The impact of information technology investment on productivity improvements in the American railroad industry between 1986 and 1995

This research examines the role of information technology investment in the American railroad industry during the years 1986 through 1995, a period during which railroad productivity dramatically increased. It is the premise of this paper that investment in information technology has played an important, but under-explored role in these productivity improvements. The purpose of this paper is to take an in-depth look at the link between railroad information technology (IT) investment and the industry's recent realized productivity improvements to better understand the role and expected returns of IT investments.; Unlike many prior studies that use economic models to investigate IT investment as a production factor input, this study adopts an organizational change perspective. A framework of this type is a novel approach to research on this topic and supports the exploration of the role of IT investment at a level significantly deeper than most prior studies.; The study's methodology includes a longitudinal, in-depth examination of a single major railroad's complete software development applications portfolio. Although there is only one firm included, this railroad is among the largest within the industry and alone represents approximately 15% of the industry's total revenue (Railroad Facts, 1996, p. 9, 70).; Both descriptive and statistical analysis techniques are used to explore the relationship between IT investment and firm performance. The findings indicate that IT investment is a management response to perceived internal and external conditions. These conditions include competitive threats, the need increase operational control, the requirement to decrease expenses, and the need to improve customer satisfaction. Performance gains resulting from IT investment are found to be related to firm performance based on the role of the IT investment. This finding leads to the recommendation that the role of IT be considered whenever evaluating IT investment returns. Only by evaluating the results of IT investments based on the managerial objectives of the organizational change will researchers be able to determine how and why IT investments contribute to improved firm performance.