The role of R&D and corporate governance in Korea: IT firms versus non-IT firms

Recent economic development in Korea was mostly driven by companies in the IT sector. Also, it is widely argued that R&D investment has a positive impact on firm value, especially for IT firms. In this paper, we analyze how R&D investment has contributed to the growth of Korea’s economy by examining the effect of R&D investment on firms’ market value, measured as Tobin’s Q, and investigate whether this effect is different between firms in the IT sector and firms in the non-IT sector. We also account for the effect of another major change experienced by Korean firms: changes in corporate governance structure. We find that for firms in the IT industry, higher R&D investment coupled with high foreign ownership results in higher firm valuation.     

Effects of information technology failures on the market value of firms

IT failures abound but little is known about the financial impact that these failures have on a firm’s market value. Using the resource-based view of the firm and event study methodology, this study analyzes how firms are penalized by the market when they experience unforeseen operating or implementation-related IT failures. Our sample consists of 213 newspaper reports of IT failures by publicly traded firms, which occurred during a 10-year period. The findings show that IT failures result in a 2% average cumulative abnormal drop in stock prices over a 2-day event window. The results also reveal that the market responds more negatively to implementation failures affecting new systems than to operating failures involving current systems. Further, the study demonstrates that more severe IT failures result in a greater decline in firm value and that firms with a history of IT failures suffer a greater negative impact. The implications of these findings for research and practice are discussed.     

Valuation of mergers and acquisitions in the telecommunications industry: a study on diversification and firm size

Since the 1996 Telecommunications Act, numerous mergers and alliances (M&A) have been consummated within the telecommunications industry. These M&A involve both large and small firms in a variety of different and similar industry segments. In this industry, replete with technological uncertainty, it is useful to evaluate the impact of these activities on the market valuation of the firms involved. This study uses event analysis to examine 44 M&A events involving 89 partners in the telecommunications industry. Drawing on prior literature on diversification and firm size, the study formulates and tests hypotheses relating the impact of near and far diversification, and the size of the firm, on market valuation. The results are mostly consistent with prior work and suggest that while overall these events weight positively on market value, M&A involving near-diversification and larger firms tend to experience greater valuation effects.     

Modeling Internet firm survival using Bayesian dynamic models with time-varying coefficients

We showcase a Bayesian dynamic analysis and apply it to a study on the impact of a set of industry, firm and e-commerce-related factors on Internet firm survival. Through the use of one age-based and another calendar time-based dynamic Bayesian model, we are able to examine how the impact of these factors changes over time. Our results are based on data from 115 publicly-traded Internet firms and suggest that Internet firm survival relates to different factors, such as the initial public offerings rate of Internet stocks in the market, financial capital and firm size at different stages in their lifetimes, whose influence may have changed over time.     

To innovate or not to innovate?

In this paper, we analyze the evolution of output decisions of adaptive firms in an environment of oligopolistic competition. The firm might either choose to produce one of several existing product variants or try to establish a new product variant on the market. The demand for each individual product variant is subject to a life cycle, but aggregate demand for product variants is constant over time. Every period each firm has to decide whether to produce the product again, introduce a new product variant itself (which generates an initial advantage on that market), or follow another firm and change to the production of an already established product. Different firms have heterogeneous abilities to develop products and imitate existing designs; therefore, the effects of the decision whether to imitate existing designs or to innovate differ between firms. We examine the evolution of behavior in this market using an agent-based simulation model. The firms are endowed with simple rules to estimate market potentials and market founding potentials of all firms, including themselves, and make their decisions using a stochastic learning rule. Furthermore, the characteristics of the firms change dynamically due to “learning by doing” effects. The main questions discussed are how the success and the optimal strategy of a firm depend on the interplay between characteristics of the industry and properties of the firm     

Estimating the impact of cloud computing on firm performance: An empirical investigation of listed firms

This study empirically investigates the economic impact of cloud service adoption on firm performance. We exploit the difference-in-differences models coupled with propensity score-based matching to estimate the performance effect of cloud computing on worldwide listed firms that adopted cloud service during 2010–2016. The results indicate that cloud computing has a significant and positive impact on the profitability and market value of listed firms with varying degrees in both short and long time periods. In addition, the magnitude of the performance effect varies with firm size and industry type. This research contributes to empirical examination on the economic values of IT investments.     

Assessing the impact of knowledge management strategies announcements on the market value of firms

Although there is much literature on the relationship between KM strategies and organizational performance, the benefit of KM strategies is not well understood. We addressed this issue by exploring how KM strategies influence a firm's market value using event study methodology. We evaluated the cumulative abnormal returns for KM strategies announced by U. S. firms from 1998 to 2003. Our findings supported the hypothesis that firms’ announcements about their KM strategies provoked positive reactions in the market. More specifically, strategies that focus on either (i) knowledge reusability through IT or (ii) knowledge sharing through informal discussions among employees contributed to higher performance than strategies that emphasized both. This outcome empirically supported our argument that the emphasis on either tacit or explicit knowledge results in a better market value of the firm. Furthermore, the market's reaction to the announcement is dependent on the firm's industry classification. The findings of this study offer insights that may help managers maximize the market impact of their KM strategies.     

Digital transformation of business ecosystems: Evidence from the Korean pop industry

The notion of business ecosystems is gaining prominence among academics and practitioners. Scholars advise that business ecosystems are inherently fluid, unbounded and amorphous and thus that their boundaries can shift. Practitioners further suggest that business ecosystems are characterised by inter‐network – as opposed to inter‐firm – competition, and, moreover, that they are mainly driven by technological advancements. And yet few studies examine the role of information technology (IT) in driving boundary practices that enable the formation and transformation of business ecosystems. Through an in‐depth case study of technology‐enabled transformations within the Korean pop music (K‐pop) industry, our study examines how the digital transformation of business ecosystems unfolded. Our study contributes to the emergent body of knowledge on business ecosystems in a number of ways. Our investigations uncover the conditions under which the constituent firms operate and analyse the role of IT and its implications on new organisational forms. From our analysis, we present a framework that reveals insights on critical boundary practices and formative strategies for digital business ecosystems. We illustrate how these boundary practices drive industry change, from a largely linear content delivery system resembling a value chain to a new value network of co‐specialisation and self‐organisation among firms in a new digital business ecosystem.     

Strategic context and patterns of IT infrastructure capability

The importance of a firm's information technology (IT) infrastructure capability is increasingly recognised as critical to firm competitiveness. Infrastructure is particularly important for firms in industries going through dynamic change, for firms reengineering their business processes and for those with multiple business units or extensive international or geographically dispersed operations. However, the notion of IT infrastructure is still evolving and there has been little empirically based research on the patterns of IT infrastructure capability across firms.We develop the concept of IT infrastructure capability through identification of IT infrastructure services and measurement of reach and range in large, multi-business unit firms. Using empirical case research, we examine the patterns of IT infrastructure capability in 26 firms with diverse strategic contexts, including different industry bases, level of marketplace volatility, extent of business unit synergies and the nature of firm strategy formation processes. Data collection was based on a combination of quantitative and qualitative methods with multiple participants.More extensive IT infrastructure capability is defined as a combination of more IT infrastructure services and more reach and range. More extensive IT infrastructure capability was found in firms where: (i) products changed quickly; (ii) attempts were made to identify and capture synergies across business units; (iii) there was greater integration of information and IT needs as part of planning processes; and (iv) there was greater emphasis on tracking the implementation of long term strategy. These findings have implications for both business and technology managers particularly in regard to how firms link strategy and IT infrastructure formation processes.     

Does IT pay to focus? An analysis of IT business value under single and multi-focused business strategies

Previous research finds that firm performance is highest when firms maintain a singular strategic focus as opposed to a multi-focused strategy. Yet, from an IT perspective, there is still some debate as to whether IT business value or the contribution of IT to firm performance is also maximized when firms maintain a single-focused strategy. Using the notion of value disciplines to model strategic foci, we find in a matched survey of executives in 241 firms that IT business value is highest in firms with a multi-focused business strategy and lowest in those with a single focus. We also find a relationship between strategic foci and the primary locus of IT value within the value chain for all focus-types except those emphasizing operational excellence. If all firms are using IT to reduce operating expenses, operationally excellent firms may find it increasingly difficult to sustain a low-cost advantage over time through IT.     

The Moderating Effect of Industry Types on IT-Coordination Costs Relationship

ABSTRACT

This study builds on prior research that examines the IT-coordination costs and firm size relationships using the transaction cost economics perspective. Specifically, this study aims to answer the following research question: Does firm’s industry type—information product industries (IPI) versus physical product industries (PPI) moderately affects the relationships between IT spending, coordination costs, and firm size? To address this research question, this study uses firm-level data from the Information Week and Compustat dataset in the United States, from 2011 to 2013. Further, this study employs the PLS-multigroup analysis (MGA) for both IPI and PPI firms. The overall PLS-MGA path analysis results show that there is a significant difference on the IT impact between the IPI and PPI firms. Indeed, firms in IPI and PPI can utilize the presence of IT pertaining to different information and physical processing activities at large.     

Market reaction to the announcement of an information technology investment: Evidence from Indonesia

This study examines the market’s reaction around and subsequent to the announcement of an Information Technology Investment (ITI). The Scholes-Williams’ and Dimson’s betas, a more accurate, and longer time-window are employed to capture market reactions in an environment of thin trading on the Indonesian capital market from 2001 to 2016. The results show that Indonesian investors need time to recognise the signals of either an increase or decrease in value from an ITI. This study also finds that greater market reactions are characterised by firms in the banking industry, smaller sized firms, lower competitive position firms, first-time IT adopter firms, and enterprise resource planning investment firms.     

An Empirical Analysis of the Relationship Between IT Training Sources and IT Value

Information technology (IT) training has been identified as a key factor for the success of IT applications and the most frequently applied coping mechanism to handle changing IT. However, there is a question as to how IT training has to be conducted to obtain desired outcomes (higher levels of IT value). This paper analyses the presence of IT training sources used by firms and examines the influence on IT business value. Here, IT training is studied according to three IT training sources: in-house IT training, outside IT training, and self IT training by employees. In addition, differences in IT training sources are analysed according to two contingency factors: business size and business industry. Results show a positive relationship between IT training sources (outside and self IT training) and IT business value and confirm that IT training sources are positively related to business size and differ moderately by business industry.     

Exploring the relationships between IT competence,innovation capacity and organizational agility

Business environments today are characterized as being very dynamic and hyper competitive. Organizations in these environments have to be agile in order to adapt their strategies and actions to be successful. While it is recognized that information technology can enable firms to be agile, there is a limited understanding of the mechanisms through and the contexts in which Information Technology (IT) enhances agility. This study examines two key antecedents of organizational agility, namely the IT competence of a firm and its innovation capacity and, examine their independent and joint effects on agility. We test our model using data collected from large firms in the US. The results provide strong support for our model. We found that firms with superior IS capabilities coupled with an aggressive IT investment orientation create digital platforms that enable them to be agile. We also found that the innovation capacity of the firm has a positive relationship with organizational agility and that firms with higher innovation capacity are better able to leverage their digital platforms to enhance agility. Our results indicate that organizational agility has a strong positive impact of firm performance. We interpret and discuss these results and their theoretical and practical implications.     

Do you see what I see? The search for consensus among executives’ perceptions of IT business value

Since firms rarely collect data on the precise economic or financial impacts of information technology (IT), perceptions play a key role in assessing IT impacts. To the extent that executives in the same firm evaluate IT impacts similarly, it can be easier to approve future IT investments or to initiate corrective action for failing IT investments. In this study, we use distributed sensemaking theory to investigate the conditions under which executives will reach a consensus as to the extent and locus of firm and process-level IT impacts in their firm. Using data from surveys of 133 top-level business executives in 13 firms, we show that consensus is a function of CIO-led sensegiving in the form of IT promotion, CIO leadership, information systems (IS) engagement with end users, and IS-business communications. The absence of consensus – discord – suggests IS disengagement, a lack of effective CIO leadership, weak IT-business communications, and ineffective promotion of the role of IT. Sensegiving does not mean telling executives what to think about IT but rather how to think about IT and its impacts at various points within the firm. Whether IT impacts are rated high or low, efforts to create increased consensus among executives can greatly enhance value from IT.     

Does it pay to align a firm’s competitive strategy with its industry IT strategic role?

While researchers have increasingly recognized the importance of information technology (IT) in leveraging a firm’s competitive strategy for achieving superior firm performance, our understanding of the nature of how a firm’s competitive strategy aligns with its industry IT strategic role and how such alignment influences firm performance remains limited. Drawing upon strategic alignment perspective, this study aims to theorize and empirically test how the firm’s competitive strategy (i.e., cost leadership, differentiation, and dual strategy) aligns with its industry IT strategic role to improve firm performance. Based on the data of Chinese publicly listed firms during 2009–2015, our results indicate that different competitive strategy aligns with different industry IT strategic roles for achieving superior performance. Specifically, cost leadership strategy aligns with automate IT strategic role, dual strategy aligns with informate IT strategic role, and differentiation strategy aligns with transform IT strategic role in generating superior firm performance. We also discuss the theoretical and practical implications of the current study.     

Market reaction to application service provider (ASP) adoption: An empirical investigation

We examined the impact of ASP adoption on the market value of the firms and explored contextual factors in the positive abnormal returns. We employed event study methodology to analyze 268 ASP adoption announcements from 1998 to 2007. The results indicated that ASP adoption announcements were associated with positive increases in the market value of the firm. In addition, differences in market returns to ASP adoption were found to depend on strategic adoption intent, firm size, industry, and vendor status. These results provide useful implications for making decisions about whether, when, and how to adopt ASP to maximize the business value.     

Firm size and performance: A study on the use of electronic commerce by container transport operators in Hong Kong

In this study, we examine the relationship between firm size and the use of electronic commerce (EC) by container transport operators in Hong Kong and their performance implications. Using data collected from a sample of container shipping operators in Hong Kong, we identified internal and external drivers that affect the use of EC by container transport operators. Our findings indicate that large firms tend to adopt EC at a higher level of sophistication. This study also investigates the relationship between the use of EC and firm performance. Our results show that sales growth is positively related to the use of EC and firm size. To understand how firm size affects firm performance, we use a structural equation model (SEM) to examine their structural relationships. Our findings indicate that firm size positively influences sales growth. On the other hand, sales growth affects the profitability of a firm. Although customer satisfaction does not have a direct impact on profitability, our SEM suggests that customer satisfaction is a significant variable that affects the sales growth of firms.     

The Impact of Information Technology Investment on Enterprise Performance: A Case Study

Investment in information technology is steadily increasing, but many organizations find it difficult to formally assess the value of IT investments because the latter are often incorporated into broad management initiatives. the authors believe that the results of the research study reported on here can help firms to develop a better understanding of the dynamic relationship between IT investment and performance at both the firm and industry levels of analysis. This study clearly demonstrates the importance of adopting an organizational change perspective when assessing the impact of IT investment on firm performance.     

Effects of firm and IT characteristics on the value of e-commerce initiatives: An inductive theoretical framework

We explore the theoretical foundations on how firm and IT characteristics explain the market value variations in e-commerce initiatives by examining the announcements of 946 e-commerce initiatives in the public media. Our approach combines the Event study methodology and Decision tree induction to examine the main and interaction effects of IT and firm characteristics on Cumulative Abnormal Returns (CAR). In particular, we generate complex interaction models that can guide e-commerce investment decisions so managers can know, for example, which combination of IT and firm characteristics are more likely to be viewed positively by investors. The selected study variables as well as explanation of the proposed framework are informed by innovation, resource-based view, transaction cost economics and complementarity theories. We have inductively developed a set of propositions that can be deductively tested to assess the validity of our proposed theoretical framework. Hence our study provides an initial roadmap for theory development on e-commerce and CAR.