Look Before You Leap: Stock Market Valuation of Mobile App Investments
49 Pages Posted: 8 Mar 2019 Last revised: 16 Feb 2021
Date Written: February 1, 2021
With the continuous growth of the mobile market, many firms are considering investing in mobile apps. Prior research and anecdotal evidence have shown that the success of a mobile app is associated with positive changes in user behavior. However, it is unclear whether the performance implications of mobile app investment can be generalized to a wide range of firms. To further our understanding of IT investments in the mobile domain, we utilized the event study methodology to analyze 761 US public firms that released their first mobile app between 2008 and 2017 on the two leading mobile app stores, Apple’s App Store and Google Play. Our results show that, on average, public firms experience a negative abnormal stock return on the day they release their first mobile app and that the value creation process of mobile app investment is highly contingent on a firm’s market position, IT capability, and industry competition. As the first empirical study to rigorously and systematically document the impact of IT investment in the mobile domain, our findings imply that firms should act cautiously when planning to enter the mobile app market.
Keywords: mobile app, IT investment, abnormal returns, firm value, business value of IT, event study
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