The “Productivity Paradox” of information technology (IT) has attracted much attention of both managers and researchers of Information Economics, since its appearance in 1988. Many scholars had done numerous researches, with the outcomes coming in different directions. The inconsistence of their conclusions implied that the linear relationship between IT investment and business performance was not stable, let alone enabling managers to realize the reason why businesses couldn’t benefit from investing in IT.

The IT Capability view, which comes from the Resource-Based Theory, can succeed in revealing the chaotic relationship between IT investment and business performance. However, related research is not present yet. The integrated investigation of how the construct of IT Capability should be built and the underlying variables are lacking. Therefore, the goal of this article is to develop the constructs and their variables of IT Capability in regard to the Resource-Based Theory so that firms facing the challenge of exploiting IT can have a clear and concise guide.

With the survey of more than one hundred IT managers, the analysis showed that IT Capability of a firm should include three dimensions: IT Infrastructure, Human-IT Resources and IT-Enable Intangibles. Ten constructs and thirty-five variables were identified. By formulating this significant intervening variable between IT investment and business performance, the research outcomes can be used in many areas of MIS.