30 research outputs found

    The Role of Information Technology in Risk/Return Relations of Firms

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    Information Technology (IT) investments are the largest capital budgeting item in most U.S. firms. Thus, there is significant scholarly interest in understanding the relationship between IT investments and firm performance. However, findings to date remain mixed: while some studies find a positive relationship between IT investments and firm performance, others fail to find any significant relationships at all. One possible reason for this may be that most studies conceptualize and measure firm performance in terms of returns~{!*~}but ignore risk. Although risk is also an important aspect of firm performance, and there are tradeoffs between risks and returns, most IS studies have not included risk in examining the relationship between IT investments and firm performance. Focusing only on the return implications of IT ignores risk/return tradeoffs and the possibility that IT can influence the risk/return positions of firms. In this study, we build on and extend the economic theory of complementarities to explain how and why IT influences risk/return relations of firms. We discuss how the incorporation of risk into the analysis of performance effects of IT provides new insights for theory and practice

    Behavioral Externalities in Decentralized Organizations

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    A number of analytic formulations of resource allocation activities in decentralized organizations have considered the effects of economic or technological externalities but most treatments have neglected concomitant organizational or behavioral effects. This paper introduces the concept of a behavioral externality and relates it to the decision-making process in decentralized organizations. Alternative analytic formulations of behavioral externalities are examined, and a numerical example is presented.

    Mean-Variance Approaches to Risk-Return Relationships in Strategy: Paradox Lost

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    A growing number of articles in the area of strategic management employ a mean-variance approach to risk-return relationships. Some researchers investigating risk-return relationships in this fashion claim to have found negative associations between the levels of return and risk. The analysis reported here demonstrates that the mean-variance approach to return and risk carries with it the consequence that statements about the relationship are inherently unverifiable in the context of the system being examined. This further implies that results obtained by using mean and variance of return are specific to the data and period examined and are not necessarily generalizable. Additionally, since mean and variance are arithmetically linked, augmenting the system with additional equations will not provide the information necessary to establish the validity or generalizability of statements involving the mean-variance relation. The analytic proofs are supplemented by examples drawn from an empirical study of the U.S. airline industry.risk, risk/return relation, strategy

    Note---Removing a Self-Imposed Restriction in Modelling Hierarchical Decision Processes

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    Models of decision-making in multi-level, hierarchical systems in the literature have been restricted to structures where the system is strictly pyramidal in nature. We will show that this restriction has been self-imposed and that existing models can be modified to represent a wide range of nonpyramidal structures.hierarchical models, nonpyramidal systems, decentralization
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