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The event study is an important methodology in management research that enables the assessment of value attributable to firm initiatives based on the responses of capital markets to news about firm actions. While capital markets are efficient in processing information about firms, their ability to rapidly determine future benefit streams linked to initiatives involving novel information technologies such as ecommerce technologies may be limited by several factors. There is considerable ambiguity related to benefits from novel technologies and their effects on industries, markets and firms in the short term. At the time of the announcement, relevant information is also not available on complementary initiatives influencing value such as such as changes to business processes, willingness of supply chain partners to make complementary changes etc. Adjustments of stock prices over longer windows are thus likely to reflect more informed assessment of the ability of firms to generate benefits and to appropriate value created by novel information technologies than those within a few days of the event. We examine the returns to e-commerce events in the period from 1999 to 2000 employing a set of short time windows (1-day, 5-days, 10-days bracketing the event) as well as a set of long event windows (6-month, 9month and 1-year from the event). The results reflect little consistency between abnormal returns in short 1day, 5-day and 10-day event windows. In contrast, the abnormal returns observed in 6, 9 and 12-month windows, though slightly different are reasonably consistent. Further, the variation of short-run abnormal returns across the two year period appear to be suspiciously similar to the fluctuations of market sentiments related to the Internet, indicating that extraneous,...

Assessing the value of information technology (IT) security investments by firms is a challenging task because of difficulties in the measurement of tangible and intangible benefits. Event study methodology that uses market valuations is a widely used in these cases. We employ the event study methodology to assess the impact of Internet security breaches on the market value of the breached firms. We also study the information transfer effect of security breaches, namely the effect of security breaches of other firms on market values of firms that develop security technology. The results of our study show that the announcement of Internet security breach is negatively associated with the market value of the announcing firm. Compromised firms, on average, lose approximately 2.1% of their market values within two days surrounding the events. This translates into $ 1.65 billion average loss in market capitalization per incident. We find that firm type, firm size, and time are important factors that explain the crosssectional variations in abnormal returns. Our results also show that the effects of security breaches are not restricted to breached firms. The market values of security developers are positively associated with the disclosure of security breaches by other firms. Each security developer, on average, gains 1.36 % more than normal gain expected by market model. This translates into, on average, a total gain of $ 1.06 billion per security firm over a two-day period.

The valuation of initial public offerings (IPOs) is of considerable interest, given the important role these enterprises play in economic growth and investors ’ decisions. IPO valuation is particularly challenging due to the meager information available about new enterprises on their offering dates. We extend the research on IPO valuation in various directions: First, we penetrate deep beyond the traditional proxies for value drivers, like R&D expenditures and cash flows, by defining and testing a host of specific productrelated and competitive environment value drivers; second, we examine IPO valuations at three distinct phases of the going-public process, third, we employ both the direct valuation and relative valuation approaches, and, fourth, we round up the analysis by examining the long-term performance of IPOs. Based on a sample of science-based IPOs that went public in the 1990s, we document the overwhelming importance of productrelated and intellectual property fundamentals, as well as the irrelevance of several key signals, such as venture capital backing and the quality of underwriters, which played prominent roles in previous research.

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The authors contributed equally and are listed alphabetically. The authors thank Professor Shivaram Rajgopal for his assistance with some methodological issues and Nate Highlander and Robert Wiltbank for their assistance with the data collection. We also thank Professors Dick Moxon, José de la Torre, John Beck, and Kevin Steensma, as well as three anonymous reviewers for their helpful comments and suggestions. ASSETS AND ACTIONS: FIRM-SPECIFIC FACTORS IN THE INTERNATIONALIZATION OF U.S. INTERNET FIRMS By providing a nearly instant connection among parties at opposite corners of the world and enabling a variety of commercial exchanges, the Internet emerged as the technology expected to create a truly global market space. Internet firms faced the challenge of capitalizing on this development. In this paper we examine what firm-specific factors are associated with the propensity of pure U.S.-based Internet firms to enhance their international presence on the Internet by developing country-specific websites. Despite the assertion that all Internet firms are born global, our findings show that the pursuit of internationalization by Internet firms is related to the levels of their intangible assets and strategic activity. Two types of intangible assets –

Please note that this is a work in progress and not a finished document. The data analysis, in particular, is not complete and more additions, modifications and changes are sure to follow.

We would like to thank audiences at the Economic Sociology seminar at MIT and the Organizational Behavior seminar at Harvard Business School for their feedback on early versions of this work. We also appreciate the comments of participants at the NYU Stern Organizational Behavior and the Harvard Workshop in Applied Statistics. We are also grateful for the assistance of Denise Murrell and Diana Blaney of Institutional Investor magazine. Shrewd, Crude, or Simply Deluded? Comovement and the Internet Stock Phenomenon We analyze comovement among Internet and other categories of stocks during the late 1990s and 2000 in an effort to assess the sophistication of stock-market valuation. Prominent accounts of the Internet stock phenomenon suggest that the prices of these stocks were determined by simplistic thinking. In particular, investors were not sufficiently discriminating as they crudely grouped all Internet stocks into an undifferentiated and highly attractive investment category. We find that, in fact, comovement among Internet stocks was high throughout much of this period but did not reach the very high levels presumed by prevailing accounts. In addition, we describe two

http://www.business.queensu.ca/kbe This paper was commissioned by the Queen’s Centre for Knowledge-Based Enterprises and is part of a Framework Series established to organize existing research and identify key research issues for future investigation. The series can be found at

In the recent rapidly changing environment of the Digital Economy, business-to-business (B2B) electronic markets have adopted cooperative strategies in lieu of competitive strategies in order to obtain resources so that they can succeed in the market. This paper aims to develop a formal theory-based understanding of a range of observed cooperative strategies by conducting an empirical study of B2B e-market strategic alliances. We draw upon research on strategic alliances, intermediation and market structure to explore the factors that motivate firms to enter into interorganizational alliances, and make choices about how to structure and provide governance mechanisms for them. We employ data from various secondary sources, and address questions about the motivation for, composition of, and impact of alliances. We investigate the frequency of alliances that B2B e-markets form by estimating a count model. We explain how B2B firms choose alliance structures and whether the cooperative strategy affects the success of B2B e-markets by using two different binomial logistic regression models. Our results show that leading B2B e-markets tend to set up cooperative relations less frequently. Also we find that strategic alliances are more likely to involve high levels of interdependence in governance (e.g., joint equity ownership),