The Relationship between Information Technology Capability and Firm Value
Date Issued
2010
Date
2010
Author(s)
Chen, Po-Yen
Abstract
The resource-based view (RBV) is widely used to solve the issue of IT investment and firm performance as “productivity paradox.” The researchers think that firms by investing to create superior IT capability, and then increase their firm performance.
However, the performance can only reflect the current and past outcome, but cannot reflect the future operating situation. Because the IT impact on business is continuous and can bring growth opportunities, only use performance to measure the impact will underestimate the value from IT. Furthermore, it may impact the willingness and decision of owners to invest in IT.
Based on the evaluation theory, firm value includes normalized earnings and growth opportunities. The normalized earnings in which representatives of current firm performance and the sustainable effects of future performance; In addition, the growth opportunities brought by IT should be included in the firm value. In this study, IT capabilities as an independent variable, and focus on the sustainable and growth opportunity of IT for firms, and thinks that use firm value to examine the value from IT capability is more appropriate.
Using the firm’s IT ranks that published by InformationWeek every year, there are 427 firms as the IT leaders from 2001 to 2009. The results are that the IT impact on performance is positive but not significant; the IT impact on value is positive and significant; the IT impact on value is more significant than on performance. In addition, we use the industry sectors to cluster, and find that the IT impact is not consistent in different industry. Overall, the positive significant impact of IT capability to firm value is confirmed, and then using the value is more accurate and comprehensive to measure the impact from IT.
Subjects
Information Technology Capability
Firm Value
Firm Performance
Type
thesis
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