The Value Relevance of Announcements of Transformational Information Technology Investments

Abstract

In this paper, we examine the influence of IT strategic role to extend the findings of Im et al. (2001), Chatterjee et al. (2002) and Dos Santos et a!. (1993). Specifically, we demonstrate that IT strategic role can explain how IT investments in each of the IT strategic roles might affect the firm's competitive position and ultimately firm value. We find positive, abnormal returns to announcements ofl Tinvestments by firms making transformative IT investments, and with membership in industries with transform IT strategic roles. The results of previous research are not found to be significant when IT strategic role is included as an explanatory variable. These results provide support for the value of capturing the IT strategic role of a firm's IT-related competitive maneuvering in studies striving to understand the conditions under which IT investments are likely to produce out-of-the-ordinary, positive returns.

Determinants of Information Technology Expenditure: A Contingent Model

“…This time period was utilized because it was after the year of 1994 that the Internet emerged as a recognized and viable business platform, which brought about major change in the industry strategic role of IT (Chatterjee, et al, 2001;Dehning, et al, 2003a). Since one of our main interests is to investigate the effect of the changing role of IT, this period provides a suitable context for us to investigate the dynamic nature of contingencies, as well as providing enough variance for the industry strategic IT role.…”

“…IT expenditure, considered as a strategic decision (Dehning, Richardson, & Zmud, 2003a; Kearns & Sabherwal, 2007) is also driven by the managers' attempts to align their business strategy with the organizational and environmental contingencies. Thus, contingency theory is an appropriate framework for explaining IT expenditure.…”

Stock market reaction to ict implementation: model based on comparison of developed and transition economies

“…The fact that ICT implementation leads to an abnormal returns of companies confi rmed also [4], [7], [27], [36] etc. [25] found positive abnormal excess for China companies, but on the other hand not for US ones.…”

Communications of the IBIMA

“…Although Markus's classic study (1983) provided invaluable insights of politics in IT implementation, the mainstream research endeavor still predominantly focuses on cost-efficient assumption of information technology such as IT investment (Dehning et al, 2003), productivity (Thatcher and Oliver, 2001), business profitability (Hitt and Brynjolfsson, 1996), and consumer value (Mukhopadhyay et al, 1995). While there is no doubt that these research studies exert profound influence on ICT research and business practice, they tend to overlook or simplify some underlying issues that could significantly alter the implementation results (Markus, 1981, Myers, 1994.…”