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The Impact of Information Technology Investments on Firm Performance and Evaluation: Evidence from Newly Industrialized Economies

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  • Kar Yan Tam

    (Department of Information and Systems Management, School of Business and Management, Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

Abstract

The impact of information technology (IT) investments on firm performance has been the subject of active research in recent years. However, findings of almost all studies are based on data collected in the United States. Little work has been done elsewhere to validate these results and to see if they are applicable across national boundaries. In this study, we fill this gap by comparing four newly-industrialized economies (NIEs) with regard to the impact of IT capital on business performance. Secondary data collected from various sources are used to assess the impact over the period from 1983 to 1991. Findings based on four business measures and a market valuation model based on Tobin's q are reported. While the current results are consistent with work done in the United States in general, discrepancies among the four NIEs are observed. Combined with findings from previous work, three pieces of evidence seem to emerge that are generally observed across country boundaries. First, IT investment is not correlated with shareholder's return. Second, there is little evidence that the level of computerization is valued by the market in developed and newly-developed countries. Third, there is no consistent measurement of IT investment as indicated by the mixed results across different performance ratios. Modeling and measurement concerns expressed in previous U.S.-based studies are also observed in our comparative study. Our findings provide a starting point to accumulate a body of comparative studies for the development of a theory that links IT investment, firm performance, and macro factors such as national technology policy in an integrated framework.

Suggested Citation

  • Kar Yan Tam, 1998. "The Impact of Information Technology Investments on Firm Performance and Evaluation: Evidence from Newly Industrialized Economies," Information Systems Research, INFORMS, vol. 9(1), pages 85-98, March.
    • Handle: RePEc:inm:orisre:v:9:y:1998:i:1:p:85-98
    DOI: 10.1287/isre.9.1.85
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    1. Philip M. Rosenzweig, 1994. "When Can Management Science Research Be Generalized Internationally?," Management Science, INFORMS, vol. 40(1), pages 28-39, January.
    2. Brian L. Dos Santos & Ken Peffers & David C. Mauer, 1993. "The Impact of Information Technology Investment Announcements on the Market Value of the Firm," Information Systems Research, INFORMS, vol. 4(1), pages 1-23, March.
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    1. Carmen Galve-Górriz & Ana Gargallo Castel, 2010. "Revisión del Estado de la sociedad de la información en Espana," Revista Facultad de Ciencias Económicas, Universidad Militar Nueva Granada, June.
    2. Neil Terry & Anne Macy & Amjad Abdullat, 2010. "Stock Market Volatility: A Comparison Of Computer And Cellular Hardware Companies," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 4(3), pages 11-24.
    3. Torsten Oliver Salge & David Antons & Michael Barrett & Rajiv Kohli & Eivor Oborn & Stavros Polykarpou, 2022. "How IT Investments Help Hospitals Gain and Sustain Reputation in the Media: The Role of Signaling and Framing," Information Systems Research, INFORMS, vol. 33(1), pages 110-130, March.
    4. Lin, Bou-Wen, 2007. "Information technology capability and value creation: Evidence from the US banking industry," Technology in Society, Elsevier, vol. 29(1), pages 93-106.
    5. Kartik Kalaignanam & Tarun Kushwaha & Jan-Benedict E. M. Steenkamp & Kapil R. Tuli, 2013. "The Effect of CRM Outsourcing on Shareholder Value: A Contingency Perspective," Management Science, INFORMS, vol. 59(3), pages 748-769, July.
    6. S J Ho & S K Mallick, 2010. "The impact of information technology on the banking industry," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(2), pages 211-221, February.
    7. Rajiv Kohli & Sarv Devaraj, 2003. "Measuring Information Technology Payoff: A Meta-Analysis of Structural Variables in Firm-Level Empirical Research," Information Systems Research, INFORMS, vol. 14(2), pages 127-145, June.
    8. Gangopadhyay, Partha & Jain, Siddharth & Bakry, Walid, 2022. "In search of a rational foundation for the massive IT boom in the Australian banking industry: Can the IT boom really drive relationship banking?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    9. Aurore J. Kamssu & Brian J. Reithel & Jennifer L. Ziegelmayer, 2003. "Information Technology and Financial Performance: The Impact of being an Internet-Dependent Firm on Stock Returns," Information Systems Frontiers, Springer, vol. 5(3), pages 279-288, September.
    10. Chun-mei Deng & Zhi Xiao & Ling Zhou, 2017. "Information systems and internal control: evidence from China," Electronic Commerce Research, Springer, vol. 17(3), pages 361-377, September.
    11. Guido Schryen, 2010. "Preserving Knowledge on IS Business Value," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 2(4), pages 233-244, August.
    12. John D’Arcy & Idris Adjerid & Corey M. Angst & Ante Glavas, 2020. "Too Good to Be True: Firm Social Performance and the Risk of Data Breach," Information Systems Research, INFORMS, vol. 31(4), pages 1200-1223, December.
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    14. Prasad, Acklesh & Heales, Jon, 2010. "On IT and business value in developing countries: A complementarities-based approach," International Journal of Accounting Information Systems, Elsevier, vol. 11(4), pages 314-335.
    15. Vincent J. Shea & Kevin E. Dow & Alain Yee-Loong Chong & Eric W. T. Ngai, 2019. "An examination of the long-term business value of investments in information technology," Information Systems Frontiers, Springer, vol. 21(1), pages 213-227, February.
    16. Lin, Winston T. & Chuang, Chia-Hung & Choi, Jeong Hoon, 2010. "A partial adjustment approach to evaluating and measuring the business value of information technology," International Journal of Production Economics, Elsevier, vol. 127(1), pages 158-172, September.
    17. Albert H. Segars & Varun Grover, 1999. "Profiles of Strategic Information Systems Planning," Information Systems Research, INFORMS, vol. 10(3), pages 199-232, September.
    18. Chen, Yueh H. & Lin, Winston T., 2009. "Analyzing the relationships between information technology, inputs substitution and national characteristics based on CES stochastic frontier production models," International Journal of Production Economics, Elsevier, vol. 120(2), pages 552-569, August.
    19. Zhiguang ZHANG & Haiqing HU & Winston T. LIN, 2019. "Analyzing the Impacts of Unobserved National Characteristics on Economic Performance of Information Technology based on a Partial Adjustment Approach With Dynamic and Variable Speed of Adjustment," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 128-142, March.
    20. Shu-Chuan Chen & Da-Sheng Lee & Chien-Yi Huang, 2021. "Evaluating the Sustainable Operating Performance of Electronics Industry Groups: Taiwanese Firms in Mainland China," Sustainability, MDPI, vol. 13(21), pages 1-28, October.
    21. Virginia Franke Kleist, 2003. "An Approach to Evaluating E-Business Information Systems Projects," Information Systems Frontiers, Springer, vol. 5(3), pages 249-263, September.
    22. Jan Brocke & Christian Sonnenberg & Alexander Simons, 2009. "Value-oriented Information Systems Design: The Concept of Potentials Modeling and its Application to Service-oriented Architectures," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 1(3), pages 223-233, June.
    23. Lin, Winston T. & Chiang, Chung-Yean, 2011. "The impacts of country characteristics upon the value of information technology as measured by productive efficiency," International Journal of Production Economics, Elsevier, vol. 132(1), pages 13-33, July.
    24. Vincent J. Shea & Kevin E. Dow & Alain Yee-Loong Chong & Eric W. T. Ngai, 0. "An examination of the long-term business value of investments in information technology," Information Systems Frontiers, Springer, vol. 0, pages 1-15.

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