An Empirical Examination of The Relationship between Capability Maturity and Firm Performance across Manufacturing and IT Industries

Abstract

We investigate the effect on firm performance of the motivation for applying maturity models in manufacturing and information technology organizations. We expect the association between profitability and maturity models to be less if motivated by external contract requirements (e.g., for certain government contracts), than if motivated internally to improve processes. Using a sample of firm-year observations for 1,105 SEC registrants in the manufacturing (Standard Industry Classification (SIC): 3600∼3812) and IT industries (SIC: 7370∼7374) for 2017 and 2018, and CMMI information from the CMMI institute published appraisal results system, it is observed that 28 public firms (17 IT firm-years and 23 manufacturing firm-years) in the sample had CMMI appraisals between 2017 and 2018. We use logistic regression to test if the likelihood of CMMI appraisal is positively associated with government sales. The results support for the manufacturing industry, but not for the IT industry, prior research's assertion that maturity is a source for competitive advantage.