| Motivated by the new productivity paradox of unexplained IT "excess" returns, this dissertation provides a comprehensive understanding of the risk-return relationship of IT investment. It consists of three interrelated chapters, providing multilevel analyses, from focal IT adoption, to IT's firm-level impact, and industry-level implications.; In Chapter 1, we jointly examine wealth and risk effects associated with electronic commerce adoptions, based on announcements in the 1996 to 2002 time frame. A striking result emerging from our analysis is that wealth effects become insignificant after controlling for contemporaneous risk effects, which are quite significant. Our cross-sectional analyses further indicate that electronic commerce in tangible goods is perceived less risky than digital goods; B2B electronic commerce is perceived less risky than B2C. Overall our results shed light on the riskiness of technology initiatives and the importance of incorporating IT risks in the estimation of IT returns.; In Chapter 2, we explore underlying mechanisms by which IT enhances firm profitability motivated by the mixed results on this subject in the literature. Specifically, we investigate the moderating effects of IT, emphasizing complementarities between IT and firm boundary strategies (diversification and vertical integration). Indeed, we find much stronger indirect (moderating) effects of IT than direct effects---when IT is used to leverage firm boundaries, the result is a higher firm return and lower firm risk. In addition, our sample split analyses suggest stronger IT complementarities in the services sector, in high IT-intensive firms and in more recent data periods. Put together, our results provide managerial implications regarding the strategic use of IT in achieving profitability.; In Chapter 3, we conduct an industry-level investigation of IT impact on risk-return performance. Existing literature lacks an examination of industry-level IT risks and the moderating role of industry characteristics. We find that regulation leads to a low-risk and low return of IT performance; technological change drives a high-risk and high-return relationship. Interestingly, we find that higher industry competition results in higher IT risk but lower IT return, suggesting IT returns are competed away without reducing risks, consistent with the notion that competition renders IT more of a strategic necessity than a source of competitive advantage. |
