IT Paradox Still Exists? Short- and Long-term Event Studies Using Electronic Channel as Vehicle

Information technology paradox (IT paradox) problem has been studied by IS scholars for decades, with their efforts to explore the economic value of information technology for firms. Although the literature in this line has broadened our knowledge, the results are inconclusive and some research gaps have been identified. First, due to the mixed findings of prior studies, whether IT investments lead to better firm performance is still a problem. Second, IT investments are often considered in general by prior studies, leaving the effects of specific IT unknown. Third, while some scholars discussed the importance of time lag effect, to my best knowledge, it has not been empirically addressed. Therefore, in this dissertation, I will complete two studies to further address the above mentioned research gaps, mainly based on resource-based view and complemented with capability building perspective and dynamic capability theory, and electronic channel (e-channel) will be studied as a specific information technology.

In the first study, I build the research model based on resource-based view (direct effect), and will adopt short-term event study methodology from accounting field to investigate the market value, as a measurement of firm performance, of information technology investment announcement, specifically the stock market reactions to e-channel investment announcement. Moreover, I believe that investors’ attitude will be influenced by different types of e-channel announcement. For example, whether it is an initial launching or relauncing e-channel, whether it is a B2B e-channel or B2C e-channel, whether it is e-channel evolving intangible goods or tangible goods, and whether it is self-developed or outsourced.

In the second study, I will adopt long-term event study methodology with firms secondary financial report data to further investigate the relationship between IT (e-channel) investments and firm performance. Based on resource-based theory (indirect effect), complemented with capability building perspective and dynamic capability theory, I propose a more complete conceptual model to explain the IT paradox problem by taking time lag issue into consideration and argue that e-channel investment will first help firms build their capabilities, and then lead to firm performance. Specifically, firms complementary resources play an important role in forming capabilities (capability building perspective); and only those firms fitting capabilities with external changing environment can finally lead to firm performance (dynamic capability theory).