INFORMATION TECHNOLOGY INVESTMENT DECISIONS UNDER ASYMMETRIC INFORMATION: A MODIFIED RATIONAL EXPECTATION MODEL

2009 ◽  
Vol 08 (01) ◽  
pp. 55-72 ◽  
Author(s):  
JINLAN NI ◽  
DEEPAK KHAZANCHI
Keyword(s):  
Information Technology ◽  
Information Asymmetry ◽  
Rational Expectation ◽  
Investment Decisions ◽  
Capital Outlay ◽  
Market Uncertainty ◽  
It Investment ◽  
Initial Capital ◽  
Expectation Model ◽  
Different Levels

In this paper, we propose that information technology (IT) managers make investment decisions about new IT initiatives based on a modified rational expectation model. Unlike traditional rational expectation models, we emphasize the relevance of market uncertainty and its impact on the return of new IT investment. This results in information acquisition decisions by managers that can cause information asymmetry. This information asymmetry is endogenous and so the IT manager can become well informed if and only if it is beneficial to do so. We also capture different levels of IT investment across managers by introducing heterogeneity across managers in terms of different levels of initial capital. Based on a simulation analysis to validate our theoretical model, we find that it is the IT manager with larger initial capital outlay who is particularly interested in acquiring information about their IT investments in order to reduce any asymmetry with competitors. Furthermore, we find that holding other things constant, fewer IT investors are informed when information cost increases and in consequence the difference of investment level between the informed and uninformed investors is more pronounced.

AMERIREAL Corporation

2011 ◽  
pp. 21-31
Author(s):  
Mo Adam Mahmood ◽  
Gary J. Mann ◽  
Mark Dubrow
Keyword(s):  
Information Technology ◽  
Organizational Performance ◽  
Investment Decisions ◽  
Optimal Investment ◽  
Student Thinking ◽  
It Investment ◽  
The Subject ◽  
Case Based

This instructional case, based on an actual firm’s experience (name changed) is intended to challenge student thinking with regard to the extent to which information technology (IT) can demonstrably contribute to organizational performance and productivity, and to which users of IT can relate their investment decisions to measurable outcomes. Relationships between an organization’s investment in IT and the effect of such investments on the organization’s performance and productivity have long been the subject of discussion and research. Managers, interested in knowing the “payoff” of such investments, are continually seeking answers to this question. A failure to understand the benefits of IT investment, or an over- or under-estimation of the benefits of a planned investment in IT relative to the costs, will likely result in less than optimal investment decisions.

Managing Strategic IT Investment Decisions From IT Investment Intensity to Effectiveness

2002 ◽  
pp. 141-157
Author(s):  
Tzu-Chuan Chou ◽  
Robert G. Dyson ◽  
Philip L. Powell
Keyword(s):  
Decision Making ◽  
Information Technology ◽  
Analytical Model ◽  
Investment Decisions ◽  
Evaluation Process ◽  
Empirical Testing ◽  
It Investment ◽  
Organizational Decision Making ◽  
Information Technology Projects ◽  
Strategic Investment

Many information technology projects fail, especially those intended as strategic. Yet, there is little research that attempts to explain the link between the IT investment intensity of strategic investment decisions (SIDs) and organizational decision-making, in order to understand this phenomenon. This paper proposes an analytical model employing a number of constructs: effectiveness of decisions, interaction and involvement in the decision-formulating process, accuracy of information and strategic considerations in the evaluation process, rarity of decisions, and the degree of IT intensity of an investment in strategic investment decisions. The model explores the relationships influencing the effectiveness of decisions. Empirical testing is based on a sample of 80 SIDs from Taiwanese enterprises. The results show that interaction, accuracy of information, and strategic considerations are mediators in the linkage of IT investment intensity and the effectiveness of SIDs. The implications of these findings for the management of strategic IT investment decisions are discussed.

AMERIREAL Corporation

2011 ◽  
pp. 98-109
Author(s):  
Mo Adam Mahmood ◽  
Gary J. Mann ◽  
Mark Dubrow
Keyword(s):  
Information Technology ◽  
Organizational Performance ◽  
Investment Decisions ◽  
Optimal Investment ◽  
Student Thinking ◽  
It Investment ◽  
The Subject ◽  
Case Based

This instructional case, based on an actual firm’s experience (name changed), is intended to challenge student thinking with regard to the extent to which information technology (IT) can demonstrably contribute to organizational performance and productivity and to which users of IT can relate their investment decisions to measurable outcomes. Relationships between an organization’s investment in IT and the effect of such investments on the organization’s performance and productivity have long been the subject of discussion and research. Managers, interested in knowing the “payoff” of such investments, are continually seeking answers to this question. A failure to understand the benefits of IT investment, or an over- or under-estimation of the benefits of a planned investment in IT relative to the costs, will likely result in less than optimal investment decisions.

The Evaluation of Risky Information Technology Investment Decisions

2004 ◽  
Vol 18 (1) ◽  
pp. 53-66 ◽  
Author(s):  
Jacob M. Rose ◽  
Anna M. Rose ◽  
Carolyn Strand Norman
Keyword(s):  
Information Technology ◽  
Prospect Theory ◽  
Investment Decisions ◽  
Decision Makers ◽  
Risk Averse ◽  
It Investment ◽  
Technology Investment ◽  
Risk Seeking ◽  
Information Technology Investment ◽  
Domain Information

This research proposes that the risk preferences of decision evaluators and the decision “domain” systematically influence evaluations of decision makers' information technology (IT) investment decisions. Results of an experiment with 160 M.B.A. student participants indicate that risk-seeking evaluators rate IT investment decisions higher than do risk-averse evaluators. Further, decision evaluators are influenced by the gain and loss decision domains when evaluating a decision maker's risky information technology investment decisions. The findings indicate that providing decision domain information to decision evaluators leads to systematic differences in IT investment evaluations. A key contribution of this study is the discovery of the relevance of prospect theory to IT evaluation processes.

AMERIREAL Corporation

2011 ◽  
pp. 21-31
Author(s):  
Mo Adam Mahmood ◽  
Gary J. Mann ◽  
Mark Dubrow
Keyword(s):  
Information Technology ◽  
Organizational Performance ◽  
Investment Decisions ◽  
Optimal Investment ◽  
Student Thinking ◽  
It Investment ◽  
The Subject ◽  
Case Based

This instructional case, based on an actual firms experience (name changed), is intended to challenge student thinking with regard to the extent to which information technology (IT) can demonstrably contribute to organizational performance and productivity and to which users of IT can relate their investment decisions to measurable outcomes. Relationships between an organizations investment in IT and the effect of such investments on the organizations performance and productivity have long been the subject of discussion and research. Managers, interested in knowing the payoff of such investments, are continually seeking answers to this question. A failure to understand the benefits of IT investment, or an over- or under-estimation of the benefits of a planned investment in IT relative to the costs, will likely result in less than optimal investment decisions.

scholarly journals Governing information technology (IT) investment: A contingency perspective on organization’s IT investment goals

2021 ◽  
pp. 031289622110095
Author(s):  
Syaiful Ali ◽  
Peter Green ◽  
Alastair Robb ◽  
Adi Masli
Keyword(s):  
Information Technology ◽  
Boards Of Directors ◽  
Contingency Theory ◽  
Jel Classification ◽  
It Investment ◽  
It Investments ◽  
Contingency Perspective ◽  
Uniform Approach ◽  
Business Executives

Using contingency theory, we argue that there is not a uniform approach for companies to govern information technology (IT) investments. Rather, the level of governance over IT investments is contingent upon the organization’s goals for its IT investments. We find that Australian organizations with both operation- and market-focused IT investment goals (i.e. dual-focused IT goals) demonstrate higher IT investment governance (ITIG) levels than those with less focused IT goals. We also document that dual-IT-focused firms that do not implement high levels of ITIG underperform. Our study informs business executives, boards of directors, and other practitioners interested in governance implementations over IT investments. JEL Classification: M1

Information technology investment and innovation performance: does investment paradox exist?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Peinan Ji ◽  
Xiangbin Yan ◽  
Yan Shi
Keyword(s):  
Information Technology ◽  
Time Lag ◽  
Innovation Performance ◽  
Test Model ◽  
It Investment ◽  
Firm Innovation ◽  
Data Set ◽  
Content Type ◽  
Lag Effect ◽  
Enterprise Innovation

Purpose The purpose of this study is to deepen the understanding of the effects of information technology (IT) investment on firm innovation performance and examining the investment paradox effect in China. Design/methodology/approach Using a sample of China’ public firms IT investment data between 2010 and 2016, the authors establish a test model of IT investment and innovation performance. Findings The result indicates that IT investment in firms have no effect on innovation performance in the investment period. However, in the full sample and manufacturing sample, the IT investment has a significant positive effect on innovation performance in the post-investment years. In addition, this study finds that large companies and low-age companies may contribute more to innovation when firm investment in IT. Research limitations/implications There are several limitations in this research. First, the authors are failed to obtain a larger sample about the IT investment information data set in China, so this study was compelled to use limited sample data from China, hence, this could lead to errors of too early generalization. Second, the authors use the number of invention patent applications to represent the performance of enterprise innovation, which may not show enterprise innovation effectively. Third, the firms in the sample are all in China Listed Companies, so this may not accurately reflect the entire environment of firm innovation performance, and could possibly. Practical implications The research confirms that there is a paradox and time lag effect in IT investment, which enterprises should pay attention to. Originality/value Existing research confirms that corporate IT investments can bring new products or services. However, the authors still do not know whether IT investment has improved the company’s ability of innovation. This study will fill this gap and the industry effect and time lag effect of the influence of IT investment on innovative performance are also examined.

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