Setting IT Standards: The Effect of Coalition Size on the Risk and Return Profiles of Participants

38 Pages Posted: 2 Apr 2009

See all articles by Nitin Aggarwal

Nitin Aggarwal

San Jose State University - Donald and Sally Lucas Graduate School of Business

Qizhi Dai

Drexel University - Bennett S. LeBow College of Business

Eric Walden

Texas Tech University - Area of Information Systems and Quantitative Sciences (ISQS)

Date Written: April 1, 2009

Abstract

IT standards are sometimes set by a single firm and sometimes set by a group of firms. One reason to do things in groups is to share risk. We theorized that setting standards in a group changes the stock returns and risk profiles of the group members. We tested our theory using a sample of 789 observations over the ten year period 1996-2005, and found that increasing the number of firms in the standard setting process decreases risk adjusted abnormal return and market risk, but increases idiosyncratic risk. Our findings have important implications for management in deciding on strategies in starting or participating in standard setting initiatives. This study contributes to the literature in IT standards and standardization, and expands our understanding of the implications of standardization strategy on shareholder risks.

Keywords: Standard, Standardization, Standard setting, Event study, Returns on IT investment, Risk of IT investment

JEL Classification: C23, E44, G14, D40, D71, O14, O32, O34

Suggested Citation

Aggarwal, Nitin and Dai, Qizhi and Walden, Eric A., Setting IT Standards: The Effect of Coalition Size on the Risk and Return Profiles of Participants (April 1, 2009). Available at SSRN: https://ssrn.com/abstract=1371638 or http://dx.doi.org/10.2139/ssrn.1371638

Nitin Aggarwal

San Jose State University - Donald and Sally Lucas Graduate School of Business ( email )

One Washington Square
San Jose, CA 95192-0066
United States
408.924.7711 (Phone)
408.924.7793 (Fax)

HOME PAGE: http://www.cob.sjsu.edu/aggarwal_n/

Qizhi Dai

Drexel University - Bennett S. LeBow College of Business ( email )

101 N. 33rd St.
Philadelphia, PA 19104
United States

Eric A. Walden (Contact Author)

Texas Tech University - Area of Information Systems and Quantitative Sciences (ISQS) ( email )

Lubbock, TX 79409
United States
806-742-1925 (Phone)

HOME PAGE: http://ericwalden.net

Register to save articles to
your library

Register

Paper statistics

Downloads
57
Abstract Views
620
rank
373,819
PlumX Metrics