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

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.information technology and firm performance, business value of information technology, information technology and Tobin's q ratio, information technology and intangible value

Information technology (IT) investment and the role of a firm: an exploratory study

“…Positive and signi"cant relationships were found between certain investment measures and organizational performance. Similarly, Bharadwaj, Bharadwaj and Konsynski (1999) found evidence that IT investments had a positive association with Tobin's q value (a "nancial market-based measure of "rm performance).…”

Investment in Intelligent Transport Aid Systems and Final Performance

“…The obtained results in this empirical study would be identified with a group of previous literature as for example. Mukhopadhyay et al (1997) that state that ICT increases the quality, and this increase offers at the same time an increase in productivity, and Bharadwaj et al (1999) that state how some intangible values, coming from ICT investments have a tendency to improve the quality of products, services, and customer attention. Porter (2001) also stresses how the implementation of ICT in organizations improves the quality and the service differentiated to the customer and Pérez (2001) in a specific work on public transport affirms that the implementation of ICT in firms improves the quality of service.…”

“…The following studies would support the results in the empirical study : Mukhopadhyay, Rajiv, and Srinivasan (1997) defend that ICT increases the quality of the service. Bharadwaj et al (1999) also show in an illustrative way, that some intangible values, coming from ICT investments, would have an impact in the improvement of some aspects: in the quality of products and services, in the relationship with the final customer. Porter (2001) stresses how the implementation of ICT improves the quality and service by promoting a differentiation in the customer.…”

“…Bharadwaj, Bharadwaj, & Konsynski (1999) show in graphic way some intangible values that generate sustainable competitive advantages, coming from ICT investments, as they can be the improvement in the quality of the products or services, the improvement in the service relationship to the customer, the creation of knowledge assets, and lastly the improvement in the co-ordination and potentiating of synergies. These aspects would fit in the same way with points 1, 2, 3 and 4 of the COTEC Document (1988) and with the points 1, 4, 5, 6, y 7 of De la Rosa and Núñez-Flores (1993).…”

A Research Model for Measuring IT Efficiency in German Hospitals

“…Although some empirical studies demonstrate a positive relationship between IT and success variables (Bharadwaj, Bharadwaj, and Konsynski, 1999;Brynjolfsson and Kemerer, 1996;Devaraj and Kohli, 2000;Dewan and Min, 1997;Mukhopadhyay, Rajiv, and Srinivasan, 1997) overall results are contradictive and result the so called "IT paradox" (Brynjolfsson, Hitt, and Yang, 2002).…”