Information Technology Effects on Firm Performance as Measured by Tobin's q

Anandhi S. Bharadwaj, Sundar G. Bharadwaj and Benn R. Konsynski
Additional contact information
Anandhi S. Bharadwaj: Goizueta Business School, Emory University, Atlanta, Georgia 30322
Sundar G. Bharadwaj: Goizueta Business School, Emory University, Atlanta, Georgia 30322
Benn R. Konsynski: Goizueta Business School, Emory University, Atlanta, Georgia 30322

Management Science, 1999, vol. 45, issue 7, 1008-1024

Abstract: Despite increasing anecdotal evidence that information technology (IT) assets contribute to firm performance and future growth potential of firms, the empirical results relating IT investments to firm performance measures have been equivocal. However, the bulk of the studies have relied exclusively on accounting-based measures of firm performance, which largely tend to ignore IT's contribution to performance dimensions such as strategic flexibility and intangible value. In this paper, we use Tobin's q, a financial market-based measure of firm performance and examine the association between IT investments and firm q values, after controlling for a variety of industry factors and firm-specific variables. The results based on data from 1988--1993 indicate that, in all of the five years, the inclusion of the IT expenditure variable in the model increased the variance explained in q significantly. The results also showed that, for all five years, IT investments had a significantly positive association with Tobin's q value. Our results are consistent with the notion that IT contributes to a firm's future performance potential, which a forward-looking measure such as the q is better able to capture.

Keywords: information technology and firm performance; business value of information technology; information technology and Tobin's q ratio; information technology and intangible value (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (175)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.45.7.1008 (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:ormnsc:v:45:y:1999:i:7:p:1008-1024

Access Statistics for this article

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