Strategic Information Systems and Financial Performance

Abstract

Abstract:Investment in strategic information systems (SIS) is advocated by numerous authors as an important way for firms to seek competitive advantage. Yet there is still little empirical evidence that implementation of SIS results in long-term competitive advantages. This is primarily due to the difficulty of isolating economic benefits attributable to SIS implementation. In this research, thirty-five sample firms identified in the media for successful employment of SIS are analyzed for evidence oflong-term financial success. This analysis is conducted over a thirteen-year period, centered around the year in which firms were identified for employment of SIS to either support growth, control costs, form alliances, differentiate products, or provide innovation of products/processes. Results show that the stock market reacted favorably to announcements that firms were using SIS, and in subsequent years those firms tended to be more productive and more profitable than their industries and than firms in their respective industries. The greatest profitability differences occurred in the years after SIS firms were initially recognized as successfully employing SIS or investing in SIS. Further, a subsample analysis revealed that the positive results were primarily driven by those firms employing SIS to support growth.Key Words and Phrases:: competitive advantagefinancial performanceproductivitygrowthprofitabilitystrategic information systems Additional informationNotes on contributorsRobert M. BrownRobert M. Brown is a Professor of Accounting at Virginia Tech. He received his Ph.D. from Georgia State University. His primary teaching interests are cost and managerial accounting. His primary research interest is in the area of financial accounting.Amy W. GatianAmy W. Gatian is an Assistant Professor of Accounting at the University of Tennessee. She received her Ph.D. from Virginia Tech. Her primary teaching and research interests are in the area of accounting information systems.James O. HicksJames O. Hicks, Jr. is a Professor of Accounting at Virginia Tech. He received his Ph.D. from Georgia State University. His primary teaching and research interests are in the area of accounting information systems.