| In recent years, healthcare investment in information technology (IT) has seen a three-fold increase. The purpose of this research is to identify how organizational and environmental contextual factors mediated by IT strategy may influence hospital financial performance.; The conceptual framework of this study borrows from diffusion of innovation theory, strategic contingency theory, and the organizational research model of context-process-performance. Measures of IT strategy (IT munificence and IT innovativeness) are developed. The effects of organizational and environmental contextual factors on IT strategy are investigated. Moreover, the effects of IT strategy on financial performance are evaluated.; A cross-sectional study design is used. Data are obtained from the Dorenfest IHDS+ Database (Version 2), the American Hospital Association (AHA) Annual Survey, the Centers for Medicare & Medicaid Services (CMS) case mix index, the Area Resource File (ARF), and the CMS Minimum Cost Data Set.; IT munificence, a measure of IT strategy, fits the study data very well, supporting the hypothesis that IT munificence represents a strategy of hospital IT competency. For the second measure of IT strategy, IT innovativeness, supports the hypothesis that organizations adopt IT in a consistent time pattern.; Structural equation modeling tested the hypothesized causal relationships between organizational, environmental, and control variables, and the measurement models (IT munificence, IT innovativeness) and indicators of financial performance. The results show that IT munificence is positively associated with hospitals that have complex information processing needs, additional communication channels, and lower HMO penetration. Results show a positive association with hospitals that have additional communication channels and IT innovativeness.; IT munificence is positively associated with higher operating margins and lower operating expenses. IT innovativeness is positively associated with higher operating margins.; The study confirms the strength of using complementary theoretical frameworks to explain how organizations can respond to the environment through information technology strategies, and how strategies affect performance. The study also supports the use of the context-process-performance framework and a linear structural equation modeling (LIRSEL) technique when complex relationships are present. The results of this study provide a reasonable basis for explaining how the environment affects strategy, and how in turn strategy affects performance. |
