What Do You Know? Rational Expectations in Information Technology Adoption and Investment.

Author List: Au, Yoris A.; Kauffman, Robert J.;

Journal of Management Information Systems, 2003, Volume 20, Issue 2, Page 49-76.

This study examines the potential applications of the rational expectations hypothesis (REH) and adaptive learning theory in IT investment and adoption decision-making. Despite the fact that rationality is commonly assumed in economic analyses, the REH's assumptions make it a unique theory and allow us to offer new perspectives on IS/IT adoption and investment decision-making. Our application of these theoretical perspectives to the IT adoption context---the first time in the IS literature to our knowledge that REH has been used to examine the mechanism for business value expectations formation---will allow us to treat the investment and adoption issues using a perspective that is based on a longer time horizon. Such settings require managers, as economic agents, to form a set of expectations about the values of various variables related to the business value of IT. Rational expectations and adaptive learning assume that decision-makers are able to utilize all available decision-relevant information efficiently and can learn the true value of a prospective investment over time. We present a number of propositions that characterize this perspective, and discuss some illustrative examples that demonstrate the efficacy of the theoretical perspective that we present to characterize the business value expectations formation process in IT adoption.

Keywords: Adaptive Learning; Business Value; Herd Behavior; Information technology investments; Informational cascades; RATIONAL EXPECTATIONS HYPOTHESIS; TECHNOLOGY ADOPTION

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List of Topics

#282	0.185	power perspective process study rational political perspectives politics theoretical longitudinal case social rationality formation construction shows multiple instead understanding fact
#49	0.132	adoption diffusion technology adopters innovation adopt process information potential innovations influence new characteristics early adopting set compatibility time initial current
#44	0.109	approach analysis application approaches new used paper methodology simulation traditional techniques systems process based using proposed method present provides various
#143	0.093	value business benefits technology based economic creation related intangible cocreation assessing financial improved key economics assess question created create understanding
#136	0.074	expectations expectation music disconfirmation sales analysis vector experiences modeling response polynomial surface discuss panel new nonlinear period understand paper dissonance
#95	0.069	learning mental conceptual new learn situated development working assumptions improve ess existing investigates capture advanced proposes types context building acquisition
#271	0.069	technology investments investment information firm firms profitability value performance impact data higher evidence diversification industry payoff return findings decisions greater