A use of DEA-DA to measure importance of R&D expenditure in Japanese information technology industry

Authors:
Toshiyuki Sueyoshi;Mika Goto
Affiliations:
New Mexico Institute of Mining and Technology, Department of Management, 801 Leroy Place, Socorro, NM, 87801, USA;Central Research Institute of Electric Power Industry, 1-6-1, Otemachi, Chiyodaku, Tokyo 100-8126, Japan
Venue:
Decision Support Systems
Year:
2013

Citing 16
Cited 0

Discriminant analysis via mathematical programming: certain problems and their causes

Computers and Operations Research
Managerial applications of neural networks: the case of bank failure predictions

Management Science
An experimental comparison of some recently developed linear programming approaches to the discriminant problem

Computers and Operations Research
Robust separation of finite sets via quadratics

Computers and Operations Research
Natural discriminant analysis using interactive Potts models

Neural Computation
Industry Clockspeed: Measurement and Operational Implications

Manufacturing & Service Operations Management
Profile distance method: a multi-attribute decision making approach for information system investments

Decision Support Systems
Recent advances in information technology and systems in the Internet-era: Introduction to the WITS'05 special issue for decision support systems

Decision Support Systems
Decision support systems unfrastructure: The root problems of the management of changing IT

Decision Support Systems
Composite quality of service and decision making perspectives in wireless networks

Decision Support Systems
The business value of information technology as measured by technical efficiency: Evidence from country-level data

Decision Support Systems
Classification by vertical and cutting multi-hyperplane decision tree induction

Decision Support Systems
Efficiency measurement for network systems: IT impact on firm performance

Decision Support Systems
A hybrid approach for efficient ensembles

Decision Support Systems
Financial performance analysis of US and world telecommunications companies: Importance of Information Technology in the telecommunications industry after the AT&T breakup and the NTT divestiture

Decision Support Systems
Arbitrary-norm separating planefn1fn1This material is based on research supported by NSF Grant CCR-9322479 and AFOSR Grant F49620-97-1-0326.

Operations Research Letters

Quantified Score

Hi-index	0.00

Visualization

Abstract

This study discusses a use of DEA-DA (Data Envelopment Analysis-Discriminant Analysis) to assess the corporate value of IT (Information Technology) firms and other manufacturing firms. It is widely known that Tobin's q is a ratio that serves as a measure of corporate value. This study explores a linkage between DEA-DA (as a methodology) and Tobin's q (as a theoretical basis for corporate performance) via the measurement of Altman's Z score (as a financial performance). The Z score provides us with aggregated information regarding financial ratios and other financial measures that investors usually examine in their investment decisions. This study applies the proposed approach to compare between Japanese IT and manufacturing firms. The empirical evidence obtained in this study indicates that R&D (Research and Development) expenditure enhances the corporate value of Japanese IT and manufacturing firms. However, the R&D expenditure of IT firms is important but not essential, compared with other manufacturing firms in Japan. The empirical result is inconsistent with the opinion of many corporate leaders and individuals who are associated with the IT industry. They believe that the R&D expenditure is essential for the Japanese IT industry to maintain its international competitiveness in the global market. In addition to the R&D expenditure, the empirical study indicates that IT leaders need to pay attention to the reduction of an R&D cycle time to enhance their competitiveness because a market cycle time of IT products is less than that of the other manufacturing products. The findings on Japanese IT and manufacturing industries are applicable to other industrial nations.