A Study of the Impact of Information Technology Investment on Firm Performance

This paper examines the role of information technology investment in the American railroad industry during the 1990s, a period during which railroad productivity dramatically increased. With the onset of deregulation and the resulting market forces driving down rates, the productivity increases have been essential for the survival of the railroads. 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. The study's methodology includes an 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.