Are New IT-Enabled Investment Opportunities Diminishing for Firms?

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Are New IT-Enabled Investment Opportunities Diminishing for Firms?

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Title: Are New IT-Enabled Investment Opportunities Diminishing for Firms?
Author(s):
Dos Santos, B. L.;
Zheng, Zhiqiang (Eric);
Mookerjee, Vijay S.;
Chen, Hongyu
Format: text
Item Type: article
Keywords: Information technology--Economic aspects
Stock price forecasting
Abstract: Today, few firms could survive for very long without their computer systems. IT has permeated every corner of firms. Firms have reached the current state in their use of IT because IT has provided myriad opportunities for firms to improve performance and, firms have availed themselves of these opportunities. Some have argued, however, that the opportunities for firms to improve their performance through new uses of IT have been declining. Are the opportunities to use IT to improve firm performance diminishing? We sought to answer this question. In this study, we develop a theory and explain the logic behind our empirical analysis; an analysis that employs a different type of event study. Using the volatility of firms' stock prices to news signaling a change in economic conditions, we compare the stock price behavior of firms in the IT industry to firms in the utility and transportation and freight industries. Our analysis of the IT industry as a whole indicates that the opportunities for firms to use IT to improve their performance are not diminishing. However, there are sectors within the IT industry that no longer provide value-enhancing opportunities for firms. We also find that IT products that provided opportunities for firms to create value at one point in time, later become necessities for staying in business. Our results support the key assumption in our work. © 2012 INFORMS.
ISSN: 1047-7047
Persistent Link: http://dx.doi.org/10.1287/isre.1110.0370
http://hdl.handle.net/10735.1/3204
Terms of Use: © 2012 INFORMS

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