT Sophistication as one cause of small firm success. Data was collected from 289 engineering firms by mail questionnaire, including 120 with at least one computer. Multiple regression analysis gave no support to IT as a success factor. Similarly, non-parametric statistical tests suggested that firms with more sophisticated IT performed no better than firms with no or less sophisticated IT. Furthermore, among only the firms with computers, many negative rather than positive correlations were found between IT variables and financial performance. Therefore, rather than support the major proposition that IT was a success factor for small firms, the mail questionnaire provided evidence to the contrary. An indepth analysis of six firms provided evidence that developing IT had, in some firms, increased operating costs and consumed important managerial time. Furthermore, there was evidence to suggest that some factors tended to encourage both IT growth and poorer performance simultaneously, which would explain the negative correlations found between IT and financial performance. Two further propositions were investigated, both relating to IT success. Using path analysis, the following factors were found to influence IT success: external assistance in identifying IT requirements, owner involvement in IT planning and in control, planning IT development, and the use of IT for many applications. However, the measure of IT success was not found to be correlated with financial performance, and this must put in question how MIS researchers should measure "success".