Effect of Information Technology Investments on Customer Satisfaction: Theory and Evidence

Abstract

This research addresses the following questions: Do information technology (IT) investments have an effect on customer satisfaction? What are the causal mechanisms that mediate the effect of IT systems on customer satisfaction? Does the effect of IT on customer satisfaction differ across industry sectors? Based on an analysis of longitudinal data on 50 U.S. firms for the period 1994-2000, we document the association between IT investments and customer satisfaction. We find support for the hypotheses that the effect of IT investments on customer satisfaction is mediated through the effect of IT on perceived quality and perceived value. Our results also indicate that the effect of IT investments on customer satisfaction differs between the manufacturing and service sectors. While prior work on the business value of IT at the firm level focused on financial and accounting measures, our research establishes the effect of IT investments on overall customer satisfaction of a firm. We propose and validate a theory of mediation effects of perceived quality and perceived value. This proposal has the potential to synthesize information systems effectiveness and marketing literature towards an integrative understanding of the relationship between IT investments and customer satisfaction.