Does operations capability enhance or impede the relationship between information technology capability and firm performance?

The information technology (IT) literature suggests that IT capability enhances firm performance. Yet recent studies have challenged this positive relationship. Based on the capability hierarchy theory, we propose a theoretical model to study how operations capability moderates the effects of IT capability on firm performance. We test the research hypotheses using data collected from 278 U.S. and 326 Chinese firms. We find some interesting, but counterintuitive, results: (1) at low levels of operations capability, IT capability decreases firm performance; (2) at medium levels of operations capability, IT capability–firm performance relationship becomes insignificant; (3) at high levels of operations capability, IT capability increases firm performance. We discuss theoretical contributions and implications for practices.