Econometric analysis reveals a positive association between IT investments and Tobin's q across firms, indicating IT enhances market-perceived future growth potential.
Key Points
To examine whether information technology investments enhance firm performance and future growth potential using Tobin's q, a forward-looking, market-based metric, rather than traditional accounting measures.
Evaluated annual firm-level financial and IT expenditure data spanning 1988 through 1993.
Modeled the relationship between IT investments and Tobin's q while controlling for firm-specific characteristics and industry-level factors.
Including IT expenditure variables significantly increased the proportion of variance explained in firm Tobin's q across all five analyzed years.
IT investments demonstrated a statistically significant positive relationship with Tobin's q for every individual year between 1988 and 1993.