Limits to value in electronic commerce-related IT investments

Abstract

We extend the limits to the value model of Davern and Kauffman to explore market and process-level factors that impact value flows to firms for their information technology (IT) investments. We characterize IT value in terms of potential value and realized value, and show how each is subject to different effects-limits to value-that diminish the benefits of the investment. Our typology identifies barriers specific to the valuation process (industry and organizational barriers), and to the conversion process (resource, knowledge and usage barriers). Following the development of our analytical framework from existing economic and organizational theories of IT valuation and technology adoption and diffusion, we analyze a series of case studies of Internet-based travel reservation systems in electronic commerce (EC). These cases provide evidence in support of the usefulness of the framework, and illustrate the extent of the difficulties faced by travel industry firms in making their investments in EC systems pay off.

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