Information Technology, Revenues and Profits: Exploring the Role of Foreign and Domestic Operations

Mithas, S., J. Whitaker, and A. Tafti. ‘Information Technology, Revenues and Profits : Exploring the Role of Foreign and Domestic Operations,’ Information Systems Research (28:2) 2017, 430-444, DOI:10.1287/isre.2017.0689.

28 Pages Posted: 8 Jul 2019

See all articles by Sunil Mithas

Sunil Mithas

University of South Florida

Jonathan Whitaker

University of Richmond, Robins School of Business

Ali R. Tafti

University of Illinois at Chicago

Date Written: November 30, 2016

Abstract

How does information technology (IT) enable firms to globalize their operations and achieve higher foreign profits? We use archival data for multinational firms publicly-traded in the United States for the years 1999 – 2006, and find indirect evidence for the role of IT to help firms achieve higher foreign profits through revenue growth rather than cost reduction. Our findings suggest that foreign responsiveness plays a more important role in generating foreign profits than does value chain structure. Our exploratory analyses for the effect of IT on domestic revenues and profits suggest some evidence for equalization of returns across foreign and domestic operations. Among additional results, we find that R&D is positively associated with foreign revenues and foreign profits with an effect greater than that of IT, and advertising is positively associated with foreign revenues with an effect greater than that of IT. By documenting how IT creates value for firms through globalization, we extend the business value of IT and international business literatures that have so far touched on firm-level globalization benefits from IT only in passing. The findings can help managers decide how to allocate discretionary expenditures to achieve strategic objectives such as foreign and domestic revenues and profits, and the role of revenue versus cost mechanisms.

Keywords: globalization, multinational corporations, foreign revenues, foreign profits, IT expenditures, business value of IT

Suggested Citation

Mithas, Sunil and Whitaker, Jonathan and Tafti, Ali R., Information Technology, Revenues and Profits: Exploring the Role of Foreign and Domestic Operations (November 30, 2016). Mithas, S., J. Whitaker, and A. Tafti. ‘Information Technology, Revenues and Profits : Exploring the Role of Foreign and Domestic Operations,’ Information Systems Research (28:2) 2017, 430-444, DOI:10.1287/isre.2017.0689., Available at SSRN: https://ssrn.com/abstract=3415193

Sunil Mithas (Contact Author)

University of South Florida ( email )

Tampa, FL 33620
United States

Jonathan Whitaker

University of Richmond, Robins School of Business ( email )

1 Gateway Road
Richmond, VA 23229
United States
804.287.6524 (Phone)
804.289.8878 (Fax)

Ali R. Tafti

University of Illinois at Chicago ( email )

601 S Morgan St, 2403 University Hall, MC 294
Chicago, IL 60607
United States

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