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
Copyright © 2017, PubsOnLine. Article first published online: April 22, 2017.
The definitive version is available at: https://doi.org/10.1287/isre.2017.0689
Mithas, Sunil, Jonathan Whitaker, and Ali Tafti. "Information Technology, Revenues, and Profits: Exploring the Role of Foreign and Domestic Operations." Information Systems Research 28, no. 2 (June 2017): 430-44.https://doi.org/10.1287/isre.2017.0689
Mithas, Sunil; Whitaker, Jonathan W.; and Tafti, Ali, "Information Technology, Revenues, and Profits: Exploring the Role of Foreign and Domestic Operations" (2017). Management Faculty Publications. 62.