A Lag Effect of IT Investment on Firm Performance

Authors:
Sangho Lee;Soung Hie Kim
Affiliations:
Korea Advanced Institute of Science and Technology, South Korea;Korea Advanced Institute of Science and Technology, South Korea
Venue:
Information Resources Management Journal
Year:
2006

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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.