Asia pacific journal of information systems

The Korea Society of Management Information Systems (한국경영정보학회)
권호 표지
DOI QR코드

DOI QR Code

Preemptive or Catch Up? Performance Differences under Enterprise Digital Transformation

  • Peinan Ji (School of Management, Lanzhou University) ;
  • Guang Yu (School of Management, Harbin Institute of Technology (HIT))
  • Received : 2022.04.21
  • Accepted : 2022.09.07
  • Published : 2022.09.30
Download PDF
⟨ Previous Next ⟩

Abstract

The use of on-premises technology in the business environment to create a competitive advantage is ushering in a new era known as digital transformation. As the foundation of digital transformation of enterprises, information technology still has a paradoxical effect on enterprises. This paper documents the effect of investments in IT on a firm's long-term profitability performance measures as return on assets (ROA), as well as tests whether the earlier entrant and the later entrant are different in IT investment performance. Using a sample of China's public firms IT investment data between 2016 and 2019, the result indicates that IT investment in firms have a positive effect on firm performance in full sample, but not in the financial industry firms. When it comes to the different investment time, the result shows no significant difference between the earlier entrant firm and the later entrant firm in the full sample, but not in the case of software industry sample. This should help alleviate the concerns that some have expressed about the viability of digital transformation given the highly publicized IT investment and implementation problems at some firms.

Keywords

Acknowledgement

This work was supported by the National Natural Science Foundation of China under Grant No.72201117.

References

  1. Acar, M. F., Zaim, S., Isik, M., and Calisir, F. (2017). Relationships among ERP, supply chain orientation and operational performance: An analysis of structural equation modeling. Benchmarking: An International Journal, 24(5), 1291-1308. https://doi.org/10.1108/BIJ-11-2015-0116
  2. Alghorbany, A., Che-Ahmad, A., and Abdulmalik, S. O. (2022). IT investment and corporate performance: Evidence from Malaysia. Cogent Business and Management, 9(1). doi:10.1080/23311975.2022.2055906.
  3. An, C. (2005). Supply Chain Management On Demand. Berlin: Supply Chain Management On Demand.
  4. Arora, B., and Rahman, Z. (2016). Information technology investment strategies: A review and synthesis of the literature. Technology Analysis and Strategic Management, 28(9), 1073-1094. https://doi.org/10.1080/09537325.2016.1181742
  5. Banker, R. D., Chang, H., and Natarajan, R. (2005). Productivity change, technical progress, and relative efficiency change in the public accounting industry. Management Science, 51(2), 291-304. https://doi.org/10.1287/mnsc.1040.0324
  6. Barber, B. M., and Lyon, J. D. (1996). Detecting abnormal operating performance: The empirical power and specification of test statistics. Journal of Financial Economics, 41(3), 359-399 https://doi.org/10.1016/0304-405X(96)84701-5
  7. Beccalli, E. (2007). Does IT investment improve bank performance? Evidence from Europe. Journal of banking finance, 31(7), 2205-2230. https://doi.org/10.1016/j.jbankfin.2006.10.022
  8. Boban, M., and Susak, T. (2017, May 22-26). The interconnection between investment in software and financial performance - The case of Republic of Croatia. Paper presented at the 40th International Convention on Information and Communication Technology, Electronics and Microelectronics (MIPRO), Opatija, CROATIA.
  9. Chang, Y. B., and Gurbaxani, V. (2013). An empirical analysis of technical efficiency: The role of IT intensity and competition. Information Systems Research, 24(3), 561-578. https://doi.org/10.1287/isre.1120.0438
  10. Demirhan, D., Jacob, V. S., and Raghunathan, S. (2005). Information technology investment strategies under declining technology cost. Journal of Management Information Systems, 22(3), 321-350. http://doi.org/10.2753/mis0742-1222220311.
  11. Demirhan, D., Jacob, V. S., and Raghunathan, S. (2007). Strategic IT investments: The impact of switching cost and declining IT cost. Management Science, 53(2), 208-226. https://doi.org/10.1287/mnsc.1060.0629
  12. Dos Santos, B., and Sussman, L. (2000). Improving the return on IT investment: the productivity paradox. International Journal of Information Management, 20(6), 429-440. http://doi.org/10.1016/s0268-4012(00)00037-2.
  13. Fernandes, T. M., Gomes, J., and Romao, M. (2017). Investments in E-Government: A benefit management case study. International Journal of Electronic Government Research, 13(3), 1-17. http://doi.org/10.4018/IJEGR.2017070101
  14. Fitzgerald, M., Kruschwitz, N., Bonnet, D., and Welch, M. (2014). Embracing digital technology: A new strategic imperative. MIT Sloan Management Review, 55(2), 1.
  15. Gangopadhyay, P., and Nilakantan, R. (2021). Peer effects and social learning in banks' investments in information technology. International Review of Economics and Finance, 75, 456-463. http://doi.org/10.1016/j.iref.2021.03.024.
  16. Gangopadhyay, P., and Nilakantan, R. (2021). Peer effects and social learning in banks' investments in information technology. International Review of Economics and Finance, 75, 456-463. https://doi.org/10.1016/j.iref.2021.03.024
  17. Gokalp, E., and Martinez, V. (2020) Digital transformation maturity assessment: development of the digital transformation capability maturity model. International Journal of Production Research. http://doi.org/10.1080/00207543.2021.1991020.
  18. Hajli, M., Sims, J. M., and Ibragimov, V. (2015). Information technology (IT) productivity paradox in the 21st century. International Journal of Productivity and Performance Management, 64(4), 457-478. https://doi.org/10.1108/IJPPM-12-2012-0129
  19. Han, S., Hasan, S., and Tucci, C. (2019, Jan 08-11). Information Technology and the Cost of Bank Loans: An Empirical Investigation. Paper presented at the 52nd Hawaii International Conference on System Sciences (HICSS), Hi.
  20. Hendricks, K. B., Singhal, V. R., and Stratman, J. K. (2007). The impact of enterprise systems on corporate performance: A study of ERP, SCM, and CRM system implementations. Journal of Operations Management, 25(1). https://doi.org/10.1016/j.jom.2006.02.002
  21. Huang, S. M., Ou, C. S., Chen, C. M., and Lin, B. (2006). An empirical study of relationship between IT investment and firm performance: A resource-based perspective. European Journal of Operational Research, 173(3), 984-999. http://doi.org/10.1016/j.ejor.2005.06.013.
  22. Ilmudeen, A. (2021). The impact of managing IT on business-IT alignment and firm performance: an empirical study. Foresight, 23(6), 679-697. https://doi.org/10.1108/FS-11-2020-0116
  23. Im, K. S., Dow, K. E., and Grover, V. (2001). Research report: A reexamination of IT investment and the market value of the firm-an event study methodology. Information Systems Research, 12(1), 103-117. http://doi.org/10.1287/isre.12.1.103.9718
  24. Ji, P. N., Yan, X. B., and Yu, G. (2020). The impact of information technology investment on enterprise financial performance in China. Chinese Management Studies, 14(3), 529-542. http://doi.org/10.1108/cms-04-2019-0123.
  25. Kane, G. C., Palmer, D., Phillips, A. N., Kiron, D., and Buckley, N. (2015). Strategy, not technology, drives digital transformation. MIT Sloan Management Review, 14, 1-25.
  26. Kappelman, L., Maurer, C., McLean, E. R., Kim, K., Johnson, V. L., Guerra, K., and Snyder, M. (2021). The 2020 SIM IT Issues and Trends Study. MIS Quarterly Executive, 20(1), 69-107. http://doi.org/10.17705/2msqe.000XX.
  27. Karhade, P., and Dong, J. Q. (2020). Information technology investment and commercialized innovation performance: Dynamic adjustment costs and curvilinear impacts. MIS Quarterly, 45(3), 1007-1024. https://doi.org/10.25300/MISQ/2021/14368
  28. Karhade, P. P., and Dong, J. Q. (2021). Information technology investment and commercialized innovation performance: Dynamic adjustment costs and curvilinear impacts. Mis Quarterly, 45(3), 1007-1024. http://doi.org/10.25300/misq/2021/14368.
  29. Khuntia, J., Saldanha, T. J. V., Mithas, S., and Sambamurthy, V. (2018). Information Technology and Sustainability: Evidence from an Emerging Economy. Production and Operations Management, 27(4), 756-773. http://doi.org/10.1111/poms.12822.
  30. Kohli, R., Devaraj, S., and Ow, T. T. (2012). Does information technology investment influence a firm's market value? A case of non-publicly traded healthcare firms. Mis Quarterly, 36(4), 1145-1163. https://doi.org/10.2307/41703502
  31. Lee, J., and Choi, J. Y. (2019). Increased health information technology investment decreases uncompensated care cost: A study of Texas hospitals. Technology and Health Care, 27(1), 13-21. http://doi.org/10.3233/thc-181399.
  32. Lee, S., and Kim, S. H. (2006). A lag effect of IT investment on firm performance. Information Resources Management Journal, 19(1), 43-69. http://doi.org/10.4018/irmj.2006010103
  33. Li, R., Rao, J., and Wan, L. Y. (2022). The digital economy, enterprise digital transformation, and enterprise innovation. Managerial and Decision Economics. http://doi.org/10.1002/mde.3569.
  34. Liu, J. W., Gong, Y. M., Zhu, J., and Titah, R. (2021). Information technology and performance: Integrating data envelopment analysis and configurational approach. Journal of the Operational Research Society, 73(6), 1278-1293. http://doi.org/10.1080/01605682.2021.1907238.
  35. Menon, N. M., and Lee, B. (2000). Cost control and production performance enhancement by IT investment and regulation changes: evidence from the healthcare industry. Decision Support Systems, 30(2), 153-169. https://doi.org/10.1016/S0167-9236(00)00095-6
  36. Mohamad, A., Zainuddin, Y., Alam, N., and Kendall, G. (2017). Does decentralized decision making increase company performance through its Information Technology infrastructure investment? International Journal of Accounting Information Systems, 27, 1-15. http://doi.org/10.1016/j.accinf.2017.09.001.
  37. Otim, S., Dow, K. E., Grover, V., and Wong, J. A. (2012). The Impact of Information Technology Investments on Downside Risk of the Firm: Alternative Measurement of the Business Value of IT. Journal of Management Information Systems, 29(1), 159-193. http://doi.org/10.2753/mis0742-1222290105.
  38. Pan, Y., Huang, P., and Gopal, A. (2019). Storm clouds on the horizon? New entry threats and R&D investments in the US IT industry. Information Systems Research, 30(2), 540-562. https://doi.org/10.1287/isre.2018.0816
  39. Qi, K. K., and Han, S. M. (2020). Does IT Improve Revenue Management in Hospitals? Journal of the Association for Information Systems, 21(6), 1486-1506. http://doi.org/10.17705/1jais.00644.
  40. Raman, A., and Singh, J. (1998). i2 Technologies, Inc. Harvard Business School.
  41. Sambrani, V. N., and Pol, N. B. (2016). Supply chain management impact of distributor ROI towards sales enhancement in FMCG Sector. Social Science Electronic Publishing. http://dx.doi.org/10.2139/ssrn.2770481
  42. Schallmo, D., Williams, C. A., and Boardman, L. (2020). Digital transformation of business models-best practice, enablers, and roadmap. Digital Disruptive Innovation (pp. 119-138). World Scientific.
  43. Selimovic, J., Pilav-Velic, A., and Krndzija, L. (2021). Digital workplace transformation in the financial service sector: Investigating the relationship between employees' expectations and intentions. Technology in Society, 66, 101640. https://doi.org/10.1016/j.techsoc.2021.101640
  44. Shea, V. J., Dow, K. E., Chong, A. Y. L., and Ngai, E. W. T. (2019). An examination of the long-term business value of investments in information technology. Information Systems Frontiers, 21(1), 213-227. http://doi.org/10.1007/s10796-017-9735-5.
  45. Stores, F., Diah, M. L. M., Abdullah, N. H., and Kadir, Z. A. (2018). The impact of information technology investment on firms performance. International Journal Of Entrepreneurship Business Development, 2(1), 43-55. https://doi.org/10.29138/ijebd.v2i1.648
  46. Takeda, F., Takeda, K., Takemura, T., and Ueda, R. (2021). The impact of information technology investment announcements on the market value of the Japanese regional banks. Finance Research Letters, 41. http://doi.org/10.1016/j.frl.2020.101811.
  47. Thakurta, R., and Deb, S. G. (2018). IS/IT investments and firm performance: Indian evidence. Journal of Global Information Technology Management, 21(3), 188-207. http://doi.org/10.1080/1097198x.2018.1498274.
  48. Wang, H., and Wang, S. H. (2022) A Semantic Model for Enterprise Digital Transformation Analysis. Journal of Computer Information Systems. http://doi.org/10.1080/08874417.2022.2037476.
  49. Xin, M., and Choudhary, V. (2019). IT investment under competition: The role of implementation failure. Management Science, 65(4), 1909-1925. https://doi.org/10.1287/mnsc.2017.3005
  50. Xue, L., Mithas, S., and Ray, G. (2021). Commitment to it investment plans: The interplay of real earnings, management, it decentralization, and corporate governance. Mis Quarterly, 45(1), 193-224. http://doi. org/10.25300/misq/2021/14970.
  51. Zhai, H., Yang, M., and Chan, K. C. (2022). Does digital transformation enhance a firm's performance? Evidence from China. Technology in Society, 68, 101841. doi: https://doi.org/10.1016/j.techsoc.2021.101841.