Paper ID
2797
Description
Portraying a digital business strategy seems to be what capital markets are looking for in firms. Tech companies raise staggering amounts of capital and long-established companies that announce a digital business strategy double their firm value over night. By drawing from information economics literature, this study investigates drivers and outcomes of a firm’s digital business strategy by utilizing the new construct of a firm-wide digital orientation. Applying a cross-industry longitudinal study, results indicate that initial public offerings provide financial flexibility to drive a firm’s digital orientation. Yet, against expectations, capital markets react negatively to firms depicting a digital orientation post share issuance. We explain this finding on the basis of investors’ digital myopia. Our analysis yields surprising, yet promising results.
Recommended Citation
Droege, Bardo; Strese, Steffen; and Brettel, Malte, "Investors’ Digital Myopia - The Information Value of Being Digital" (2019). ICIS 2019 Proceedings. 22.
https://aisel.aisnet.org/icis2019/governance_is/governance_is/22
Investors’ Digital Myopia - The Information Value of Being Digital
Portraying a digital business strategy seems to be what capital markets are looking for in firms. Tech companies raise staggering amounts of capital and long-established companies that announce a digital business strategy double their firm value over night. By drawing from information economics literature, this study investigates drivers and outcomes of a firm’s digital business strategy by utilizing the new construct of a firm-wide digital orientation. Applying a cross-industry longitudinal study, results indicate that initial public offerings provide financial flexibility to drive a firm’s digital orientation. Yet, against expectations, capital markets react negatively to firms depicting a digital orientation post share issuance. We explain this finding on the basis of investors’ digital myopia. Our analysis yields surprising, yet promising results.