IT Investment Decision and Performance of Online Brokerage Firm Under Heterogeneity of IT Service Dimensions

Abstract

Online brokerage is growing rapidly nowadays and revenue from online brokerage service is over the half of total revenue of security firm in Korea. Therefore, management of service quality of brokerage system has become a crucial managerial issue. Because service quality has multi dimension characteristic, IT investment for each dimension may be different. Also result of IT investment is decided by not only amount of IT investment but also firm’s non IT-related monetary capability. In previous papers, result of IT investment is explained without consideration of multi dimension characteristic. In this paper, we investigate IT investment decision and performance of on-line brokerage firms under heterogeneity of IT service dimension. These are investigated both analytically and empirically. According to our results, we found that IT investment and service quality are different in each dimension. High capability firm invest more in IT system instead of advantage of capability, and they make better financial performance by providing better service quality. Also, we found that firm’s non IT-related capability moderates the service quality effect to performance. In conclusion, high capability firm provide better service quality and make better financial performance despite more IT spending. Low capability firm can’t make same level of financial performance of high capability firm only by IT investments. Firm’s non IT-related capability is a crucial factor in service industry and firms have to build up capability to make better performance.