The Impact of Investment-Mix on ICT Firms' Financial and Market Performances




Journal Title

Journal ISSN

Volume Title



This research evaluates the relative impact of an Investment-Mix, composed of innovation-oriented investments (technology and entrepreneurship) as well as the traditional CAPEX investment, on the market and financial performances of Information and Communications Technology (ICT) firms. This study is inspired by Schumpeter’s innovation economic theory, which views technology and entrepreneurship as the main drivers of economic growth. To perform this analysis, I created two models: a Sales Growth Estimation Model (SGEM) for financial performance analysis and a Stock Market Evaluation Model (SMEM) for market performance analysis. I tested the models first on the entire ICT sector and then on four selected industries, each representing an order in a value chain. The test results are consistent with Schumpeter’s innovation economic theory. The results show that technology and entrepreneurship do have a major impact on ICT firms’ financial performance. However, these firms appear to have spent too much on internal R&D and are getting diminishing returns from this investment. To maximize returns, ICT firms should find ways other than mere internal R&D to gain a technological advantage, such as collaboration with other firms (which is part of SG&A). This Investment-Mix may have opposite impacts on financial performance and market performance. When making an Investment-Mix decision, firm managers must consider and balance the potential reverse impacts on both performances because they must satisfy the customers and investors. It appears that Investment-Mix proportion varies depending on the order of the industry in a value chain. In general, down-stream industries push more innovation activities (technology and market) responsibilities to up-stream industries. Major negative events, such as the 2008 financial crisis, influence the Investment-Mix impact on both financial and market performance. Therefore, an analysis should be time-segmented accordingly to draw meaningful conclusions.



Investments—Mathematical models, Technological innovations, Information technology—Management, Economics—Mathematical models, Research and development projects