Electronic Commerce Investments, the Resource-Based View of the Firm, And Firm Market Value

International Journal of Accounting Information Systems, Vol. 6, pp. 5-29, 2005

25 Pages Posted: 8 Jan 2007

See all articles by Colin Ferguson

Colin Ferguson

University of Melbourne - Faculty of Business and Economics (Deceased)

Frank Finn

University of Queensland - Business School

Jason Hall

University of Michigan, Stephen M. Ross School of Business

Abstract

Firms have embraced electronic commerce as a means of doing business, either because they see it as a way to improve efficiency, grow market share, expand into new markets, or because they view it as essential for survival. Recent research in the United States provides some evidence that the market does value investments in electronic commerce. Following research that suggests that, in certain circumstances, the market values noninnovative investments as well as innovative investments in new products, we partition electronic commerce investment project announcements into innovative and noninnovative to determine whether there are excess returns associated with these types of announcements. Apart from our overall results being consistent with the United States findings that the market values investments in electronic commerce projects, we also find that noninnovative investments are perceived as more valuable to the firm than innovative investments. On average, the market expects innovative investments to earn a return commensurate with their risk. We conclude that innovative electronic commerce projects are most likely seen by the capital market as easily replicable, and consequently have little, if any, competitive advantage period. On the other hand, we conclude from the noninnovative investment results that these types of investments are seen as being compatible with a firm's assets-in-place, in particular, its information technology capabilities, a view consistent with the resource-based view of the firm.

Keywords: Electronic commerce, Resource-based theory, Replicability, Competitive advantage period, Innovative investments, Noninnovative investments, Firm market value, Event study

Suggested Citation

Ferguson, Colin and Finn, Frank and Hall, Jason L., Electronic Commerce Investments, the Resource-Based View of the Firm, And Firm Market Value. International Journal of Accounting Information Systems, Vol. 6, pp. 5-29, 2005. Available at SSRN: https://ssrn.com/abstract=955057

Colin Ferguson (Contact Author)

University of Melbourne - Faculty of Business and Economics (Deceased)

Frank Finn

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Jason L. Hall

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street, Ross School of Business
University of Michigan
ANN ARBOR, MI MI 48104
United States
+1 734 926 6989 (Phone)

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