The value of IT to firms in a developing country in the catch-up process: An empirical comparison of China and the United States

Abstract

This study seeks to better understand the role of information technology (IT) to firms in a developing country in the catch-up process. Using the event study methodology, we empirically compare the value of IT investments to firms in China and those in the United States. Three factors that may affect the value of IT (industry, firm size, and firm type) are considered. We find that IT investment announcements significantly increase firms' market value in China but not in the US. This may be evidence that IT brings more benefits to firms in China, helping them to catch up with leader firms in the US. Furthermore, we find that the positive effects of IT investments are more easily observed in IT-using firms than in IT-producing firms in China. Our findings offer further insight into the catch-up theory and the value of IT investments.