DuPont analysis of an IT-enabled competitive advantage

Recent research has shown that if used effectively, information technology (IT) can provide companies with superior performance relative to their direct competitors [MIS Q 24 (2000) 169; Inf Manage 38 (2000) 103]. The most common benefits from the successful use of IT are in increased profitability or efficiency. Return on assets (ROA) decomposition (DuPont analysis) allows financial statement users to examine where this IT-enabled competitive advantage shows up in accounting performance measures, whether in profitability, efficiency or both. Using a matched pair design, comparing companies with an IT-enabled competitive advantage to their direct competitors, we find that successful use of IT pays off in a combination of increased profitability and efficiency. This is different from a competitive advantage that is not IT-enabled, where the only performance advantage is in profitability. All data used in tests are available from public sources.