Technology usage and innovation: Its effect on the profitability of SMEs

Purpose – The purpose of this paper is to determine if firms that invest in information technology (IT) and innovate are more profitable than those that do not and to analyze how firms in general and on the island of Puerto Rico, in particular, have found an avenue to compete, grow, and become profitable using technology in production and service, and by extending into the use of electronic commerce. Some recent investigations find that investments in IT do not lead to productivity improvements as measured by accounting standards. Earlier research identified four factors that can lead to such a paradoxical finding.Design/methodology/approach – The present investigation was undertaken to evaluate, utilizing a case method approach, the extent to which small and medium firms in different industries are prone to this paradoxical condition. Six firms identified in Puerto Rico were contacted to obtain both qualitative and quantitative information from senior officers and CEOs through personal and telephone inte...