Impact of It Investment On Firm's Performnce

The Impact of Information Technology Investments on Firm Performance and Evaluation:
Evidence from Newly Industrialized Economies

Author(s): Kar Yan Tam
Source: Information Systems Research, Vol. 9, No. 1 (March 1998), pp. 85-98
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/23010871
Accessed: 08-09-2016 04:35 UTC
JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted
digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about
JSTOR, please contact support@jstor.org.
Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at
http://about.jstor.org/terms
INFORMS is collaborating with JSTOR to digitize, preserve and extend access to Information Systems
Research
This content downloaded from 134.84.192.101 on Thu, 08 Sep 2016 04:35:13 UTC
All use subject to http://about.jstor.org/terms
The Impact of Information Technology
Investments on Firm Performance and
Evaluation: Evidence from Newly

Industrialized Economies
Kar Yan Tam

Department of Information and Systems Management, School of Business and Management, Hong Kong Univers
Science and Technology, Clear Water Bay, Hong Kong
kytam@usthk.ust.hk
The impact
subject ofofactive
information
research intechnology
recent years. (IT) investments
However, onalmost
findings of firmallperformance has been the
studies are based
on data collected in the United States. Little work has been done elsewhere to validate these
results and to see if they are applicable across national boundaries. In this study, we fill this
gap by comparing four newly-industrialized economies (NIEs) with regard to the impact of
IT capital on business performance. Secondary data collected from various sources are used
to assess the impact over the period from 1983 to 1991. Findings based on four business
measures and a market valuation model based on Tobin's cj are reported. While the current
results are consistent with work done in the United States in general, discrepancies among the
four NIEs are observed. Combined with findings from previous work, three pieces of evidence
seem to emerge that are generally observed across country boundaries. First, IT investment is
not correlated with shareholder's return. Second, there is little evidence that the level of com
puterization is valued by the market in developed and newly-developed countries. Third,
there is no consistent measurement of IT investment as indicated by the mixed results across
different performance ratios. Modeling and measurement concerns expressed in previous U.S.
based studies are also observed in our comparative study. Our findings provide a starting
point to accumulate a body of comparative studies for the development of a theory that links
IT investment, firm performance, and macro factors such as national technology policy in an
integrated framework.
(Information Technology; Computers; Investment; Performance; Valuation; Economics; Business Value)
1. Introduction ing firms. So far, empirical findings reported in the lit

erature are mixed.
The business value of information technology (IT) in
vestments has received considerable interest from both
These discrepancies, in many cases, could be traced
back to the inconsistency of performance measures.
academics and the business community in recent
This is clarified by Hitt and Brynjolfsson (1994), who
years. The central question is whether the tremendous
argued that IT value can be measured in three dimen
amount of IT capital invested in the last few decades
sions: productivity, business performance, and con
has had any impact on the performance of the invest
sumer value. Drawing on theories from various disci
1047-7047/98/0901 /0085$05.00
Information Systems Research
Copyright © 1998, Institute for Operations Research
and the Management Sciences Vol. 9, No. 1, March 1998 85
TAM
Impact of IT Investments on Firm Performance and Evaluation
plines, they argued that these three dimensions

from are not
IT investments. This report will focus on the im
necessarily causally related. Based on IT spending
pact of IT
data
on business performance and market valu
collected in the United States, they showed ation. In order to make the results comparable, the
that while
variables and
IT capital is correlated with firm-level productivity, it methodology used here will be compat
ible with
has little correlation with business performance. Onprevious studies conducted in the United
States.
the other hand, IT capital has created tremendous
value that is passed on to consumers (Brynjolfsson
1996). Classifying IT value into different dimensions
and assessing its impact accordingly will2. Firm Performance Measures
eliminate
much of the ambiguity in comparing results As from ex by Hitt and Brynjolfsson (1994), produc
suggested
isting studies. tivity improvement and business performance are not
Another means to validate findings is to compare IT correlated. Improvements in productivity
necessarily
impacts across different countries. So far, will
almost all
not necessarily translate into gains in profit mea
empirical studies were conducted in the United
sures States.
and increase in the stock market value of the
It remains unclear whether findings such as those re
firm. Clemons argued (1991) that IT has become a com
ported in Hitt and Brynjolfsson (1994) are applicable
petitive necessity rather than a source of competitive
to other countries, especially those that advantage.
have been This is premised on free market entry. Fol
spending heavily on IT in recent years. As Rosenzweig
lowing Hitt and Brynjolfsson (1994), we hypothesize
(1994) suggested, the external validity of a that
study
thede
same argument could be applied to countries
pends on the extent to which the theorized or observed
with a reasonably open market for IT products, imply
relationship among variables can be generalized to
ing the rejection of the following hypotheses:
other settings. A key dimension of external validity is
Hypothesis
international generalization. In view of the size of theHI. IT investment is correlated with busi
worldwide IT market and the rapidly changing share
ness performance ratios of the firm.
distribution at the global level, it is important to ex
pand the scope of investigation to include other counH2. IT investment is correlated with the
Hypothesis
tries. As Dedrick and Kraemer (1995) have observed,
stock market return of the firm.
few studies compare a number of countries
systematically. Hypothesis HI relates to the ex-post evaluation of
A review of articles in major IS journals indicates no firm performance, while H2 is concerned with the mar
firm-level empirical work has been done outside the ket valuation of returns from investing in IT. In an ef
United States on this subject. There are only a few com ficient market, securities should be valued to yield the
parative studies on IT investment so far—mainly pio required return. Since there is little evidence that IT
neer work on the relationship between IT investment investments are more (or less) risky than other invest
and economic growth (King et al. 1992, 1994, 1995; ments, they should generate similar returns.
Kraemer, Gurbaxani and King 1992; Kraemer and For HI, three commonly used performance ratios
Dedrick 1994, Dedrick and Kraemer 1995). However, are used: (1) Return on Equity (ROE), (2) Return on
these studies reside at the country level with a focus Asset (ROA), and (3) Return on Sales (ROS). For H2,
on national IT policy and economic development. the Total Shareholder Return (TSR) is used. These mea
In this study, we attempt to fill this gap by empiri sures are well understood in business and are widely
cally examining the impacts of IT capital on business used to evaluate the quality of an investment. Further
performance in four newly industrialized economies more, they have been used in previous IT impact stud
(NIEs) in Asia: Hong Kong, Singapore, Malaysia, and ies (Alpar and Kim 1990, Cron and Sobol 1983, Hitt
Taiwan. Recent work by Tam (1995) has reported IT and Brynjolfsson 1994, Strassmann 1990, Weill 1992),
impact varies in these four countries with Singapore thus creating a basis for comparison. Definition of each
and Taiwan showing significant productivity gains variable can be found in Table 1.

Vol. 9, No. 1, March 1998
TAM
To estimate the impact of IT capital on theseputers

ratios,of different ages. The service provided by a
a regression model is developed as shown below: computer in each year after its purchase is propor
tional to the initial investment in the system. Each sys
BPRit = 2 gA + 2 QkIk tem is referred to as a vintage of capital. The flow of
t k
+ aln(Clf) capital services is a quantity

+ index of capital inputs
pin(BV
from different vintages. The fact that computers are
where BPRIt general-purposeis machines oneallows the assumption
of of t
ROA, or perfect substitutability
ROS; Cit to be made. is
This enablesthe
us to
book asset define total computer of
value capital stock firm
as a weighted sum i
variables of past investments.
used to The weights are given by a sched
control
with t£[1983,. .
ule indicating the decline in relative 1991]
efficiency of each
five different industries. In a recent IT investment vintage as given below:
study, Harris and Katz (1991) reported a relationship oo
between firm size and IT investment. The book asset

Qt = (2)
value is used to control for firm size effect,1 which is a 7 = 0
common practice in empirical studies investigating the

relationship between accounting variables and finanwhere Cit is the to
cial ratios (Banz 1981, Dimson and Marsh 1986). t, and C,(T is the c
age t at time t. Equ
oo
3. IT Capital Measurement and C« = ^dAit-r, (3)

Data Sources r = 0
3.1. Measurement of IT Capital where dT is the relative efficiency index for a

In this study, we treat computers as a class with age z, and Ait_ t is the amount of com
of capital
stock. The stock includes major processors and periph for firm i at time t — z,z = 0..®.
vestment
erals that provide the underlying computing Depending
infra on the nature of the capital good
structure of a firm. Data are obtained from annual is be constructed using either a straight line o
sues of the Asia Computer Directory (ACD), which ing balance method. To reflect the rapid adv
publishes descriptions of hardware installations of ofma computer technology, a declining balance
jor firms in Asia. ACD is the leading source of IT in efficiency is used:
formation for vendors and users in Asia with a publi
dz = (1 -nY, (4)
cation history of more than 15 years. An example of a
typical inclusion is shown in Figure 1.
where // can be interpreted as the de
Since the acquisition date and price of a computer
is assumed to be 20% in our anal
system are available in ACD, computer capital stock
preciation rate of 20% is consistent
can be derived by using the perpetual inventory
accepted depreciation method for
method (Jorgenson 1989). The method requires aggre
the four economies.2 While a com
gating different flows of services obtained from com
preciate in the physical sense, it w
as system software and application
'Popular firm size proxy include market capitalization, asset book
value, and number of employees. Market capitalization was used ing demand for greater processin
initially. One reviewer suggested using book asset value as an alter
native. Talking this recommendation, the author revised and rees2 A review of the accounting rules in asset
significant difference in the choice of deprec
timated the model. As expected from previous research, the results
Computer systems are treated as fixed asse
indicate no qualitative difference between using market capitaliza
tion or asset value as a proxy to firm size. annual depreciation rates are in line with th

Vol. 9, No. 1, March 1998 87
TAM
Table 1 Variable Definitions
Variable Computation Source
Computer Capital Market value of central processors plus value of PCs and terminals. Asian Computer Directory
Deflated by Computer price.
Total Shareholder Return Price change plus accumulated dividends divided by initial price. PACAP and Global Vantage
Return on Equity Pretax income divided by total shareholders equity. PACAP and Global Vantage
Return on Assets Pretax income divided by total assets. PACAP and Global Vantage
Return on Sales Pretax income divided by total sales. PACAP and Global Vantage
Computer Price Deflator Rate of price decline (ranging from 15% to 30%). Asian Computer Directory
Book Value (of Assets) Assets deflated by GDP deflator. PACAP and Global Vantage
Market Value Total Liabilities plus Market Value of Common Equity (yearend). PACAP and Global Vantage
Figure 1 A Typical Firm Description Published in the Asian Cimputer Directory
LAM SOON (HONG KONG) LTD

6 Cheung Yue Street
Cheung Sha Wan
Kowloon
Hong Kong
Tel: 2743 2011
Fax: 2786 1480
Telex: 54020 LAMSO HX
Business: Edible oil, detergent, flour & packaging material manufacturer
Computer: 2 Hitachi M-240H
Delivery year: 1990
Status of ownership: Purchased
Value of all hardware: U.S.$ 1,260,000
Applications: Billing, accounts receivable, sales analysis, inventory control,
general ledger, purchasing and accounts payable
Main memory size: 14 MB
Word size: 32 bit
Direct access storage devices: Fixed disks
Capacity: 3 x 2.4 GB
Tape drives: 2 dual tape
Printers: 2 x 600 Ipm; Chinese matrix line, 120 Ipm; inserted printer, terminal
matrix printer
Terminals: 14 Hitachi
Other peripherals: Epson LQ-1050 printer, NEC P7 printer, AMT Accel-500, IBM
PC compatible, HP LaserJet
Leased circuits: 3
Remote terminals: 2, 4 remote emulated terminal
Dial up circs: In progress
Operating System: VOS1/ES, MS/DOS
Proprietary software packages: G/E system, inventory, sales invoicing system, etc

TAM
bility over time. The depreciation rate attempts

firms
to cap
that were publicly listed in the stock exchan
ture the rate of obsolescence of a computer inas the potential pool of firms. Each firm is t
relation
to the expected services it delivers. Replacements
matched
are with the entries reported in annual issu
treated as new vintages in our calculation. ACD which contain information about hardware in
stallations for major firms in these four countries. As

3.2. Adjusting the Quality and Price Effects of IT
shown in Figure 1, it includes information about the
Capital
firm's business as well as the model and cost of major
dx represents a general rate of depreciation and should
hardware and peripherals. However, not all firms in
be adjusted for quality improvement and price decline
ACD are publicly listed. To obtain related financial in
of computers over time. These adjustments can be in
formation, each firm in ACD is matched with entries
corporated by multiplying the computer stock by a
in two financial databases: PACAP and GV. Firms ap
price deflator derived from published price indices for
pearing in both sources are then retrieved. As shown
computer capital, e.g., the computer price index pub
in row 3 of Table 2, the sample so collected represents
lished by the Bureau of Economic Analysis (BEA).3
some of the largest firms in the Asia Pacific region in
Note that the depreciation rate represents the rate of
terms of market capitalization. These firms also rep
obsolescence in meeting the users' needs over time,
resent heavy users of IT in the four economies.
while the price deflator reflects the declining price of
Each firm in the dataset is assigned to one of the five
the acquisition of computer capital of the same type.
industries: service, industrial, trading, transportation
While we have reasons to expect that the depreciation
and utility. Classification is done by first grouping
rate and price deflators may vary among the four econ
firms according to their line of business as stated in
omies, it is more likely that variation of the rate of ob
solescence (i.e., ju) is more uniform than the rate of ACD. For firms operating in more than one industry,
they are classified to the industry that generates most
price decline of computers. The price deflator is related
to factors such as distribution channel, tax incentive, of its revenue. Almost all firms in our sample have a
distinct line of business which falls into one of the five
pricing structure, import/export policy of IT products
as well as the price elasticity dynamics of IT users (Tam
industries. The classification is then validated by
matching the firms in each group with the listing clas
1996) in each economy. These factors are likely to im
sification in their local stock exchanges. Inconsistencies
pose a trend of price decline which is unique to each
are resolved and firms are reassigned in consultation
economy. To address variation in price deflator, four
with local experts. It is found that over 95% of the firms
annual price deflators are used in our analysis: 0.15,
0.2, 0.25, and 0.3. When combined with the 20% de are correctly classified in the first step. The dataset is
nonbalanced, with the number of firms increasing be
preciation rate, the total depletion period for computer
tween 1983 and 1991. Multiple occurrences of the same
capital ranges from 5 to 7 years. This is in line with the
firm during the investigation period is accounted for
life cycle of most computer models and is consistent
with our observations on the change in computer in by using year dummies in the regression model. Only
stallations in the firms listed in ACD over time. firms with all the information required to estimate
Equation (1) are retrieved. Others with missing data
3.3. Data Sources
are discarded. Summary statistics of the data sample
Although small and medium-sized enterprises (SMEs)
are shown in Tables 2 and 3.
dominate the four economies, we will focus on large
firms so that comparisons can be made with U.S. stud
4.We
ies that were based on large enterprises. Data Analysis
select
The analysis is performed using OLS. The results are
3Other documented indices include those by Chow (1967),
Cartwright and Smith (1988), Gordon (1989), Triplett summarized in Tables 4-8. To save space, only the re
(1989), Berndt
sults based
and Griliches (1990). However, there are discrepancies on a price deflator of 20% are shown. The
in these
works, due mainly to the difference in models (e.g.,above analysis
hedonic or simis repeated for 15%, 25%, and 30%. It is
ple) and the selection of variables (e.g., RAM, CPU cycle).
found that the coefficients and significance levels are

Vol. 9, No. I, March 1998 89
TAM
Table 2 Data Sample Summary Hong Kong shows a significant coefficient with a neg
ative sign. The same regressions are rerun with differ
Hong Kong Singapore Malaysia Taiwan
ent price deflators (0.15,0.25, and 0.30). The coefficients
Number of Firms 38 26 24 18
are not sensitive to changes in the price rate. The sign
Total Number of Observations 201 140 112 97 and magnitude of coefficients remain the same. Note
Market Capitalization of firms as of that the explanatory power of models for TSR, ROE,
December 1991 (% of total and ROA is in line with previous studies. To probe
market) 18% 28% 19% 14%
further into the findings, a power test for each hypoth
Industrial (% of sample) 55.4% 64.3% 51.7% 87.6%
16.4% 8.1% 39.7% 3.4%
esis is performed according to Cohen (1977) and
Trading (% of sample)
14.1% 27.6% 8.6% 9%
Baroudi and Orlikowski (1989). The results are sum
Service (% of sample)
Utilities (% of sample) 3.4% 0% 0% 0% marized in Table 8. As can be observed, the power tests
Transportation (% of sample) 10.7% 0% 0% 0% conducted for Hong Kong, Singapore, and Taiwan (ex
cept TSR) score higher than the acceptable value of 0.8
suggested by Cohen (1977). Thus, the chance of not
not sensitive to the rate of price decline. As shown in reporting an IT impact if one exists in these three econ
Tables 4-7, IT capital does not correlate with return on omies is quite small. The lower power for Malaysia,
stock value (TSR) in all four countries, thus H2 is not which averages 0.67, should be taken into account in
supported. The TSR model explains a fair amount of interpreting the insignificant results.
variance, ranging from 20.8% for Hong Kong to 31.9% To account for any lag effects of IT capital on firm
for Singapore. performance, the above analysis is repeated using IT
Results for HI are mixed for the four economies. capital with a one-year lag. Results of the estimation
Hong Kong and Malaysia show no correlation between based on a 20% price deflator are shown in Table 9.
IT and ROA. Singapore shows a significant positive For TSR, all four economies are found to be insignifi
relationship but the contrary is observed for Taiwan.
cant, thus H2 is not supported. Like the analysis with
For ROE, while Hong Kong shows no sign of correla no lag, the results for HI are mixed. The results of ROA
and ROS are identical to those without a lag. For ROE,
tion, Singapore and Malaysia demonstrate a significant
positive relationship. On the other hand, a negative
Hong Kong shows a positive correlation, indicating the
relationship is observed for Taiwan. For ROS,existence
only of a lag effect. However, the significance re
Table 3 Summary Statistics and Performance Measures
Hong Kong Singapore Malaysia Taiwan
27.8% 6% 4.4% 37.3%
Total Shareholder Return (TSR) (62.9%) (10%) (10.9%) (80.9%)

21.2% 19.8% 21.1% 12%
Return on Equity (ROE) (19.3%) (30.5%) (30.2%) (7.5%)

11.3% 16.1% 15.5% 7.3%
Return on Asset (ROA) (9.3%) (29.3%) (25%) (4.6%)

19.7% 12.3% 16% 0.1%
Return on Sales (ROS) (18.7%) (22.9%) (16%) (0.1%)

Computer Capital (in US$ 7.83 4.42 5.27 1.49
million) (41.64) (15.51) (13.76) (16.14)

Book Value of Asset (in US$ 796.39 489.53 538.95 388.2
million) (128.65) (464.03) (522.5) (472.1)
Standard deviations are enclosed in parentheses.

90 Vol. 9, No. 1, March 1998
TAM
Table 4 Business Performance Analysis of Hong Kong Firms
Total Shareholder Return on Return on

Return Equity Assets Return on Sales
(1 Year) (1 Year) (1 Year) (1 Year)
Computer Capital 0.019 1.626 -0.109 -2.208**
(5.006) (0.957) (0.453) (0.766)

Size 3.739 -1.079 -0.615 8.565**
(5.349) (1.193) (0.565) (0.955)

Dummy Variables Year and industry Year and industry Year and industry Year and industry
Adjusted R2 0.208 0.018 0.048 0.331
** = p < 0.01, * = p < 0.05. Heteroskedasticity-
Table 5 Business Performance Analysis of S
Total Shareholder
Return on Return on
Computer Capital -0.329 2.298** 1.621** 1.850
(0.685) (1.012) (0.524) (1.483)

Size 0.289 0.988 -0.223 4.245
(1.218) (1.808) (0.935) (2.649)

Adjusted R2 0.319 0.260 0.253 0.139
** = p< 0.01, * = p< 0.05. Heteroskedasticity-consistent standard errors are enclosed in parentheses.
suits observed before for Singapore and Malaysia no two values suggest either the market is in disequilib
longer exist in our lag analysis. For Taiwan, a negative rium or that there are sources of rent-generating assets
relationship is detected. The above analysis is repeated that do not appear on the books. Tobin's q has been
for price deflator = 0.15,0.25,0.3. The results are iden suggested for use in evaluating firm performance
tical. Again, the power of the tests are calculated to (Wernerfelt and Montgomery 1988) and many have
determine the validity of the results. As shown in Table adopted this method to evaluate such intangible cor
10, the power for all tests decrease slightly due mainly porate assets such as R&D (Cockburn and Zvi 1988).
to a reduction of sample size across all economies. The We extend the use of the Tobin's q to the study of IT
overall results are similar.
investment. In particular, we hypothesize that com
4.1. Market Value of the Level of IT Capital puter capital measured as a percentage of book value is val
ued by the market. A number of rationales are given for
As indicated by the small adjusted R2 for some NIEs,
the market to value IT investment. IT is considered as
there may be factors which affect share return and
business performance that are not captured by athe means to save costs by automating labor-intensive
operation processes. Also, IT is generally regarded as
model. To fine-tune our analysis, we adopted the
an enabler for business process reengineering whose
Tobin's q theory proposed in Hitt and Brynjolfsson
aim is to streamline the structure and operation of a
(1994). The theory postulates that the long-run equilib
rium market value of a pool of assets held by a firm
firm. The saved expenses can be viewed as a stream of
equals its book value. Any discrepancies between the
income in the future. Also important is the strategic

Vol. 9, No. 1, March 1998 91
TAM
Table 6 Business Performance Analysis of Malaysia Firms

Computer Capital -0.879 3.223* 0.678 -0.932
(0.732) (1.436) (0.437) (0.657)

Size -0.429 -1.862 -1.379 0.842
(1.537) (2.986) (0.909) (1.365)

Adjusted ft2 0.227 0.185 0.361 0.577
** = p < 0.01, * = p < 0.05. Heteroskedasticity-consistent standard errors are enclosed in parentheses.
Table 7 Business Performance Analysis of Taiwan Firms
Computer Capital -3.686 -2.646** -1.729** -0.004
(8.590) (0.813) (0.486) (0.006)

Size 1.091 1.632 0.588 -0.028**
(9.089) (0.899) (0.542) (0.007)

Adjusted R2 0.239 0.096 0.091 0.198
use of IT to increase market share and introduce new

products. Success in gaining an edge in these dimen
Table 8 Sign and Significance of Computer Capital Coefficient in
sions will increase the firm's revenue and profit mar
Single Year Performance Regressions
gin in the long run. In any of these cases, the relative
Total Shareholder Return on Return on Return on share of the IT asset is expected to be positively valued
Return Equity Assets Sales by the market. To test this hypothesis, a valuation
(1 Year) (1 Year) (1 Year) (1 Year) model is developed as shown below:
Hong Kong ns (0.83) ns (0.98) ns (0.98) -(0.98) log (MVu) = a + E Dk a log (BV„ ) + (3 (5)
Singapore ns (0.81) + (0.82) + (0.82) ns (0.82)
Malaysia ns (0.66) + (0.67) ns (0.67) ns (0.67)
where MV,( is the market value, Cit is the stock of IT
Taiwan ns (0.78) - (0.82) - (0.82) ns (0.82)
capital, and BV,( is the book value of firm i at time t
adjusted for industry difference by the dummies Dk. It
ns: not significant; +: significant positive correlation at 5%; -: significant
negative correlation at 5%. The power of the test is stated in parenthesis; it
follows that the sign and magnitude of P in Equation
is based on a medium effect size with a 5% significance level and a nondi (5) indicate the significance of IT capital as a revenue
rectional test according to Cohen (1977). generating source. If (3 is significant, one can conclude
that IT investment is valued by the market.

TAM
Table 9 Business Performance Analysis of Firms (One-Year Lag)
Total Shareholder
Return Return on Equity Return on Assets Return on Sales
Computer -2.480 2.389* 0.194 -2.318*
Hong Kong Capital (6.460) (1.177) (0.531) (0.956)

Size 5.626 -0.870 -0.318 8.995*
(6.519) (1.345) (0.616) (1.109)

Adjusted R2 0.193 0.011 0.026 0.329
Singapore Computer -0.230 1.706 1.349* 1.567
Capital (0.789) (1.076) (0.574) (1.667)

Size 0.106 1.869 0.183 4.421
(1.435) (1.956) (1.044) (3.031)

Adjusted R2 0.304 0.237 0.221 0.094
Malaysia Computer -0.757 2.637 0.445 -1.146
Capital (0.666) (1.560) (0.445) (0.701)

Size -1.354 -1.860 -1.394 0.038
(1.482) (3.393) (0.969) (1.525)

Adjusted R2 0.341 0.195 0.431 0.637
Taiwan Computer -2.997 -2.805** -1.824** -0.002
Capital (10.42) (0.913) (0.567) (0.007)

Size -2.221 1.437 0.488 0.027*
(11.28) (0.996) (0.625) (0.008)

Adjusted R2 0.243 0.089 0.088 0.184
Results of the regression are shown in Table 11.

When compared with the ratio analysis, the regressors
Table 10 Sign and Significance of Computer Capital Coefficient in of the valuation model have more explanatory power.
One-Year Lag Performance Regressions The adjusted R2 are all higher when compared with
estimates based on TSR and the three ratios, with Tai
Total Shareholder Return on Return on Return on
Return Assets Sales
wan capturing more than 90% of the variance.
Equity
(1 Year) (1 Year) (1 Year) (1 Year) Only Malaysia indicates a significant P, indicating
the level of IT investment contributes positively to the
Hong Kong ns (0.73) + (0.95) ns (0.95) - (0.95) market value of a firm. Again, different computer de
Singapore ns (0.72) ns (0.73) + (0.73) ns (0.73)
Malaysia ns (0.57) ns (0.59) ns (0.59) ns (0.59)
flators are used and the sign and significance of the
Taiwan ns (0.72) - (0.75) - (0.75) ns (0.75) coefficients remain unchanged. The statistical power
for the test of (3 are 0.98, 0.82, 0.67, and 0.82 for Hong
ns: not significant; +: significant positive correlation at 5%; -: significant
Kong, Singapore, Malaysia, and Taiwan, respectively.
negative correlation at 5%. The power of the test is stated in parenthesis; it
is based on a medium effect size with a 5% significance level and a nondi
All economies except Malaysia score higher than 0.8.
rectional test according to Cohen (1977). However, the test for Malaysia detects a significant ef
fect (at 1% significance level), therefore the lower
power may not adversely affect the validity of the con
clusion as compared when the result is not significant.

TAM
Table 11 Market Value Analysis (Dependent Variable Isrelationship,

Market which uses societal context as a predictor
Value) in the relationship. Confirmation of a context
embedded relationship automatically implies univer
Coefficient Hong Kong Singapore Malaysia Taiwan
sal acceptance of the findings because societal vari
Constant 13.490** 8.390** 8.750** 5.070** ables have been explicitly accounted for. The second
(0.740) (1.030) (0.855) (0.858) type is a context-excluded relationship, which employs
(IT/BV) 0.078 0.033 0.001** 5.570 data from a single nation. Its confirmation is restricted
(1.090) (0.009) (0.004) (5.200) to the nation studied. To investigate its universal gen
Dummy Variables Industrial Industrial Industrial Industrial
erality requires testing the relationship across different
sector sector sector sector
Adjusted R2 0.836 0.685 0.653 0.914 nations. So far, almost all empirical research on IT in
vestment is based on a single nation and can be clas
** = p < 0.01, * = p < 0.05. Heteroskedasticity-consistent standard sified as context-excluded. The validity of the findings
errors are enclosed in parentheses. as universal knowledge needs to be evaluated in dif
ferent national settings. A key findings of the current
study is that market expectation of firm performance
is not correlated with IT investment. Thus, when com
5. Discussion and Limitations
bined with findings by Hitt and Brynjolfsson (1994),
The impact of IT investment on firm-level performance
there is strong evidence that the relationship could be
in four NIEs is empirically investigated in this paper.
established with universal applicability. In other
Using previously adopted methodology, we test the
words, the level of IT investment is not an explanatory
correlation between computer capital and a number
variable inof
shareholder return when the market is ef
performance ratios and determine whether the market
ficient. The latter condition implies the ability of in
value IT investment by firms. The findings reveal dif
vestors to discern discrepancies in national settings
ferences across NIEs and across performance
measures.
and incorporate them in calculating the expected re
turn. In an efficient market, investors will consider dis
When compared across performance measures, one
crepancies in accounting procedures and evaluate a
can observe that results on shareholder return are very
consistent while results on other ratios are mixed for firm based on its future profitability rather than on its
historical performance. The short-run competitive ad
the four NIEs. The finding of null impact on share
holder return does not contradict with the mixed re vantage such as first mover advantage of new IT ap
plications cannot be sustained for a prolonged period.
sults of the accounting ratios. Such a difference could
Eventually, the novel applications will become routine
be explained by the general belief that shareholder re
turn represents the market's expectation of the future
operations and will be copied by competitors in the
industry.
profitability of a firm while the other three ratios (ROE,
Thus, all gains in performance will disappear
ROA, and ROS) are mainly historical measures.eventually.The In a forward-looking market, this infor
mation is properly discounted in the security's price.
current work indicates that this is indeed supported
empirically across the four NIEs. An insignificant impact is expected and this is dem
onstrated in our findings in the four NIEs.
The advantage of cross-national research is to allow
On the other hand, our findings suggest that the re
researchers to establish the generality of findings and
lationship
the validity of interpretations across different nations between IT investment and accounting ra
(Kohn 1987). Given the increasing amount of IT tios
incould be confounded by institutional factors and
are societal specific. The findings on ROE, ROA, and
vestment worldwide, results based on a single nation
need to be tested and confirmed in different national ROS, when combined with empirical studies con
settings to establish external validity. Cheng (1994) deducted in the United States, indicate the impact of IT
fines two types of research findings with universal ap investment on firm performance is not a direct one and
plicability that can be obtained from cross-nation stud is likely moderated by the different management ori
ies. The first type is called a context-embedded entation and financing decisions unique to a national

TAM
line better known, investors should expect the same

setting. For example, Lee and Blevins (1990) reported
determinants of accounting performance vary returns
consid as on other capital investments.
erably between ratios and between industrializedWhile
and the learning effect of firms will likely intro
newly industrialized countries. They found that duce
pera lag on firm performance (Brynjolfsson 1993), its
formance depends very much on the debt ratio, impact
capital may not be uniform over time. This may ex
intensity, export activity, firm size, plant andplain
equipthe discrepancies between the one-year lag and
no-lag results of HI. As suggested by Attewell (1992),
ment, and level of diversification. These moderating
a large
variables are in turn affected by deeper cultural and knowledge barrier needs to be overcome in the
societal factors. This is consistent with a study by adoption
Child of business computing. Once an IT applica
(1981), which reports that macro-level variables, in implemented and institutionalized, the lag will
tion is
gradually shorten or even disappear. As suggested by
cluding IT, have become more similar across countries,
whereas micro-level variables related to culture and Peffers and Dos Santos (1996), a one-year lag may not
social behavior have become dominating factors that capture all of the performance impacts because firms
may not realize all of the benefits of such investments
limit the generalizability of findings of studies across
for several years due to the organizational learning ef
social systems. The effects of these variables may even
dominate other IT factors such as information systemfect. Following this line of reasoning, we suspect that
management and development. Recent work has atlag effect may still exist for IT capital. However, it
the
tempted to incorporate variables in the value chain may
as not be easily detectable especially when the anal
intermediate links between IT investment and ysis is restricted to a constant lag period (e.g., one year)
accounting-based performance ratios (Barua et al.
and aggregated IT captial is used in the current study.
Similar to U.S. firms (Hitt and Brynjolfsson 1994),
1995). To the extent that societal factors are adequately
represented, findings of these studies could market
have lim valuation of IT capital as a rent-generating
ited generalization to other countries. The source mixed does
renot exist in three of the four NIEs. In these
sults obtained for ROS, ROE, and ROA in the NIEs, IT is treated no different than other assets. The
current
potential gains from investing in IT are fully recog
work indicate the impact of IT on firm performance
should not only be moderated by intermediatenized andvarivalued by the market. On the one hand, the
ables but should also be investigated in conjunction
significant results observed in Malaysia, though very
with any societal factors that may have ansmall,
impactindicate
on the potential of IT may not be fully re
firm performance. alized. Such a potential has value and is reflected in
Furthermore, impact of IT investmentthe can be price.
share af We speculate that the significant result
fected by the amount and effectiveness ofobserved
IT deployin Malaysia could be attributed to the differ
ment. An important factor is the type of ent state of IT development in the country. The eco
IT deploy
nomic development
ment. A closer look at the IT applications, which are measured by GNP still lags be
hind thecan
also published in ACD, reveals that the majority other three NIEs. Using the IT maturity model
reported
be classified as transactional systems that are nonin in a survey of a number of Asian countries
novative in nature. This is consistent with (APO 1994),by
a study which include the four NIEs studied here
Dos Santos et al. (1993), which found that the financial
(Table 12), Malaysia was still in the initial stage of IT
market values IT investments selectively. Using development
U.S. during the period investigated in this
data, they reported that the financial market study.
onlyThe other three NIEs were already in the
val
ues IT investments that are innovative in nature. Other Growth and Maturity stage. Thus, it is hypothesized
less innovative IT investments will have no or even that Malaysian firms may not have completely insti
negative effects. The dominance of transactional tutionalized
ori their IT applications and the benefits may
notstill
ented systems is of no surprise since all four NIEs have been fully realized. Furthermore, it is ob
served that a large percentage of Malaysian firms in
lag behind the United States in developing strategic
and innovative applications. As transactional systems
the sample are industrial firms with a heavy concen
are well understood and their impacts on the bottom
tration in agriculture and plantations. The combined

Vol. 9, No. 1, March 1998 95
TAM
effect may be that a substantial gain in business

roles in perthe advanced application of IT by firms. Ho
formance is expected when these companies ever, automate.
their positive impacts on firm performance m
Thus, an increase in the level of computerization
be underminedis by other factors including tight reg
matched with a corresponding increase in the valu
lation of key industries such as telecommunicatio
ation of Malaysia firms. and banking, outdated legal and copyright measures
Our findings also provide implications on andthe con restrictions commonly found in develop
import
tinuing debate regarding the effectiveness ing of market
countries.
directed vs. plan-directed strategy on the development
Although it is a first attempt at considering the im
of the IT industry at the national level. Thepact
impactof ITof in a cross-national context, this paper ha
government policy on IT investment can beseveral addressedlimitations that need to be recognized in int
from two perspectives. The first focuses on preting
the needits offindings. First, the current study represents
an IT policy to facilitate IT production and theinfrastruc
empirical testing of IT capital on performance, an
ture development at the national level. Theno second
attemptfo is made to provide a theoretical framewor
cuses on the relationship between national IT policy
Yet, the empirical findings can be used to guide and
and IT investment impact at the firm level. facilitate
While pre the development of such a theoretical mode
vious work has documented the importance Second,of our
na definition of IT capital includes only co
tional IT policy in IT production in a number puter
of Asian
and peripherals without accounting for softwa
Pacific countries (Dedrick and Kraemer 1995),and little re from IT labor. This may underestimate th
input
search has been done to investigate whether contribution
the exis of IT capital and consequently overe
tence of such a national policy will benefit mate
firms its
toimpact. This problem is addressed by using
have better leverage on their IT investments to imcomputer deflators in our analysis. For ex
different
prove their performance. As indicated in the ample, a 15% price decline factor, which underes
current
study, there is no clear evidence that this is mates
indeedthe theactual price decline, would offset the unde
case. According to Dedrick and Kraemer (1995), estimation
Hong problem in IT capital. As our finding
Kong and Malaysia are labeled as marketindicate, directed, the results are not sensitive to changes in t
while Taiwan and Singapore are labeled as plan dideflator. Nevertheless, there is a risk that the
computer
rected. It is interesting to note that although the four
amount of IT capital is not exact but an approximatio
economies have different governmental technologyThird, the data sample is compiled from a relatively
large number
policies, IT investment has no significant impact on of secondary sources. Although consis
shareholder return for all four NIEs. Also, the results
tency checks are conducted to ensure the data are o
of ROE, ROA, and ROS are mixed within theacceptable
market quality, data problems may still exist. Th
and plan-directed groups. in fact is a recognized challenge for researchers doin
A basic premise for establishing a nationwide comparative
IT pol studies in developing countries. For
icy (i.e., plan-directed) is that a centralized ample,
effort no
ledconsistent deflator for capital investmen
by the government will better facilitate the(e.g., by industry, assets) exist for the four economie
diffusion
Thus,
and application of IT for economic growth, implying we have to resort to the GDP deflator in our
study.
implicitly that a positive impact will be realized at While
the IS researchers may not be familiar wit
the data
firm level. However, as indicated by our results, sources used here, the sources are public
there
is no solid evidence that government-led ITavailable.
policy hasIn fact, the Global Vantage and PACAP
any significant impact on firm performance. tabases are published by U.S. institutions. Unlike man
Unlike IT production, the impact of IT policyIT
onimpact
firm studies that employ proprietary firm data,
performance, even if it does exist, is likely istopossible
be indi for others to replicate and extend the cu
rect. Many objectives of a national policy suchrent as cre in the future.
study
ating a nationwide telecommunication network, en
Our findings also reveal similar measurement pro
lems and modeling concerns cited in previous studie
hancing computer awareness, facilitating technology
transfer, providing R&D training, expanding Oneand im
concern is the unit of analysis. Some of these firms
have
proving the quality of IT education certainly playmultiple
key business units and their use of IT cou

TAM
Table 12 IT Maturity Model and Its Characteristics
IT Users IT Facilitators IT Providers
Low Awareness No/low government • Inadequate

Limited use Support protection of copy
Low/no Low priority on right
expenditure on IT supporting or • Dependence on
hardware and developing IT overseas IT
software facilitators providers
• Few software
developers
Increasing interest Creation of • Gradual
to know how to coordinating body development of
improve responsible for application S/W
productivity in promotion of • Integration of
specific functions standards, education, software and
using IT etc. hardware
Emphasis on user Market-driven • System integration
friendliness facilitating roles • Development of
Expanding IT user integrated network
base
be quite different. For these firms, the impact of IT on mance in a way which facilitates systematic compari
son with studies done across national boundaries. The
business performance will be averaged out because
our data set is limited to aggregated IT investment at main contribution of this study to IT impact studies is
the firm level and performance measures at the busi to investigate IT investment at the firm level in a cross
national setting. Our findings add to the validity of
ness unit level are not available. Similarily at the in
observed relationships between IT investment and
dustry level, effects of specific industries are averaged
firm performance reported in previous studies. While
out because our classification of firms into five indus
it is important to explain the difference between NIEs
tries may be too coarse for some firms. as they relate to environmental factors and govern
Another concern is the insignificant results of the
ment policy, this is beyond the scope of the current
accounting ratios (ROE, ROA, and ROS). We share the
study. However, work in this area is far from complete.
More work needs to be done in theory development
view of Hitt and Brynjolfsson (1994) that the results
may due to the bluntness of our model which postuand empirical analysis, especially through compara
lates a direct relationship between IT capital and ac studies at the country level. Our study provides a
tive
starting point for accumulating empirical findings
counting performance ratios. Although there is a dra
across national boundaries for the development of a
matic increase in IT capital for all four countries from
theory that links IT investment, firm performance and
1983 to 1991, IT capital as a percentage of the firm's
macro factors such as national technology policy and
total assets is still very small. By 1991, IT capital ratio
environmental factors in an integrated framework.4
is 0.98%, 5.1%, 3.3%, and less than 1% for Hong Kong,
Singapore, Malaysia, and Taiwan, respectively. Given
4This research is partially supported by a grant from the Hongkong
Telecom Institute of Information Technology. The author would like
such a low ratio, contributions of IT capital may not be
to thank faculty members of the Department of Information and
detectable using the current model. Systems Management at HKUST, the associate editor, and four re
viewers for their helpful comments on early drafts of the paper. Dis
cussion with country representatives of the Asian Productivity Or
6. Conclusion ganization Symposium on Applications of IT in National
Development provided helpful feedback on preliminary findings of
Our objective is to document empirical findings of the
the project. The author also appreciates the excellent research assis
relationship between IT investment and firm perfor
tance provided by Gloria Choy.

Vol. 9, No. 1, March 1998 97
TAM
References nology and Capital Formation, D. W. Jorgenson and R. Landau,

A]par, P. and M. Kim, "A Microeconomic Approach to the Mea(eds.), MIT Press, Cambridge, MA 1989, 77-124.
surement of Information Technology Value," J. ManagementHarris,
In S. E. and J. L. Katz, "Firm Size and the Information Tech
formation Systems, 7, 2 (1990), 55-69. nology Investment Intensity of Life Insurers," MIS Quarterly,
Attewell, P., "Technology Diffusion and Organizational Learning:September (1991), 333-354.
Hitt,
The Case of Business Computing," Organizational Sci., 3, 1 L. and E. Brynjolfsson, "The Three Faces of IT Value: Theory
(1992), 1-19. and Evidence," Proc. 15th International Conf. on Information Sys
Asian Productivity Organization, Report on Conclusions and Recomtems, 1994.
Jorgenson, D. W., "Capital as a Factor of Production," in Technology
mendations: Symposium on Applications of Information Technology
in National Development, November 1994. and Capital Formation (D. W. Jorgenson and R. Landau (eds.)),
Baroudi, J. L. and W.J. Orlikowski, "The Problem of Satistical PowerMIT Press, Cambridge, MA, 1989.
in MIS Research," MIS Quarterly, March (1989), 87-106. King, J. L., K. L. Kraemer, V. Gurbaxani, J. Dedrick, K. S. Raman,
Barua, A., C. Kriebel, and T. Mukhopadhyay, "Information Techand C. S. Yap, "Government Policy and Information Technol
nologies and Business Value: An Analytic and Empirical In ogy in Asia-Pacific Countries: A Conceptual Overview," Infor
vestigation," Information Systems Res., 6, 1, (1995), 3-23. matization and Public Sector, 2 (1992), 97-110.
Berndt, E. R., and Z. Griliches, "Price Indexes for Microcomputers:, V. Gurbaxani, K. L. Kraemer, F. W. McFarlan, K. Raman, and
An Exploratory Study," National Bureau of Economic Research C. S. Yap, "Institutional Factors in Information Technology In
Working Paper #3378, Cambridge, MA, 1990. novation," Information Systems Res., 5, 2 (1994), 139-169.
Brynjolfsson, E., "The Productivity Paradox of Information Techand K. L. Kraemer, "Information Infrastructure, National Pol
nology," Comm. ACM, 36,12 (1993), 67-77. icy, and Global Competitiveness," Information Infrastructure and
and Hitt, L., "Is Information Spending Productive? New Evi Policy, 1 (1995).
dence and New Results," Pro. 14th International Conf. on Infor
Kohn, M. L., "Cross-national Research as an Analytic Strategy:
mation Systems, (1993). American Sociological Association 1987 Presidential Address,"
, "The Contribution of Information Technology to ConsumerAmerican Sociological Rev., 52 (1987), 713-731.
Welfare," Information Systems Res., 7, 3 (1996), 281-300. Kraemer, K. L. and J. Dedrick, "Payoffs from Investment in Infor
Cartwright, D. W. and S. D. Smith, "Deflators for Purchases of Commation Technology: Lessons from the Asia-Pacific Region,"
puters in GNP: Revised and Extended Estimates, 1983-88," Sur World Development, 22, 12 (1994), 1921-1931.
vey of Current Business, 68 (1988), 22-23. , V. Gurbaxani, and J. L. King, "Economic Development, Gov
Cheng, J. L. C., "The Concept of Universal Knowledge in Organi ernment Policy, and the Diffusion of Computing in Pacific Area
zational Science," Management Sci., 40,1 (1984), 162-168. Nations," Public Admin. Rev., 52, 2 (1992), 146-156.
Child, J., "Culture, Contingency and Capitalism in the Cross
Lee, J. and D. E. Blevins, "Profitability and Sales Growth in Indus
national Study of Organizations," Res. Organizational Behavior,
trialized Versus Newly Industrializing Countries," Management
3 (1981), 303-356.
International Rev., 30 (1990), 87-100.
Chow, G. C., "Technological Change and the Demand for Comput
Rosenzweig, P. M., "When Can Management Science Research be
ers," American Economic Rev., 57 (1967), 1117-1130.
Generalized Internationally?" Management Sci., 40,1 (1994), 28
Clemons, E. K, "Evaluation of Strategic Investments in Information 39.
Technology," Comm. ACM, 34, 1 (1991), 22-36.
Strassman, P. A., The Business Value of Computers, Information Eco
Cockburn, I. and Z. Griliches, "Industry Effects and Appropriability
nomics Press, New Canaan, CT 1990.
Measures in the Stock Market's Valuation of R&D and Patents,"
Triplett, J. E., "The Economic Interpretation of Hedonic Methods,"
American Economic Rev., May (1988), 419-23.
Survey of Current Business, 86 (1986), 36-40.
Cohen, J., Statistical Power Analysis for the Behavioral Sciences, Second
Tam, K. Y., "Analysis of Firm-Level Information Technology Invest
Ed., Academic Press, New York, 1977.
ments: A Comparative Study of High Growth Economies,"
Cron, W. L. and M. G. Sobol, "The Relationship Between Comput
Working Paper, Hong Kong University of Science and Tech
erization and Performance: A Strategy for Maximizing the Eco
nology, Clear Water Bay, Hong Kong, 1995.
nomic Benefits of Computerization," /. Information Management,
6 (1983), 171-181. , "Dynamic Price Elasticity and the Diffusion of Mainframe
Computing," ]. Management Information Systems, 13, 2 (1996),
Dedrick, J. and K. L. Kraemer, "National Technology Policy and
163-183.
Computer Production in Asia-Pacific Countries," The Informa
tion Society, 11 (1995), 29-58.
Weill, P., "The Relationship Between Investment in Information
Dos Santos, B. L., K. Peffers, and D. C. Mauer, "The Impact of In Technology and Firm Performance," Information Systems Res.,
3, 4 (1992), 307-333.
formation Technology Investment Announcements on the Mar
ket Value of the Firm," Information Systems Res., 4,1 (1993), 1 Wernerfelt, B. and C. A. Montgomery, "Tobin's q and the Impor
23. tance of Focus in Firm Performance," American Economic Review,
March (1988), 246-250.
Gordon, R. J., "The Postwar Evolution of Computer Prices," in Tech
Peter Weill, Associate Editor. This paper was received on July 13,1995, and has been with the author 5 months for 3 revisions.

98 Vol. 9, No. 1, March 1998

Impact of It Investment On Firm's Performnce

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Impact of It Investment On Firm's Performnce

Uploaded by

Copyright:

Available Formats

The Impact of Information Technology Investments on Firm Performance and Evaluation:

Evidence from Newly Industrialized Economies

Evaluation: Evidence from Newly

Kar Yan Tam

1. Introduction ing firms. So far, empirical findings reported in the lit

Impact of IT Investments on Firm Performance and Evaluation

plines, they argued that these three dimensions

Information Systems Research

Impact of IT Investments on Firm Performance and Evaluation

To estimate the impact of IT capital on theseputers

+ aln(Clf) capital services is a quantity

between firm size and IT investment. The book asset

common practice in empirical studies investigating the

3. IT Capital Measurement and C« = ^dAit-r, (3)

3.1. Measurement of IT Capital where dT is the relative efficiency index for a

Information Systems Research

Impact of IT Investments on Firm Performance and Evaluation

Table 1 Variable Definitions

Variable Computation Source

Figure 1 A Typical Firm Description Published in the Asian Cimputer Directory

LAM SOON (HONG KONG) LTD

Information Systems Research

Impact of IT Investments on Firm Performance and Evaluation

bility over time. The depreciation rate attempts

stallations for major firms in these four countries. As

Information Systems Research

Impact of IT Investments on Firm Performance and Evaluation

Table 3 Summary Statistics and Performance Measures

Hong Kong Singapore Malaysia Taiwan

27.8% 6% 4.4% 37.3%

Total Shareholder Return (TSR) (62.9%) (10%) (10.9%) (80.9%)

Return on Equity (ROE) (19.3%) (30.5%) (30.2%) (7.5%)

Return on Asset (ROA) (9.3%) (29.3%) (25%) (4.6%)

Return on Sales (ROS) (18.7%) (22.9%) (16%) (0.1%)

million) (41.64) (15.51) (13.76) (16.14)

million) (128.65) (464.03) (522.5) (472.1)

Standard deviations are enclosed in parentheses.

Information Systems Research

Impact of IT Investments on Firm Performance and Evaluation

Table 4 Business Performance Analysis of Hong Kong Firms

Total Shareholder Return on Return on

(1 Year) (1 Year) (1 Year) (1 Year)

Computer Capital 0.019 1.626 -0.109 -2.208**

(5.006) (0.957) (0.453) (0.766)

(5.349) (1.193) (0.565) (0.955)

** = p < 0.01, * = p < 0.05. Heteroskedasticity-

Table 5 Business Performance Analysis of S

(1 Year) (1 Year) (1 Year) (1 Year)

Computer Capital -0.329 2.298** 1.621** 1.850

(0.685) (1.012) (0.524) (1.483)

(1.218) (1.808) (0.935) (2.649)

Information Systems Research

Impact of IT Investments on Firm Performance and Evaluation

Table 6 Business Performance Analysis of Malaysia Firms

Total Shareholder Return on Return on

(1 Year) (1 Year) (1 Year) (1 Year)

Computer Capital -0.879 3.223* 0.678 -0.932

(0.732) (1.436) (0.437) (0.657)

(1.537) (2.986) (0.909) (1.365)

Table 7 Business Performance Analysis of Taiwan Firms

Total Shareholder Return on Return on

Return Equity Assets Return on Sales

(1 Year) (1 Year) (1 Year) (1 Year)

Computer Capital -0.329 2.298 1.621 1.850

Computer Capital -3.686 -2.646 -1.729 -0.004