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Aubert, B., HEC Montreal, Victoria University of Wellington Croteau, A.-M., John Molson School of Business Hooper, V., Victoria University of Wellington. IT Investments and Productivity. How does IT create value?. Value creation and IT infrastructure.

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it investments and productivity
Aubert, B., HEC Montreal, Victoria University of Wellington

Croteau, A.-M., John Molson School of Business

Hooper, V., Victoria University of Wellington

IT Investments and Productivity

value creation and it infrastructure
Value creation and IT infrastructure
  • The role of IT governance in the establishment of IT architecture (Peterson, 2001, 2004)
  • The definition of IT infrastructure (Broadbent and Weill, 1997)
    • Services
    • HR components
    • IT components
  • Strategic alignment (Chan, Huff, Barclay, Copland, 1997)
  • Flexibility enabled by IT (Fink and Neumann, 2009)
  • Diminishing marginal returns with IT investments (Nevo, Wade, Cook, 2010)
interaction effects
Interaction effects
  • Brynjolfsonn-Hitt (2004) suggest that complementary investments are required to extract benefits from IT investments
  • Yuhn and Park (2010) found that organizational transformation is associated with IT applications to produce growth
  • Cozzarin and Percival (2010) found no interaction between workplace practice and IT usage, and no interaction between training and IT usage
  • Bloom, Sadun, Van Reenen (2012) found that US multinationals enjoyed higher productivity from IT than non-US multinationals. The combination of IT investments with management practices was the likely explanation.
framing the it value research
Framing the IT Value Research

Success Rate

Governance of IT assets

Definition of IT assets

Source: Soh, C. and Markus, L., How IT Creates Business Value: A Process Theory Synthesis, ICIS 1995.

governance
Governance
  • Clear responsibility for the IT infrastructure
    • Policies
    • Acquisition
    • information
  • Planning process
    • Exists
    • Aligned with business goal
    • Assessment of new technology
it infrastructure
IT infrastructure
  • Connectivity
    • The degree to which IT can connect to others, both inside and outside the organization
  • Scalability
    • The degree to which IT can be scaled and upgraded on existing infrastructure
  • Compatibility
    • The degree to which IT can share any type of information both inside and outside the organization
  • Data administration
    • Use of data dictionary and common data definitions
  • Enterprise model
    • Comprehensive approach documenting business processes, inventories, standards
  • IT personnel competency
    • The degree to which IT personnel possess relevant skills and experience to perform IT activities
research model
Research Model

IT infrastructure

Governance

Connectivity

Compatibility

Clarity of responsibility

Scalability

Market success/ business performance

Internal performance

Data administration definition

Enterprise model definition

Level of planning

IT personnel competency

Process change investment

Non-IT personnel competency

Training

Controlling for strategic type

measures
Measures
  • Governance (Lewis and Byrd, 2003)
  • IT infrastructure
    • Connectivity (Chanopas, Krarit, and Khang 2006)
    • Scalability (Chanopas, Krarit, and Khang 2006)
    • Compatibility (Fink and Neumann, 2009)
    • Data administration definition (Lewis and Byrd, 2003)
    • Enterprise model definition (Lewis and Byrd, 2003)
    • IT personnel competency (Chanopas, Krarit, and Khang, 2006)
  • Complementary investments
    • Non IT Personnel competency (adapted from Chanopas et al. 2006)
    • Training (Statistics Canada)
    • Process changes (Statistics Canada)
  • Internal Performance (Hudson, Smart, and Bourne, 2001)
  • Market Performance (Venkatraman, 1989)
slide11
Data
  • 429 respondents
    • 176 Canada
    • 253 New Zealand
  • No difference between jurisdictions
  • Firm Size
    • Less than 50 : 14,8%
    • Between 51 and 100: 27,5%
    • Between 101 and 250: 29,9%
    • Over 251: 27,8%
analysis
Analysis
  • Partial Least Squares
    • Analysis of reliability
    • Validity
      • Convergent
      • Discriminant
    • Path analysis
it infrastructure as a second order construct
IT Infrastructure as a second order construct

Centralization of responsibility

R2 = 0,51

R2 = 0,21

R2 = 0,22

0,45

IT infrastructure

Market success/ business performance

Internal performance

0,21

0,46

Level of planning

0,34

0,22

0,74

Training

0,20

0,67

Scalability

0,87

0,70

0,04 (n.s.)

0,76

Non-IT personnel competency

Enterprise model definition

Compatibility

IT personnel competency

0,63

Data administration definition

Process change investment

Connectivity

first observations
First observations
  • IT infrastructure as a whole influences firm performance. It is not a specific component of infrastructure that increases the firm productivity
  • Training and IT skills of non-IT personnel increase the performance of the firm.
  • Process changes do not influence the performance of the firm
  • Training and process change do not show an interaction effect with IT infrastructure
low it infrastructure
Low IT Infrastructure

R2 = 0,20

R2 = 0,22

Market success/ business performance

Internal performance

0,45

0,26

0,22

-0,24

Non-IT personnel competency

Process change investment

Training

high it infrastructure 4
High IT infrastructure (4+)

R2 = 0,14

R2 = 0,18

Market success/ business performance

Internal performance

0,38

0,17

0,23

0,25

Non-IT personnel competency

Process change investment

Training

process changes implemented decreasing frequency
Process changes implemented (decreasing frequency)

*: significant difference between high infrastructure and low infrastructure (p<0,05)

conclusion
Conclusion
  • Governance does explain IT infrastructure
  • Individually, infrastructure components do not have a significant influence on performance
  • IT infrastructure has to be considered as an ensemble
    • Efforts to improve IT infrastructure have to address all the components
    • Incentives to increase only one of the components (like hi-speed connections) might not enhance the firm performance significantly
  • Non-IT personnel have to be IT skilful
  • Training has a significant impact on performance
  • There is a high IT infrastructure threshold to reach before gaining benefits from process changes investments
slide24

THANK YOU

QUESTIONS?

data administration and enterprise model levels of definition
Data administration and enterprise model levels of definition

Data administration level of definition

Enterprise model level of definition

Back to Measures

compatibility and connectivity
Compatibility and connectivity

Compatibility

Connectivity

Back to Measures

scalability
Scalability

Back to Measures

process change investments
Process Change Investments

Built from a list provided by Statistics Canada

Organizational change refers to a change in the way in which work is organized within your workplace or between your workplace and others. Has your workplace experienced any of the following forms of organizational change recently?

Back to Measures

training investments
Training investments

In your organization, there is:

Back to Measures

non it personnel competency adapted from chanopas krarit khang 2006
Non IT Personnel competency (adapted from ChanopasKraritKhang 2006)

Back to Measures

internal performance adapted from hudson smart and bourne 2001
Internal Performance (adapted from Hudson, Smart, and Bourne 2001)

When comparing your company relative to your principal competitors:

Back to Measures

market performance venkatraman 1989
Market Performance (Venkatraman 1989)

Using to the following scale, would you please indicate your perception along the following dimensions related to your actual business performance. Please circle the number that best represents your opinion. For any item that is not applicable to your situation, please circle na (not applicable).

Back to Measures

governance and it infrastructure
Governance and IT Infrastructure

Data administration definition

0,386

Level of planning

R2 = 0,33

0,287

0,480

R2 = 0,26

Compatibility

0,247

0,454

0,277

0,273

Enterprise model definition

R2 = 0,46

0,243

0,261

Clarity of responsibility

R2 = 0,35

0,187

Connectivity

0,316

R2 = 0,29

Scalability

0,349

IT personnel competency

R2 = 0,29