Previous research on information technology (IT) failures has predominantly focused on determining the impact of security breaches on firm value. However, little is known about IT failures that emerge accidentally and are unrelated to security incidents. This study approaches this notable research gap by applying the resource weakness framework and utilizing event study methodology. Based on a sample of 571 failure events from publicly-traded European firms, we find that non-security-related IT failures result on average in a 0.32% decline in firm value over a two-day event window. Interestingly, this decline is diminishing in more recent years. Moreover, the loss in firm value is particularly pronounced if the failure is caused by a software error (1.08%). In sum, our findings suggest that the often-neglected resource weakness perspective – that complements resource strengths within resource-based view – has strong explanatory power regarding the contingency factors of IT failure events.
Schweikl, Stefan; Schinnen, Matthias; and Obermaier, Robert, "When the Machine Stops: The Impact of Information Technology Failure on Firm Value" (2022). ECIS 2022 Research Papers. 36.
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