Are New IT-Enabled Investment Opportunities Diminishing for Firms?

Brian L. Dos Santos (), Zhiqiang (Eric) Zheng (), Vijay S. Mookerjee () and Hongyu Chen ()
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Brian L. Dos Santos: College of Business, University of Louisville, Louisville, Kentucky 40292
Zhiqiang (Eric) Zheng: School of Management, University of Texas at Dallas, Dallas, Texas 75080
Vijay S. Mookerjee: School of Management, University of Texas at Dallas, Dallas, Texas 75080
Hongyu Chen: School of Management, University of Texas at Dallas, Dallas, Texas 75080

Information Systems Research, 2012, vol. 23, issue 2, 287-305

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.

Keywords: information technology industry; business value of IT; event study; stock price volatility; financial market evaluation; IT and firm performance; macroeconomic news; IT value (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (10)

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