Information Technology Investment Decisions Research Articles

Does institutional investor influence information technology investment decisions and corporate performance?

Does institutional investor influence information technology investment decisions and corporate performance?

FACTORS INFLUENCING INFORMATION TECHNOLOGY INVESTMENTS IN SOUTH AFRICAN SMALL AND MEDIUM SIZE ENTERPRISES: A CONCEPTUAL STUDY

Small and medium-sized businesses (SMEs) are essential to South Africa's development and economic progress. Information technology (IT) expenditures have become crucial for SMEs to stay competitive in the quickly changing digital market. The purpose of this study is to examine the variables affecting IT investments in South African SMEs. The paper provides a thorough examination of the literature, the technique used, the findings, and a discussion of the implications through a conceptual study. The study's findings were derived from an analysis of 15 of the best and most relevant journal articles out of a total of 200 that were obtained and evaluated through Google Scholar that are related to factors impacting IT investments in South African SMEs. The objective was to aggregate the views of many scholars on the issues affecting IT investments in South African SMEs from their writings. The study's findings indicates that financial constraints, perceived return on investment (ROI), industry-specific factors, technological complexity and skills, perceived risk, outside influences, organisational culture, and leadership are among the factors that affect IT investments in South African SMEs. With regards to the study's findings, it is recommended that SMEs should work to understand and address the factors influencing information technology investments in South Africa so they can make informed IT investment decisions, and policymakers should foster an environment that encourages the uptake of technology and the expansion of this industry.

Juggling Information Technology (IT) Exploration and Exploitation: A Proportional Balance View of IT Ambidexterity

Firms in the digital age often do not know whether they should focus on exploiting their existing information technology (IT) resources or focus on exploring novel IT resources. They are often told to maintain a perfect balance between IT exploitation and IT exploration. In this study, we show that firms do not need to have the same levels of IT exploitation and exploration simultaneously to improve organizational agility. IT ambidexterity can be achieved by proportional balance between IT exploitation and exploration without forcing the perfect balance between the two. With finite resources, the maximal agility is not associated the perfect balance between IT exploitation and exploration; instead, it is associated with the proportional balance between IT exploitation and exploration, and the optimal proportional balance could vary based on the firm’s total resources allocated for IT ambidexterity. Our findings on proportional balance between IT exploitation and exploration could profoundly influence how firms make IT investment decisions. Rather than pursuing a perfect balance between IT exploitation and IT exploration, firms should consider both their organizational characteristics and environmental conditions to identify optimal levels of proportional balance between the two.

Experimental Evidence for the Effects of Organizational Culture on Managers’ IT Capital Expenditure Decisions

The research question addressed in this study is whether, in the context of an information technology investment decision, a manager will decide differently in a situation where there is no information about a firm’s organizational culture compared with a situation where the firm’s organizational culture is known to be either bureaucratic or innovative. This paper’s experimental results show that a person will decide differently in response to knowledge of the firm’s organizational culture. Results also show that for the same types of organizational culture there are no significant differences in investment decisions among participants classified as being provincial, transnational, or foreign. Additional analysis shows that personal risk profile is a significant covariate for the group of participants classified as provincials but has no effect on decision-making for participants classified as foreigners and transnationals.

How Firms Make Information Technology Investment Decisions: Toward a Behavioral Agency Theory

ABSTRACT While prior research has established that information technology (IT) investment has a significant impact on firm performance, relatively few studies have provided insights into the antecedents of IT investment decisions. By integrating the behavioral theory of the firm and agency theory, we propose a behavioral agency theory to explain performance shortfalls and corporate governance, which monitors and controls managers’ tendency of overinvestment or underinvestment in IT, as key drivers that jointly determine IT investment. As such, IT investment facilitates a firm’s problemistic search that generates innovation in response to performance gaps. We further examine the role of innovation outputs as a mediating mechanism linking IT investment to firm performance. Our econometric analysis of a large-scale panel dataset provides empirical evidence corroborating our theory. Overall, this study contributes a behavioral agency theory to deepen our understanding about performance drivers and outcomes of IT investment decisions.

High-Quality Information Technology and Capital Investment Decisions

ABSTRACTWe examine the effect of high-quality information technology (IT) on management's capital investment decisions. Evaluating capital investment decisions with contemporary investment efficiency and long-term measures of investment effectiveness, we document a positive relation between high-quality IT and capital investment decision quality. In particular, we find high-quality IT is associated with more optimal levels of investment as well as fewer future fixed asset write-downs. We also disaggregate investment efficiency and find the relation with IT quality holds for investment decisions related to capital expenditures and acquisitions, but not research and development expenditures. Overall, our results suggest managers equipped with better internal information from higher-quality IT are able to make superior capital investment decisions. Our study contributes to the literature by providing evidence of a significant determinant of capital investment decision quality and documenting a specific mechanism that mediates the indirect effect of IT quality on future performance.JEL Classifications: D83; E22; G31; M15; M41.Data Availability: We thank InformationWeek for providing annual rankings that were previously published. All other data are publicly available from regulatory filings; we obtained data from the Compustat, Execucomp, and I/B/E/S databases.

High-Quality Information Technology and Capital Investment Decisions

We examine the effect of high-quality information technology (IT) on management’s capital investment decisions. Evaluating capital investment decisions with contemporary investment efficiency and long-term measures of investment effectiveness, we document a positive relation between high-quality IT and capital investment decision quality. In particular, we find high-quality IT is associated with more optimal levels of investment as well as fewer future fixed asset write-downs. We also disaggregate investment efficiency and find the relation with IT quality holds for investment decisions related to capital expenditures and acquisition but not research and development expenditures. Overall, our results suggest managers equipped with better internal information from higher quality IT are able to make superior capital investment decisions. Our study contributes to the literature by providing evidence of a significant determinant of capital investment decision quality and documenting a specific mechanism that mediates the indirect effect of IT quality on future performance.

Intuition in Information Technology Investment Decision: A Quantitative Method

IT investment decisions made by the company have uncertain value characteristics; have a high risk than other capital investment failures and intangible benefits of expected. In this situation, effective decision making is an important (perhaps most important) part of managerial activity. In this article, we analyze the influence of decision making under uncertainty, company size, and environmental hostility to intuition and analyze the intuition of company performance. There are five companies as study sample (ie: university, hospital, regional owned enterprises, creative industry, and software house industry) in East Java, Indonesia. The method used was a survey. The respondents were Top Level Management that is responsible for IT investment decision. Data analysis techniques used was Structural Equation Modeling-Generalize Structure Component Analysis (SEM-GSCA). Although intuition process is critical for effective IT investment decision making, we found that: (1) decision making under uncertainty and environmental hostility did not affect on intuition; (2) company size has a positive effect on intuition, and (3) intuition has a positive effect on company performance

Paying to Program? Engineering Brand and High-Tech Wages

We test the hypothesis that information technology (IT) workers accept a compensating differential to work with emerging IT systems and that employers that invest in these systems can, in turn, capture greater value from the wages they pay. We show that much of the utility IT workers derive from these systems is from skills acquired on the job. This is principally true for younger workers at employers where skill development is encouraged, and the effects are stronger in thicker markets where workers with newer skills have more outside options. An analysis of the text in online employer reviews supports the notion that IT workers value access to interesting IT systems above most other employer attributes. These findings are important because (1) they provide evidence of how worker preferences can influence corporate IT investment decisions, (2) they shed light on factors influencing IT skill development, and (3) they point to a potentially important explanation for returns from IT investments. This paper was accepted by Chris Forman, information systems.

Toward an IT investment decision support model for global enterprises

With the emergence of information technology (IT), many international companies capitalize on IT to improve their management and operation to obtain the competitive advantages. But, the implementation of IT investment in many companies has not been completely successful to achieve the expected goal and unfortunately result in the miserable forfeiture. Meanwhile, the decision support system of IT investment has not been mature enough to be built to assist decision maker in a comprehensive manner to effectively handle the IT investment for international companies. To bridge this gap, the purpose of this study is to develop an effective and operational, integrated research framework to support the IT investment decisions of international businesses with a variety of subordinating branches located worldwide. In specific, the framework examines the IT investment decisions with six constructs including finance, strategy, information, organization, process and technology; and incorporate 30 measurement indicators. An IT investment decision support system is thus developed based on the aforementioned constructs and measurement variables incorporated in this research. Weights which are analyze by applying the AHP method are assigned for the six constructs to evaluate the necessity and efficacy of an IT investment decision. This support system can be used to facilitate the allocation of budgets for conducting the IT investment, providing a better control over the progress of IT investment execution and implementation and identifying the most useful attributes and generating the valuable insights for the trans-departmental or international IT projects.

Total Cost Ownership for Information Technology Investment Decisions (IT)

Total Cost Ownership for Information Technology Investment Decisions (IT)

IT project management under real options theory and IT governance: a case study on organisation relocation

Information technology (IT) governance is meant to define the objectives assigned to the information technology in order to plan set and implement the processes related to the management of IT life cycle. IT goals constantly evolve and the monitoring of IT projects is one of the main preoccupations of IT department managers. Indeed, decision makers often lack reliable tools to model and assess the randomness of the various components of IT governance and subsequently anticipate the best investment decisions. This research develops a varied set of techniques for: 1) making the right IT investment decisions in the context of an effective IT governance; 2) predicting the behaviour of IT components in a new location through simulating these decisions in two different environments. For this purpose, governance strategies are simulated in the conditions of the relocation through the proposed framework. This modelling approach stands out by establishing a real-time decisional framework based on real options analysis (ROA). Thus, various scenarios are generated in both the current and the new (post-relocation) environment via a Monte Carlo simulation.

Emotion in IT Investment Decision Making with A Real Options Perspective: The Intertwining of Cognition and Regret

Real options thinking helps individuals cope with uncertainties in the information technology (IT) investment decision-making process. Our study examines the intertwining of cognition and a specific emotion, regret, in IT real options decision making using a multisite case study of IT investments. We develop a process model that explains the context in which regret is triggered, the strategies used to regulate regret, and how these strategies influence the valuation, creation, exercise, and revaluation of several types of IT real options. Our research highlights that while some regret regulation strategies may be productive, others are counterproductive. Our findings extend the studies on cognition-based models of IT real options by including emotion, which allows us to explore human behavior on a psychological level and offer a more fundamental understanding of IT real options thinking. Practitioners must recognize the presence of regret that could cloud cognition-based analysis and must be sensitive to its impact.

Fit and Misfit of Plural Sourcing Strategies and IT-Enabled Process Integration Capabilities: Consequences of Firm Performance in the U.S. Electric Utility Industry

Recent work has shown that a firm's plural sourcing strategy, which determines how much it chooses to make versus how much it chooses to buy, requires consideration of the complementarities and constraints that affect the differential advantages of making and buying. Elaborating on this perspective, we theorize how (mis)fit between a firm's plural sourcing strategy of simultaneously making and buying and its development of information technology (IT) enabled interfirm and intrafirm process integration capabilities influences firm performance in deregulated markets. We position our theory development and empirical tests in the context of the power-generation segment of the U.S. electric utility industry (EUI), an asset-intensive industry that has been deregulated to promote the separation of key value chain activities (i.e., generation, transmission, and distribution) and the development of wholesale energy markets. We draw on the transaction cost economics, coordination costs, and IT capabilities perspectives to theorize that a firm achieves fit (realizing performance benefits) by increasing market sourcing intensity (MSI)--or, how much it buys relative to how much it makes-- and developing IT-enabled interfirm process integration capability for external coordination with the market, or misfit (realizing performance penalties) by increasing MSI and developing IT-enabled intrafirm process integration capability for coordinating internal production. We collated data from archival sources for 342 utility firms in the power-generation segment to construct a panel dataset for the period 1994--2004 on (1) firms' MSI from wholesale electricity markets, (2) firms' IT investment decisions to develop interfirm and intrafirm process integration capabilities, (3) measures of firm performance, and (4) several control variables related to exogenous shocks (i.e., regulatory change, oil crisis), region of operation, and firm-level factors. Our results suggest that fit between MSI and the development of IT-enabled interfirm process integration capability improves firm profitability, assessed by return on assets, and misfit between MSI and the development of IT-enabled intrafirm process integration capability extracts penalties in firm profitability. We also find evidence that fit between MSI and the development of IT-enabled interfirm process integration capability improves market valuation, assessed by Tobin's Q, and asset turnover, assessed by operating revenue/total assets. We discuss the implications of our findings for the development of IT capabilities to accompany a firm's plural sourcing strategy and the literature on IT business value.

Electronic Commerce Investment Under Condition Of High Uncertainty: A Real Options Approach

Why managers in electronic commerce investment projects should pay attention to real options logic when they operate in unpredictable environment? Whether existing of real options’ reasoning in these kinds of investments led to better performance and enables firms to manage, handles uncertainty and risk effectively, and minimizes any unexpected results? Which kind of uncertainty will be reduced by using real options reasoning? In the present study, we explore how real options’ reasoning has been conceptualized in the information technology and electronic commerce investment decision processes that are subject to multiple sources of uncertainties. Finally, we show that real options reasoning does not always enhance project performance under conditions of higher uncertainty. We conclude with implications for future empirical research hope that our study stimulates future work on real options and electronic commerce investment. Keywords: uncertainty perception, e- commerce investment, real options, flexibility, project performance

Making sense of technology trends in the information technology landscape

A major problem for firms making information technology investment decisions is predicting and understanding the effects of future technological developments on the value of present technologies. F...

Improving Enterprise Governance of IT in a Major Airline: A Teaching Case

A common and critical dilemma confronting enterprises today is how to ensure that they realize value from their large-scale investments in information technology (IT) and IT-enabled change. IT-enabled investments can bring huge rewards, but only with the right governance and management processes and full engagement from all management levels. This teaching case is about the tough but rewarding journey of the Dutch airline company KLM in improving the governance of IT, moving from managing the cost of IT towards managing the business value of IT. Although KLM still has challenges ahead, the changes in structures, processes and relational mechanisms have helped to restore trust between the business and the IT organization, and lowered business operating costs through a more rigorous selection and portfolio management process. The changes have also increased the resources allocated to IT innovation. Although KLM faced some unique challenges as it began the journey to transform its enterprise governance of IT, the realization of greater business value from today's significant and increasingly complex investments in IT is a concern for all businesses. We therefore believe that the practices and lessons learned at KLM can be applied by other organizations as they seek to more fully engage their own business unit managers in IT investment decision making and in accountability for realizing business value.

Real Options and System Dynamics for Information Technology Investment Decisions

We propose a unique combination of system dynamics and real options into a robust and innovative model for analyzing return on investments in IT. Real options modeling allows a cost benefit analysis to take into account managerial flexibilities when there is uncertainty in the investment, while system dynamics can build a predictive model, in which one can simulate different real-life and hypothetical scenarios in order to provide measurements that can be used in the real options model. Our return on the investment model combines these long-established quantitative techniques in a novel manner. This study applies this robust hybrid model to a challenging IT investment problem: adoption of RFID in retail. Item-level RFID is the next generation of identification technology in the retail sector. Our method can help managers to overcome the complexity and uncertainties in the investment timing of this technology. We analyze the RFID considerations in retail decision-making using real data compiled from a Delphi study. Our model demonstrates how the cost and benefits of such an investment change over time. The results highlight the variable cost of RFID tags as the key factor in the decision process concerning whether to immediately adopt or postpone the use of RFID in retail. Our exploratory work suggests that it is possible to combine merchandising and pricing issues in addition to the traditional supply chain management issues in studying any multifaceted problem in retail.

Does information technology investment influence a firm's market value? a case of non-publicly traded healthcare firms

Managers make informed information technology investment decisions when they are able to quantify how IT contributes to firm performance. While financial accounting measures inform IT's influence o...

Does Information Technology Investment Influence a Firm's Market Value? A Case of Non-Publicly Traded Healthcare Firms

Managers make informed information technology investment decisions when they are able to quantify how IT contributes to firm performance. While financial accounting measures inform IT's influence on retrospective firm performance, senior managers expect evidence of how IT influences prospective measures such as the firm's market value. We examine the efficacy of IT's influence on firm value combined with measures of financial performance for non-publicly traded (NPT) hospitals that lack conventional market-based measures. We gathered actual sale transactions for NPT hospitals in the United States to derive the q ratio, a measure of market value. Our findings indicate that the influence of IT investment on the firm is more pronounced and statistically significant on firm value than exclusively on the accounting performance measures. Specifically, we find that the impact of IT investment is not significant on return on assets (ROA) and operating income for the same set of hospitals. This research note contributes to research and practice by demonstrating that the overall impact of IT is better understood when accounting measures are complemented with the firm's market value. Such market valuation is also critical in merger and acquisition decisions, an activity that is likely to accelerate in the healthcare industry. Our findings provide hospitals, as well as other NPT firms, with insights into the impact of IT investment and a pragmatic approach to demonstrating IT's contribution to firm value.