Interorganizational IT investments and the value upstream relational capital

Abstract

PurposeThe focus of this article is upstream relational capital, the intangible value of a firm's business relations with its suppliers. The paper aims to propose and test a valuation model of an organization's upstream relational capital that incorporates the leveraging impact of IT investments.Design/methodology/approachA survey was carried out of 159 CEOs in the wireless telecommunication industry.FindingsEvidence suggests that IT and non‐IT factors contribute to explain abnormal return on relational investments.Research limitations/implicationsThis exploratory study is based on a single industry and relational capital is valued by CEO using psychometric scales.Practical implicationsThis study shows how IT‐related information helps external investors to value a firm's upstream relationship capital and hence assess the impact of interorganizational IT investments on the firm's valuation.Originality/valueThese results militate for more transparency in regard to relational investments and the relational context of the firm in the management discussion section of the annual report.