The impact of rfid adoption on the market value of firms: An empirical analysis

Indranil Bose, Ariel K.H. Lui, Wai Ting Ngai

Research output: Journal article publicationJournal articleAcademic researchpeer-review

20 Citations (Scopus)

Abstract

Extant research praises the benefits of radio frequency identification (RFID) on the basis of case studies and experience reports. However, empirical studies that access the strategic impact of RFID on organizations are rare, and the financial impact of RFID adoption on the firms remains unclear. This article provides empirical evidence related to the effect of RFID adoption on market value of firms by examining short-term market reaction toward RFID adoption. Based on 108 publicly traded firms that adopt RFID, we find that RFID adoption has a statistically significant negative impact on a firm's market value. The stock price of the firm decreases by at least 0.29% on the day of the announcement, indicating that the investors perceive RFID adoption announcements to be bad news for most firms. Moreover, the subsampling analysis indicates that US-based firms, late adopters, nonmanufacturing firms, less diversified firms, financially unhealthy firms, and low growth potential firms suffer more negative impact when they announce the news of RFID adoption. Overall, this article adds to the accumulating evidence about the risks that accompany a disruptive IT like RFID and provides a note of caution to firms that are interested to invest in RFID.
Original languageEnglish
Pages (from-to)268-294
Number of pages27
JournalJournal of Organizational Computing and Electronic Commerce
Volume21
Issue number4
DOIs
Publication statusPublished - 1 Oct 2011

Keywords

  • Abnormal reaction
  • Adoption of RFID
  • Disruptive technology
  • Event study
  • Financial market
  • Market reaction
  • Stock price

ASJC Scopus subject areas

  • Information Systems
  • Computer Science Applications
  • Computational Theory and Mathematics

Cite this