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AIS Newsletter |
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IS SECTION / AMERICAN ACCOUNTING ASSOCIATION. |
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In the Literature : Research on Determining IT Value |
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Rajiv Kohli and Varun Grover, 2008. Business Value of IT: An Essay on Expanding Research Directions to Keep up with the Times, Journal of the Association for Information Systems, Volume 9, Issue 1, Article 1, January.
Much of the work on the business value of IT has examined relationships between IT inputs and economic outcomes of the firm. Yet, business executives and researchers continue to question the value of IT investments. The authors argue that while the current trajectory of research in this important area is useful, it is limited. In order to address the evolving nature of IT and the novel contexts in which it is being exploited, the authors state that IS academia must create a discontinuity in their thinking of how IT value should be studied. After summarizing what has learned thus far, the authors discuss key new research themes that must be addressed if IT is to be demonstrably relevant. Further, the authors identify specific research thrusts, areas for theoretical development, and research questions on IT-based value that must be included in their research agenda for the future. The authors conclude by challenging IT researchers to consider the consequences of status quo research themes versus an expanded set of research questions.
Sanjeev Dewan and Fei Ren, 2007. Risk and Return of Information Technology Initiatives: Evidence from Electronic Commerce Announcements, Information Systems Research, Volume 18 Issue 4, pp. 370-394, December.
This paper takes an event study approach to jointly examine the wealth and risk effects associated with electronic commerce announcements, contributing to the emerging research on the riskiness of IT investments and the trade-off between risk and return in the information systems literature. The authors estimate a generalized event study model that allows for both systematic and unsystematic risk changes on data collected for electronic commerce announcements in the 1996-2002 time frame. A striking result emerging from the authors’ analysis is that wealth effects are not significant after controlling for contemporaneous risk changes. Both total and unsystematic risk show a significant post-event increase in 1998 and 2000, whereas systematic risk adjusts downward in 1996 and 2002. Put together, the authors’ results contribute to nascent understanding of how IT initiatives affect the risk-return profile of the firm.
Sanjeev Dewan, Charles Shi, and Vijay Gurbaxani, 2007. Investigating the Risk--Return Relationship of Information Technology Investment: Firm-Level Empirical Analysis, Management Science, Volume 53, Issue 12, pp. 1829-1842, December.
This paper develops empirical proxy measures of information technology (IT) risk and incorporates them into the usual empirical models for analyzing IT returns: production function and market value specifications. The results suggest that IT capital investments make a substantially larger contribution to overall firm risk than non-IT capital investments. Further, firms with higher IT risk have a higher marginal product of IT relative to firms with low IT risk. In the market value specification, the impact of IT risk is positive and significant, and inclusion of the IT risk term substantially reduces the coefficient on IT capital. The authors estimate that about 30% of the gross return on IT investment corresponds to the risk premium associated with IT risk. Taken together, results show that IT risk provides part of the explanation for the unusually high valuations of IT capital investment in recent research.
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