A Lag Effect of IT Investment on Firm Performance

A Lag Effect of IT Investment on Firm Performance

Sangho Lee (Korea Advanced Institute of Science and Technology, South Korea) and Soung Hie Kim (Korea Advanced Institute of Science and Technology, South Korea)
Copyright: © 2006 |Pages: 27
DOI: 10.4018/irmj.2006010103
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Abstract

This article discusses the positive effects of IT investment on firm financial performance when a distinct range of characteristics is examined. The relationship between IT investment and firm performance considering the information intensity of the industry is explored using a distributed lag model. Findings indicate both a positive effect and a positive lag effect of IT investment. The effects of IT investment in the high information-intensive industry are significantly larger than in the low information-intensive industry. Furthermore, a lagged effect of IT investment is larger than an immediate effect, regardless of the information intensity of the industry. We conclude that firms in the high information-intensive industry need to be more cognizant of performance factors when investing in IT investment than in the low information-intensive industry. Moreover, it is necessary to consider the time lag between IT investment and firm performance.

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