Brian L. Dos Santos

The Impact of Information Technology Investment Announcements on the Market Value of the Firm

Determining whether investments in information technology IT have an impact on firm performance has been and continues to be a major problem for information systems researchers and practitioners. Financial theory suggests that managers should make investment decisions that maximize the value of the firm. Using event-study methodology, we provide empirical evidence on the effect of announcements of IT investments on the market value of the firm for a sample of 97 IT investments from the finance and manufacturing industries from 1981 to 1988. Over the announcement period, we find no excess returns for either the full sample or for any one of the industry subsamples. However, cross-sectional analysis reveals that the market reacts differently to announcements of innovative IT investments than to followup, or noninnovative investments in IT. Innovative IT investments increase firm value, while noninnovative investments do not. Furthermore, the markets reaction to announcements of innovative and noninnovative IT investments is independent of industry classification. These results indicate that, on average, IT investments are zero net present value NPV investments; they are worth as much as they cost. Innovative IT investments, however, increase the value of the firm.

Competitor and vendor influence on the adoption of innovative applications in electronic commerce

Abstract The rapid growth of the Internet over the past 5 years has greatly increased interest in its potential use of the Internet for electronic commerce (EC), particularly as a vehicle for transactions between customers and suppliers. Today, Internet-based EC applications are in their infancy and investments in innovative information technology (IT) applications are risky and expensive. The managerial decision, to adopt these EC applications early or wait for the technology to become more established, is not trivial. Early adoption poses significant demand and technological risks, but the rewards could be great. We report on an empirical investigation of the influences on the adoption decision for one of the earliest EC applications, the automated teller machine (ATM) system, to determine whether marketing efforts by hardware and software vendors, imitation of competitors or a mixture of influences affected these decisions among bank managers. We develop a time series of cumulative ATM adoption estimates for 1971–1992 and use these data to fit three models from the diffusion of innovation literature, the external, internal and mixed influence models. The results suggest that imitation and communication among industry competitors was most important, but marketing efforts by the technology vendors were also important in the first few years after the introduction of the technology.

Differences in analyst's attitudes towards information systems development: evidence and implications

Abstract Many studies have concluded that one of the causes of systems development failures is that systems professionals have a technical orientation, lack knowledge of human needs and motivation, and are machine oriented. This paper presents evidence that systems analysts attitudes vary considerably and although some of them have a technical orientation, others emphasize the behavioral and socio-political aspects of development. Q-methodology was used to study the attitudes of thirty analysts with varying backgrounds from eight different organizations. Three groups of analysts emerged, each with a distinct attitude. One group is characterized by its emphasis on user needs and is less concerned with the technical aspects of systems development. Another group is characterized by its emphasis on the technical aspects of systems development and project management issues. A third group is characterized by its emphasis on the socio-political aspects of systems development. The study also attempted to find similarities in the backgrounds and experience of analysts with similar attitudes. The implications of these findings for information systems management are discussed.

Expert system design: minimizing information acquisition costs

Abstract Today, many organizations are investing heavily in expert systems. Unfortunately, many of these systems will fail to deliver the maximum possible value to their investors because little attention has been paid to the cost of providing these systems with the information they require to make a decision. In an expert system, the cost of providing the information that the system requires can be substantial. Minimizing information costs without affecting the decisions made by the system can reduce the cost of operating the system and thereby increase value. We develop an algorithm that determines an optimal information acquisition strategy for an existing system and show how a specific information acquisition strategy can be implemented. Because of the computational complexity of the algorithm, we also develop a simpler, heuristic solution to the problem. Our tests indicate that the heuristic performs very well. Prolog implementations for the same problem, on the other hand, perform poorly.