Dupont Analysis of an IT-Enabled Competitive Advantage

International Journal of Accounting Information Systems, Vol. 3, No. 3, pp. 165-176, October 2002

Posted: 26 Feb 2009

See all articles by Bruce Dehning

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance

Date Written: October 1, 2002

Abstract

Recent research has shown that if used effectively, information technology (IT) can provide companies with superior performance relative to their direct competitors [MIS Q 24 (2000) 169; Inf Manage 38 (2000) 103]. The most common benefits from the successful use of IT are in increased profitability or efficiency. Return on assets (ROA) decomposition (DuPont analysis) allows financial statement users to examine where this IT-enabled competitive advantage shows up in accounting performance measures, whether in profitability, efficiency or both. Using a matched pair design, comparing companies with an IT-enabled competitive advantage to their direct competitors, we find that successful use of IT pays off in a combination of increased profitability and efficiency. This is different from a competitive advantage that is not IT-enabled, where the only performance advantage is in profitability. All data used in tests are available from public sources.

Keywords: Information technology, Competitive advantage, DuPont analysis, Return on assets

JEL Classification: M15, M41, O14

Suggested Citation

Dehning, Bruce and Stratopoulos, Theophanis C., Dupont Analysis of an IT-Enabled Competitive Advantage (October 1, 2002). International Journal of Accounting Information Systems, Vol. 3, No. 3, pp. 165-176, October 2002. Available at SSRN: https://ssrn.com/abstract=1306193

Bruce Dehning (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 x35943 (Phone)

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