# Does ICT investment necessarily improve operational performance? An empirical analysis of health services firms in India

## TL;DR

This study examines how ICT investments affect the performance of healthcare firms in India, finding that while ICT reduces costs, it doesn't boost sales or profits without marketing efforts.

## Contribution

The study provides empirical evidence on the differential impact of accumulated versus contemporaneous ICT investment on healthcare firm performance in a developing economy.

## Key findings

- Accumulated ICT investment reduces operational costs, but contemporaneous ICT investment does not significantly affect operating expenses.
- ICT investment does not lead to increased sales or profits, indicating a disconnect between cost efficiency and productivity gains.
- Advertisement and marketing significantly improve sales and profits of health services firms.

## Abstract

The impact of investing in information and communication technology (ICT) on healthcare sector is widely debated. Specifically, the question of how ICT influences the performance of healthcare firms in developing economies is understudied. This study, therefore, examines the impact of ICT investment on the performance of health services firms in India.

The system generalized method of moment (GMM) is applied on a longitudinal dataset comprising of 378 firms from 2000 to 2023.

The study presents evidence on differential effect of contemporaneous and accumulated stock of ICT investment on three metrics of firm performance: operating expenses, sales, and profits. There are three key findings of the study. First, the accumulated stock of ICT leads to reduced operational costs. In contrast, contemporaneous investment in ICT is found to have an insignificant impact on operating expenses of firms. Second, ICT fails to convert the enhanced cost efficiency into higher sales and profits. This result highlights a disconnect between technological advancement and productivity gains. Third, advertisement and marketing (A&M) is found to have a significant, positive impact on the sales and profits of health services firms.

The study indicates that health services firms in India are able to utilize ICT to achieve cost efficiency but not strategic positioning in terms of providing differentiated, high-quality healthcare service. Hence, mere ICT investment cannot be considered a unique resource for the firms. It is imperative for health services firms to develop and promote inimitable value propositions. As firms must continuously invest and upgrade ICT to enhance the quality of healthcare services, they should concomitantly spend on advertisement and marketing (A&M) to improve the perception and brand value among existing and potential patrons.