Market reaction to application service provider (ASP) adoption: An empirical investigation

We examined the impact of ASP adoption on the market value of the firms and explored contextual factors in the positive abnormal returns. We employed event study methodology to analyze 268 ASP adoption announcements from 1998 to 2007. The results indicated that ASP adoption announcements were associated with positive increases in the market value of the firm. In addition, differences in market returns to ASP adoption were found to depend on strategic adoption intent, firm size, industry, and vendor status. These results provide useful implications for making decisions about whether, when, and how to adopt ASP to maximize the business value.