Publication Type
Journal Article
Version
publishedVersion
Publication Date
5-2022
Abstract
Moving into cloud computing represents a major marketing shift because it replaces on-premises offerings requiring large, up-front payments with hosted computing resources made available on-demand on a pay-per-use pricing scheme. However, little is known about the effect of this shift on cloud vendors' financial performance. This study draws on a longitudinal data set of 435 publicly listed business-to-business (B2B) firms within the computer software and services industries to investigate, from the vendors' perspective, the shareholder wealth effect of transitioning to the cloud. Using a value relevance model, we find that an unanticipated increase in the cloud ratio (i.e., the share of a firm's revenues from cloud computing) has a positive and significant effect on excess stock returns; and it has a negative and significant effect on idiosyncratic risk. Yet these effects vary across market structures and firms. In particular, unanticipated increases in market maturity intensify the positive effect of moving into the cloud on excess stock returns. Further, unexpected increases in advertising intensity strengthen the negative effect of shifting to the cloud on idiosyncratic risk.
Keywords
Cloud ratio, Excess stock returns, Idiosyncratic risk, Market maturity, Advertising intensity
Discipline
E-Commerce | Marketing | Strategic Management Policy
Research Areas
Marketing
Publication
Journal of the Academy of Marketing Science
Volume
50
Issue
3
First Page
538
Last Page
562
ISSN
0092-0703
Identifier
10.1007/s11747-021-00818-7
Publisher
SAGE Publications
Citation
NEZAMI, Mehdi; TULI, Kapil R.; and DUTTA, Shantanu.
Shareholder wealth implications of software firms' transition to cloud computing: A marketing perspective. (2022). Journal of the Academy of Marketing Science. 50, (3), 538-562.
Available at: https://ink.library.smu.edu.sg/lkcsb_research/6956
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1007/s11747-021-00818-7