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Byline: Masayuki Morikawa (1) Abstract: This paper examines the impact of investment in information technology (IT) on the performance of Japanese firms. My findings imply that there is a positive and statistically significant relationship between IT and firm profitability and innovation, but only for small firms. These results underscore the importance of investment in IT for small companies. The acceptance of IT by this sector is fundamental to the success of structural adjustment in the Japanese economy. Author Affiliation: (1) Ministry of Economy, Trade and Industry, 1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo, 100-8901, Japan Article History: Registration Date: 02/10/2004

Many contemporary markets, particularly markets of information technology products and information services, are characterized by increasing returns, including those resulting from bandwagon and network effects. At the same time, in larger firms, innovation often takes place in distinct units that are semi-autonomous and that have the responsibility for more than one phase in the product development process. In the most extreme case, a separate profit center is created within which research and development (R&D), production, marketing, and related activities are fully integrated and that has its own responsibility for external relations: an internal innovative venture. The central issue in this paper is the relation between the way firms organize their innovative activities and the market dynamics caused by bandwagon and network effects. We focus on the decision-making actors and we propose a categorization of causes of increasing returns and definitions of bandwagon and network effects that are consistent with this aim. We investigate the extent of internal autonomy of the unit, the extent of the integration of R&D, marketing and other activities in the product development process, and the extent of external autonomy. Three cases of projects creating software products, two of them in the same firm, demonstrate that the organization of innovation and the dynamics of the market are mutually dependent. More in particular, we hold that higher autonomy of teams, particularly in managing external relations, is important to cope with and manage bandwagon and network effects. Index Terms--Autonomy of project teams, bandwagon effects, increasing returns, network effects, organization of innovation.

ABSTRACT Researchers have questioned for sometime the financial value that IT investment provides to firms. Primary difficulties have been in the statistical measurements deployed. This paper shows that these difficulties [...]

This article discusses the need for senior managers to take leadership in making six key information technology decisions. They should decide how much to spend on IT, which business processes should receive IT funds and which IT capabilities need to be companywide.. They must also decide how good IT services need to be, which privacy and security risks are acceptable and whom to blame if an IT initiative fails.

This article examines the risk involved when contract manufacturers decide to do business with small, potentially fast-growing companies. Topics addressed include selecting entrepreneurial customers, as well as tips for the strategic, financial, and managerial nurturing of start-ups.

Over the last few decades, organizations have been increasingly investing in information technology (IT). However, despite these substantial investments in IT, empirical studies have not persuasively established corresponding improvements in organizational performance. In fact, to the contrary, many studies investigating investments in IT have found no significant relationship between firm performance and investments in IT. Brynjolfsson and Kaufman and Weill identify shortcomings in past studies. These shortcomings include measurement errors, lags between investments and benefits, redistribution of profits, and mismanagement of IT resources. This paper proposes a framework for measuring the efficiency of investments in IT that addresses these shortcomings. In particular, we demonstrate how a mathematical programming technique called Data Envelopment Analysis (DEA) can be used to evaluate the efficiency of IT investments. Our framework is illustrated using data compiled for over 200 large organizations. The paper illustrates how the shortcomings listed above can be addressed. Keywords: Information technology; Economics of information technology; Data envelopment analysis; Information systems; Firm performance

Extant literature indicates that majority of Fortune 100 CEOs believe that their companies are not getting the most out of their information technology (IT) investments even as IT expenditure continues to grow. It has been estimated that such investments have come to account for a third of all capital expenditures, and for as much as half of the total business costs of certain business organizations. Consequently, measurement of IT effectiveness has become an important concern of information systems managers. A case study is presented that illustrates how quantitative/tangible and qualitative/intangible costs and benefits can be measured using traditional approaches based on the concepts of net present value.

This study examines the direct and interaction effects of IT investments and IS department efficiency on different facets of firm performance. Specifically, measures for financial, sales, and intermediate firm performance are considered. IS budget is used as a measure of IT investment; asset turnover and labor productivity are used as intermediate performance measures; and sales per IS employee and income per IS employee are used as measures of IS department efficiency. Secondary sources were used to construct a database of 210 firms, which was used for statistical analysis. Our results suggest that; (i) IS budget is not related to financial firm performance, but is positively related to sales performance; (ii) The results for intermediate performance were mixed; (iii) IS efficiency had no impact on the relationship between IS budget and firm performance measures, except market share. Analysis of the results suggest that the effect of IT investments should be assessed simultaneously on both aggregate and intermediate performance. Furthermore, IS departments with 'high' efficiency may be unable to better leverage each additional dollar spent on IT. This has significant implications for organizations considering radical downsizing and elimination of their IS departments, as in the process they could reduce their conversion effectiveness. Key words - information systems, technology, productivity, cost benefit analysis, investment