Information Technology, Organizational Learning, and the Market Value of the Firm
This paper compares the mean and variance of cumulative abnormal returns following announcements of two types of information technology (IT) investments: those which entail the "exploitation" of firm's current capabilitie...
| Main Author: | |
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| Format: | Working Paper |
| Language: | en_US |
| Published: |
2003
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| Online Access: | http://hdl.handle.net/1721.1/3542 |
| _version_ | 1811077409470939136 |
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| author | Hunter, Starling David, III |
| author_facet | Hunter, Starling David, III |
| author_sort | Hunter, Starling David, III |
| collection | MIT |
| description | This paper compares the mean and variance of cumulative abnormal returns following
announcements of two types of information technology (IT) investments: those which
entail the "exploitation" of firm's current capabilities vs. those which involve the
exploration of new capabilities. The paper addresses two understudied questions in
research on the contribution of IT to firm performance: the contingent nature of those
contributions and the impact on risk (or variance), as well as on return (mean). To
examine these questions I first performed a standard event study analysis on a sample
of 150 announcements of IT investments made by 59 publicly-traded retailers between
the years 1990-1997. I performed two types of multivariate regression analysis on the
event returns: ordinary least squares (to assess the impact of the two types of
investments on the mean level of returns) and multiplicative heteroscedastic regression
(to determine the impact on the variance of the returns). The results indicate that, as
expected, IT investments "exploitative" IT investments have the same mean as, yet
lower variance than, abnormal returns associated with "exploratory" IT investments.
Somewhat unexpectedly, I found that both types of IT investments had a significantly
negative impact on the market value of the firm. Taken together, these findings suggest
that the characteristics of IT investments themselves, as well as the industry and
strategic context within which they were made, are important determinants of the
market value of the firm. As such, the results of this study should be of interest to
researchers interested in the contribution of IT to firm performance and to MIS
professionals both in the retailing sector, in particular, and other service sectors, more
generally. |
| first_indexed | 2024-09-23T10:42:34Z |
| format | Working Paper |
| id | mit-1721.1/3542 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T10:42:34Z |
| publishDate | 2003 |
| record_format | dspace |
| spelling | mit-1721.1/35422019-04-10T16:37:33Z Information Technology, Organizational Learning, and the Market Value of the Firm Hunter, Starling David, III This paper compares the mean and variance of cumulative abnormal returns following announcements of two types of information technology (IT) investments: those which entail the "exploitation" of firm's current capabilities vs. those which involve the exploration of new capabilities. The paper addresses two understudied questions in research on the contribution of IT to firm performance: the contingent nature of those contributions and the impact on risk (or variance), as well as on return (mean). To examine these questions I first performed a standard event study analysis on a sample of 150 announcements of IT investments made by 59 publicly-traded retailers between the years 1990-1997. I performed two types of multivariate regression analysis on the event returns: ordinary least squares (to assess the impact of the two types of investments on the mean level of returns) and multiplicative heteroscedastic regression (to determine the impact on the variance of the returns). The results indicate that, as expected, IT investments "exploitative" IT investments have the same mean as, yet lower variance than, abnormal returns associated with "exploratory" IT investments. Somewhat unexpectedly, I found that both types of IT investments had a significantly negative impact on the market value of the firm. Taken together, these findings suggest that the characteristics of IT investments themselves, as well as the industry and strategic context within which they were made, are important determinants of the market value of the firm. As such, the results of this study should be of interest to researchers interested in the contribution of IT to firm performance and to MIS professionals both in the retailing sector, in particular, and other service sectors, more generally. 2003-08-22T20:18:40Z 2003-08-22T20:18:40Z 2003-08-22T20:18:40Z Working Paper http://hdl.handle.net/1721.1/3542 en_US MIT Sloan School of Management Working Paper;4418-03 395400 bytes application/pdf application/pdf |
| spellingShingle | Hunter, Starling David, III Information Technology, Organizational Learning, and the Market Value of the Firm |
| title | Information Technology, Organizational Learning, and the Market Value of the Firm |
| title_full | Information Technology, Organizational Learning, and the Market Value of the Firm |
| title_fullStr | Information Technology, Organizational Learning, and the Market Value of the Firm |
| title_full_unstemmed | Information Technology, Organizational Learning, and the Market Value of the Firm |
| title_short | Information Technology, Organizational Learning, and the Market Value of the Firm |
| title_sort | information technology organizational learning and the market value of the firm |
| url | http://hdl.handle.net/1721.1/3542 |
| work_keys_str_mv | AT hunterstarlingdavidiii informationtechnologyorganizationallearningandthemarketvalueofthefirm |