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Information Resources Management Association
Advancing the Concepts & Practices of Information Resources Management in Modern Organizations

A Lag Effect of IT Investment on Firm Performance

A Lag Effect of IT Investment on Firm Performance
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Author(s): Sangho Lee (Korea Advanced Institute of Science and Technology, South Korea) and Soung Hie Kim (Korea Advanced Institute of Science and Technology, South Korea)
Copyright: 2006
Volume: 19
Issue: 1
Pages: 27
Source title: Information Resources Management Journal (IRMJ)
Editor(s)-in-Chief: George Kelley (University of Massachusetts, USA)
DOI: 10.4018/irmj.2006010103

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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.

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