Information Technology, Revenues, and Profits: Exploring the Role of Foreign and Domestic Operations

Sunil Mithas (), Jonathan Whitaker () and Ali Tafti ()
Additional contact information
Sunil Mithas: Robert H. Smith School of Business, University of Maryland, College Park, Maryland 20742
Jonathan Whitaker: Robins School of Business, University of Richmond, Richmond, Virginia 23173
Ali Tafti: College of Business Administration, University of Illinois at Chicago, Chicago, Illinois 60607

Information Systems Research, 2017, vol. 28, issue 2, 430-444

Abstract: How does information technology (IT) enable firms to globalize their operations and achieve higher foreign profits? We use archival data for multinational firms publicly traded in the United States for the years 1999–2006, and find indirect evidence for the role of IT to help firms achieve higher foreign profits through revenue growth rather than cost reduction. Our findings suggest that foreign responsiveness plays a more important role in generating foreign profits than does value chain structure. Our exploratory analyses for the effect of IT on domestic revenues and profits suggest some evidence for equalization of returns across foreign and domestic operations. Among additional results, we find that research and development is positively associated with foreign revenues and foreign profits with an effect greater than that of IT, and advertising is positively associated with foreign revenues with an effect greater than that of IT. By documenting how IT creates value for firms through globalization, we extend the business value of IT and international business literatures that have so far touched on firm-level globalization benefits from IT only in passing. The findings can help managers decide how to allocate discretionary expenditures to achieve strategic objectives such as foreign and domestic revenues and profits, and the role of revenue versus cost mechanisms.

Keywords: globalization; internationalization; multinational corporations; foreign revenues; foreign profits; foreign costs; IT expenditures; business value of IT (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://doi.org/10.1287/isre.2017.0689 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:28:y:2017:i:2:p:430-444

Access Statistics for this article

More articles in Information Systems Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().