Market Value Impacts of Information Technology Enabled Supply Chain Management Initiatives

Market Value Impacts of Information Technology Enabled Supply Chain Management Initiatives

C. Ranganathan (Department of Information and Decision Sciences, University of Illinois at Chicago, Chicago, IL, USA), Chen Ye (Department of Information Systems, Finance and Business Analytics, College of Business, Purdue University Calumet, Hammond, IN, USA) and Sanjeev Jha (Department of Decision Sciences, The Whittemore School of Business and Economics, University of New Hampshire, Durham, NH, USA)
Copyright: © 2013 |Pages: 16
DOI: 10.4018/irmj.2013070101

Abstract

This study investigates the market value impacts of IT-enabled supply chain systems using event study method. The authors examine abnormal stock returns to investments in IT-enabled SCM systems announced by 346 firms from 2001 to 2004, and find significant, positive abnormal returns for two, three, and five day periods surrounding the event date. Further, the authors employ organizational integration perspective to test if market value impacts differ based on the functional scope, physical scope and the industry context of the SCM systems adopted by the firms. Using a multiple regression analysis, the authors find the abnormal returns to be greater for firms investing in SCM systems with greater functional scope and physical scope. The authors find marginal evidence for the effect of industry context and no impact of firm size on the market value generated from investments in SCM systems.
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Prior Studies On Scm Systems And Firm Performance

Our research directly builds on two groups of prior studies. Table 1 summarizes key studies that use objective data for assessing SCM systems and firm performance. These studies provide preliminary support for positive business returns from investments in SCM systems. However, the results on the stock market returns have been mixed, and many of these studies largely examined firms making SCM investments in the pre-Y2K period when SCM software market was relatively immature.

Table 1.
Key studies on IT-enabled SCM initiatives and firm performance
StudySample and Time PeriodKey Findings
Dehning, Richardson and Zmud 2007 Public disclosures on the adoption of SCM systems by 123 manufacturing firms in years 1994-2000.Adoption of SCM software systems increased gross margin, inventory turnover, market share, return on sales, and reduced selling, general, and administrative expenses in manufacturing firms
Filbeck et al. 2005 Announcements made SCM software vendor firms on software purchases by 247 client firms in 1995-2000 periodNo significant abnormal returns for the full sample, but announcements pertaining to 52 firms whose names appeared in certain news outlets had significantly positive, abnormal stock returns.
Hendricks, Singhal and Stratman 2007 SCM system adoption announcements of 140 firms in 1995-1999 periodFirms investing in SCM systems had no statistically significant stock returns during implementation, but had some significant returns in post-implementation period. However, these firms had significant positive ROA and ROS during and after post-implementation
Mitra & Singhal, 2008 Announcements made by 144 firms on joining web-based exchanges in 2000-2001Participation in B2B web-exchanges yielded positive, but only marginally significant abnormal returns
Jeong & Lu 2008 Announcements made by 128 firms making RFID investments in years 2001-2006RFID adoption announcements generated positive, abnormal returns in general, greater returns for firms in manufacturing sector.
Bose et al., 2011 RFID investment announcements from 1997 to 2009RFID announcements had statistically significant negative impact on market value of firms.
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