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A Lag Effect of IT Investment on Firm Performance

Author

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  • Sangho Lee

    (Korea Advanced Institute of Science and Technology, South Korea)

  • Soung Hie Kim

    (Korea Advanced Institute of Science and Technology, South Korea)

Abstract

This article discusses the positive effects of IT investment on firm financial performance when a distinct range of characteristics is examined. The relationship between IT investment and firm performance considering the information intensity of the industry is explored using a distributed lag model. Findings indicate both a positive effect and a positive lag effect of IT investment. The effects of IT investment in the high information-intensive industry are significantly larger than in the low information-intensive industry. Furthermore, a lagged effect of IT investment is larger than an immediate effect, regardless of the information intensity of the industry. We conclude that firms in the high information-intensive industry need to be more cognizant of performance factors when investing in IT investment than in the low information-intensive industry. Moreover, it is necessary to consider the time lag between IT investment and firm performance.

Suggested Citation

  • Sangho Lee & Soung Hie Kim, 2006. "A Lag Effect of IT Investment on Firm Performance," Information Resources Management Journal (IRMJ), IGI Global, vol. 19(1), pages 43-69, January.
    • Handle: RePEc:igg:rmj000:v:19:y:2006:i:1:p:43-69
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    Cited by:

    1. Xiaoting Liu & Jichang Dong & Kangxian Ji & Xiuting Li & Shijie Xu, 2022. "Investigating the ‘Short Pain’ and ‘Long Gain’ Effect of Environmental Regulation on Financial Performance: Evidence from Chinese Listed Polluting Firms," Sustainability, MDPI, vol. 14(4), pages 1-18, February.
    2. Millán, José María & Lyalkov, Serhiy & Burke, Andrew & Millán, Ana & van Stel, André, 2021. "‘Digital divide’ among European entrepreneurs: Which types benefit most from ICT implementation?," Journal of Business Research, Elsevier, vol. 125(C), pages 533-547.
    3. Xu, Xiaobo & Zhang, Weiyong & Li, Ling, 2016. "The impact of technology type and life cycle on IT productivity variance: A contingency theoretical perspective," International Journal of Information Management, Elsevier, vol. 36(6), pages 1193-1204.
    4. Khallaf, Ashraf, 2012. "Information technology investments and nonfinancial measures: A research framework," Accounting forum, Elsevier, vol. 36(2), pages 109-121.
    5. Saridakis, George & Lai, Yanqing & Mohammed, Anne-Marie & Hansen, Jared M., 2018. "Industry characteristics, stages of E-commerce communications, and entrepreneurs and SMEs revenue growth," Technological Forecasting and Social Change, Elsevier, vol. 128(C), pages 56-66.
    6. Winarno, Wahyu Agus & Tjahjadi, Bambang & Irwanto, Andry, 2021. "Time Lag Effects of IT Investment on Firm Performance: Evidence from Indonesia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(3), pages 89-101.
    7. Lunardi, Guilherme Lerch & Becker, João Luiz & Maçada, Antonio Carlos Gastaud & Dolci, Pietro Cunha, 2014. "The impact of adopting IT governance on financial performance: An empirical analysis among Brazilian firms," International Journal of Accounting Information Systems, Elsevier, vol. 15(1), pages 66-81.
    8. Patalas-Maliszewska Justyna, 2012. "Assessing the Impact of Erp Implementation in the small Enterprises," Foundations of Management, Sciendo, vol. 4(2), pages 51-62, December.

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