When Does Information Technology Investment Matter for Accounting Information System Quality? The Moderating Role of Firm Age

Evaluating the effectiveness of Information Technology (IT) investments has always been an elusive but important goal of IS researchers. This study builds on a prior study that examined changes in the market value of the firm as reflected by the stock price in response to IT investment announcements. Data on stock prices were analyzed for 238 publicly traded companies. In addition to the stock price analysis, reaction of trading volume to the announcements was also examined to identify whether IT investment announcements affect investors' beliefs about IT value. Potentially confounding factors such as industry, size, and time lag effects were also analyzed. Size and time lag effects were found for all IT investment announcements. Reactions of price and volume were negatively related to firm size and became more positive over time. The positive excess return for smaller firms shows that smaller firms can leverage the lower price/performance ratio of new IT and reap greater rewards from IT investments than larger firms. Also, the result of time lag effect demonstrates that the stock market has recently begun to identify both tangible and intangible benefits of IT investments. For recent IT investment announcements, industry classification and firm size also affected the reactions of stock price to the announcements. This study provides optimism on the stock market reaction to IT investment announcements as well as further insight into the study of IT impacts on organizational performance.

This study establishes a dynamic model under real options analysis to analyze the optimal timing decision of information technology (IT) investments when the output price for firms is stochastic and benefits of IT investments are arisen from the increasing output price, increasing sale, and cost savings. We derive the closed form expression of the timing of IT investments and furthermore prove that IT investments rise at an increasing rate in economic booms and fall in economic busts. This study finds that increasing (decreasing) price volatility will delay (advance) the timing of IT investments. Increasing IT investments, however, may not delay the timing of IT investments. In addition, the decreasing (increasing) efficiency and increasing (decreasing) depreciation of IT investments will delay (advance) the timing of IT investments.

PurposeThis research investigates the differential impact of information technology (IT) investments based on their features, such as investment in data management capability, security improvement, IT outsourcing or new IT infrastructure. The Long-Horizon Event Study (LHES) is essential for providing a more appropriate measure of the value of IT investments because firms' strategic decisions often set long-horizon and large-scale organizational goals, and there is inherent uncertainty regarding future cash flows resulting from these investments. Therefore, the authors aim to analyze how announcements of IT investments affect the firm's abnormal stock returns over the long term and to compare the differential impact of different features of IT investment.Design/methodology/approachThe authors gathered IT investment announcements and stock data of listed firms in Korea between 2000 and 2018, and the monthly stock market returns over the 5 years after the announcements. To measure the differential impact of IT investments based on the investment features, the authors separate announcements data into five groups. A LHES is used to estimate the long-term effects of IT investment announcements.FindingsThe results indicate that announcements of IT investments had a long-term positive effect on firm performance. Additionally, the findings reveal differential effects of IT investments across industries and investment features. Notably, news of self-developed IT investments and IT investments in the manufacturing industry had significantly positive effects. However, contrary to common belief, announcements of investments in so-called essential IT areas such as data, security, or new IT infrastructure did not yield significant effects.Originality/valueAlthough the need for LHES has been emphasized in information systems research, few follow-up studies have been conducted since Barua and Mani (2018). This is primarily due to the challenges associated with collecting large-scale abnormal stock returns data over a long horizon. This research represents the first LHES to investigate the differential impact of IT investments based on their features. By doing so, this study can provide valuable insights for decision-makers within firms, helping them understand the time horizon of market outcomes of IT investments based on their features. Furthermore, this work extends the scope of LHES to comprehend the differential impacts of investment features. For instance, managers need to grasp that so-called essential IT investments, such as data management, security enhancements or new IT infrastructure, may not necessarily generate long-term market value.

PurposeThis paper aims to examine the influence of information technology (IT) investment, including innovative IT investment and non-innovative IT investment, on comprehensive enterprise financial performance in a developing country, China.Design/methodology/approachThis paper applies the method proposed by Barber and Lyon to construct the control group to study the impact of IT investment on financial performance of enterprises, using a sample of 229 IT investment announcement data of Chinese listed companies between 2011 and 2015.FindingsThe analysis of the financial benefits of these IT implementations yields mixed results. The results show that companies investing in IT can significantly improve profitability both the implementation and post-implementation periods for the full sample, improve the solvency only during the implementation phase, improve the growth ability after implementation time and cannot reduce business costs in all periods. At the same time, the authors find that, compared with non-innovative IT investment, the innovative samples do not achieve better financial performance, except the profitability financial indicator.Research limitations/implicationsThere are several limitations in this research. First, there is no large sample about the IT investment information data set in China, so this study was compelled to use limited sample data from China; hence, this could lead to errors of too early generalization. Second, the firms in the sample are all in China’s listed companies, so this may either not accurately or possibly could reflect the entire environment of developing countries.Originality/valueFirst, it extends the scope of the established literature by examining the influence of IT investment with China’s public firms data and IT investment to see if such spending has had an influence on corporate financial performance. Second, there is a lack of research on the impact of IT investment on comprehensive financial performance of an enterprise, compared with the previous one-sided financial performance, such as profitability or financial cost. Third, as far as the authors are aware, there are no studies on the impact of IT investment on firm financial performance based on innovative and non-innovative classification.

This article provides a new way of thinking about managerial discretion in information technology (IT) investment decisions. We delve into the existence, antecedents, and consequences of sticky IT investment behavior, an understudied managerial deliberate resource commitment decision in response to changes in sales. Guided by downsizing theory, we initially theorize and find that IT investments exhibit stickiness: IT investments move downward less for sales decreases than they move upward for equivalent increases. Then drawing upon agency theory, adjustment costs theory, and managerial expectations theory—which influence managers’ motivation for downsizing—we predict and demonstrate that managers’ empire-building incentives, their avoidance of adjustment costs, and their optimism regarding future sales strengthen their engagement in sticky IT investments. Furthermore, we introduce and operationalize three novel measures of firm-specific IT investment stickiness that reflect slack IT resources during sales downturns, respectively, capturing the influence of empire-building incentives, adjustment costs, and managerial optimism. Built on these measures, we uncover that the degree of stickiness in a firm's IT investments offers additional insights into predicting future performance, growth in future IT labor, and growth in future sales. Overall, our work formulates an integrative conceptual framework for understanding sticky IT investment that incorporates the presence and antecedents of managers’ asymmetric IT investment decisions, as well as the implications of firm-specific sticky IT investment for forecasting future corporate outcomes. We discuss these findings and their practical and theoretical implications in detail.

PurposeThe purpose of this study is to deepen the understanding of the effects of information technology (IT) investment on firm innovation performance and examining the investment paradox effect in China.Design/methodology/approachUsing a sample of China’ public firms IT investment data between 2010 and 2016, the authors establish a test model of IT investment and innovation performance.FindingsThe result indicates that IT investment in firms have no effect on innovation performance in the investment period. However, in the full sample and manufacturing sample, the IT investment has a significant positive effect on innovation performance in the post-investment years. In addition, this study finds that large companies and low-age companies may contribute more to innovation when firm investment in IT.Research limitations/implicationsThere are several limitations in this research. First, the authors are failed to obtain a larger sample about the IT investment information data set in China, so this study was compelled to use limited sample data from China, hence, this could lead to errors of too early generalization. Second, the authors use the number of invention patent applications to represent the performance of enterprise innovation, which may not show enterprise innovation effectively. Third, the firms in the sample are all in China Listed Companies, so this may not accurately reflect the entire environment of firm innovation performance, and could possibly.Practical implicationsThe research confirms that there is a paradox and time lag effect in IT investment, which enterprises should pay attention to.Originality/valueExisting research confirms that corporate IT investments can bring new products or services. However, the authors still do not know whether IT investment has improved the company’s ability of innovation. This study will fill this gap and the industry effect and time lag effect of the influence of IT investment on innovative performance are also examined.

Purpose – Since the 1970s productivity growth in most economies slowed, while information and communication technology expenditures increased: the “information technology (IT) productivity paradox.” Some researchers reported an end to the paradox, but this is most likely due to IT industry growth approaching the Year 2000 phenomenon. The purpose of this paper is to update IT productivity paradox research. Design/methodology/approach – For comparability this research replicates methods employed by previous studies but employs a two-level approach: first macroeconomic indicators; second labor and multi-factor productivity. Findings – Findings suggest IT investment has high positive correlation with gross domestic product growth, but not labor or multi-factor productivity. This ambiguity suggests the paradox is still poorly understood. Research limitations/implications – The findings are not conclusive; the authors cannot confirm or reject the existence of the productivity paradox. The global recession and banking crisis makes it prudent to wait until recovery before analyzing data from that period. Practical implications – Lack of convincing evidence supporting positive effects from IT investment suggests some firms benefit from IT investment, but not others, and that IT investment has questionable returns. Social implications – Firm level studies might find IT investment benefits some firms, but lack of convincing macroeconomic level evidence of positive effects of IT investment suggests the paradox still exists. Originality/value – This research updates the IT productivity paradox demonstrating the phenomenon is still poorly understood and thus worthy of further study, questioning the benefits of IT investment for industry and national economies.

Organizations are spending increasing amounts on information technology (IT). However, the existing literature provides little evidence of a relationship between IT investment and organizational strategic performance. Based on extensive reviews of past research, the authors relate comprehensive sets of IT investment measures (independent variables) and organizational strategic performance measures (dependent variables) to answer some of the questions raised by managers with regard to the benefits of IT investment. Five ratios were used to represent investment in IT while six ratios represented organizational strategic performance. Although the individual IT investment variables were found to be only weakly related to organizational strategic performance, they became significant predictors of performance when grouped and analyzed by means of canonical correlation. The results provide important insights regarding the benefits of IT investment. >

PurposeThis study tests the impact of family control on information technology (IT) investment and IT adoption in MSMEs in India.Design/methodology/approachThis study employs a survey research design. Micro, small, and medium enterprise (MSME) owners in India were surveyed to test the impact of family control on IT investment and IT adoption.FindingsOur empirical results show that family control — measured by family ownership, family member firm management, and/or family CEO duality — increases IT investment and IT adoption in India. Family ownership increases the chances of IT investment and IT adoption by 19.24% and 38.40%, respectively. Firm management by family members increases the chances of IT investment and IT adoption by 11.29% and 18.29%, respectively. CEO duality increases the chances of IT investment and IT adoption by 51.13% and 258%, respectively. Thus, CEO duality has a higher impact on IT investment and IT adoption than family ownership and firm management by family members.Research limitations/implicationsThe empirical results may be generalized only to MSMEs similar to those surveyed in this study. Additionally, this study relied on the perceptions and judgments of MSME owners.Originality/valueThis study contributes to the literature on the impact of family control on IT investment and IT adoption in the developing economics. This study can help scholars to develop further studies in the family control area. Our findings may help MSME owners to increase family control to survive and prosper into the future. Additionally, MSME management consultants may find the empirical results useful to provide consulting services.

This study documents variation across industries in creditors’ perceptions of the risk of information technology (IT) investments. The associations we document between IT investments and both initial bond ratings and yield spreads suggest that credit-rating agencies and bond investors consider IT investments in automate and informate industries less risky than those in transform industries. We document that IT investments are associated with more volatile future cash flows in transform industries than in automate or informate industries. The findings indicate that bond investors prefer IT investments in automate industries, where the cash flow payoffs to IT investment are smaller but more stable than in transform industries. Overall, these findings provide the important insight that bondholders’ perceptions of IT investments vary across industries based on bondholders’ aversion to the riskiness and the lack of collateralizability of IT investments. Senior managers should recognize that IT investments have implications for both operational performance and financing costs (e.g., costs of debt) of the firm, and they should consider the potential financial benefits of increased IT capabilities, such as the willingness of corporate bond investors to accept lower financing costs.

We examine the effect that investments in information technology (IT) have on downside risk profiles of companies that made public announcements of their investments in technology. Given the limitations of financial and decision theory perspectives on risk, we adopt the strategic management perspective that stresses downside risk as an important alternative measure of firm performance. We examine whether different types of IT investments have a differential impact on firm downside risk. Drawing on the resource-based view of the firm and the real options perspective, we find evidence that IT investments and their timing influence organizational downside risk. Transformational and informational IT investments lead to a reduction in downside risk only if they lead to strategic IT investments in the industry. For competitive necessities such as IT investments that automate business functions, a reduction in downside risk is realized by investing in parity with industry participants. Our study contributes to the literature by offering an alternative perspective on the benefits of IT investments, particularly where no apparent incremental financial results may be evident. It also generates insights on IT investment strategies that may help firms keep up with or stay ahead of the competition.

The extant literature has provided valuable insights into the post-failure behavior of organizations, highlighting two distinct tendencies: failure learning and threat rigidity. While failure learning involves organizations embracing change and seeking improvements after experiencing failures, threat rigidity leads to a more conservative and resistant approach to change during such times. In our study, we used a pioneering approach by integrating these seemingly competing perspectives within the context of data breaches. Employing a propensity score matching (PSM)-combined-difference-in-differences (DiD) approach, we uncovered a dual impact of data breaches on firms’ information technology (IT) investment—after data breaches, firms tend to increase their IT investment intensity (a promoting effect) while simultaneously reducing their new IT investments (an inhibiting effect). Furthermore, we found that a firm with a strong quality culture exhibits a stronger tendency to increase its IT investment intensity following a data breach, while a firm highly valuing innovation demonstrates a weaker trend in reducing new IT investments after a breach. In post hoc analyses, we found that the impact of data breaches on IT investments is contingent on a series of factors related to the nature of the breach and the specific type of IT investments considered. Overall, our study provides valuable insights into the complex and diverse relationship between data breaches and IT investments in firms.

The relationship between Information technology (IT) investment and business performance has long been the subject of debate by academics and practitioners. Despite the fact that firms nowadays have made substantial investments in information technology, studies in IT investment have often found little persuasive evidence that IT investment created strong leverage on the value of the firm. Although capabilities of IT infrastructure services are one of the most critical issues facing IS managers, previous studies with a focus on IT infrastructure services is very limited. We attempt to explore the links between various IT infrastructure service investment strategies, a firm's IT infrastructure services, and business performance. The result shows that organizations taking IT flexibility strategy strongly respond to having a larger, more capable IT infrastructure while those with utility IT investment strategy have a negative relationship with their IT infrastructure services provided. There is a positive relationship between organizational IT infrastructure services capability and business performance. The existence of a non-significant relationship between IT investment and business performance reveals that increasing. IT investments without enhancing IT infrastructure services capability might be responsible for the negative results in business performance despite increased IT expenditure.

The increase in information technology (IT) investment and organizational competition are the reasons for the evaluation of investment decisions in the IT field. The evaluation that needs to be done is to set priorities for IT investments, given the limited resources and human resources. The determination of IT investment priorities must be carefully considered by managing effective IT investments to provide positive results for the organization. The purpose of this research is to investigate IT investment governance and to investigate how to determine and govern IT investment projects' priorities in improving IT performance and organizational performance at one of the largest universities in Indonesia. The method used in this research is a qualitative method. Data collection techniques in this study are interviews and document reviews, and the NVIVO application is used to analyze the data. The results of the study show that IT investment governance at the university is still in the process of development, but has been implemented quite good. This is indicated by the existence of functional structures, processes, and relational mechanisms that are following several policies and regulations applied at the university. Although it has been carried out quite well, IT investment governance cannot be said to be effective because it still has weaknesses, namely that the university still does not have a clear IT governance standard or framework.

Since the popular of the term IT in the mid-1980s, the literature has attempted to investigate the benefits of IT investment, due to the enormous potential of IT investment to achieve competitive advantage and better firm performance. It can be indicated from previous literatures that national economic growth and firm performance are influenced by IT investment. However, limited number of studies are performed at industry level. This section shows significant line of thought to investigate the impact of IT investment on economic growth and industry performance. The main contribution of this study is to add the relationship between IT investment and business performance at industry level. The results indicated that the total amount of IT investment had significant positive association with business performance at both economic and industry levels for almost all the industries covered in the study. Keywords Information Technology (IT), Investment, business performance, economic growth, labor productivity