Sarv Devaraj

Measuring Information Technology Payoff: A Meta-Analysis of Structural Variables in Firm-Level Empirical Research

Payoffs from information technology (IT) continue to generate interest and debate both among academicians and practitioners. The extant literature cites inadequate sample size, lack of process orientation, and analysis methods among the reasons some studies have shown mixed results in establishing a relationship between IT investment and firm performance.In this paper we examine the structural variables that affect IT payoff through a meta analysis of 66 firm-level empirical studies between 1990 and 2000. Employing logistic regression and discriminant analyses, we present statistical evidence of the characteristics that discriminate between IT payoff studies that observed a positive effect and those that did not. In addition, we conduct ordinary least squares (OLS) regression on a continuous measure of IT payoff to examine the influence of structural variables on the result of IT payoff studies.The results indicate that the sample size, data source (firm-level or secondary), and industry in which the study is conducted influence the likelihood of the study finding greater improvements on firm performance. The choice of the dependent variable(s) also appears to influence the outcome (although we did not find support for process-oriented measurement), the type of statistical analysis conducted, and whether the study adopted a cross-sectional or longitudinal design. Finally, we present implications of the findings and recommendations for future research.

Information technology payoff in the health-care industry: a longitudinal study

Abstract: With the enormous investments in Information Technology (IT), the question of payoffs from IT has become increasingly important. Organizations continue to question the benefits from IT investments especially in conjunction with corporate initiatives such as business process reengineering (BPR). Furthermore, the impact of technology on nonfinancial outcomes such as customer satisfaction and quality is gaining interest. However, studies examining the IT—performance relationship have been far from conclusive. The difficulty in identifying impacts from technology has been the isolation of benefits of IT from other factors that may also contribute to organizational performance. Furthermore, benefits from technology investments may be realized over an extended period of time. Finally, IT benefits may accrue when they are done in concert with other organizational initiatives such as business process reengineering. This calls for studies that take into account control variables as well as data that span time periods. In this study, we examine monthly data collected from eight hospitals over a recent three-year time period. We specify propositions that relate investments in IT to performance, and the combined effect of technology and BPR on performance. We draw upon the literature in health-care management to incorporate appropriate control variables in the analyses. Our results provide support for the IT—performance relationship that is observed after certain time lags. Such a relationship may not be evident in cross-sectional or snapshot data analyses. Also, results indicate support for the impact of technology contingent on BPR practiced by hospitals.

Relating Collaborative Technology Use to Teamwork Quality and Performance: An Empirical Analysis

Although team-based work systems are pervasive in the workplace, the use of collaborative systems designed to facilitate and support ongoing teamwork is a relatively recent development. An understanding of how teams embrace and use such collaborative systems - and the relationship of that usage to teamwork quality and team performance - is critical for organizational success. We present a theoretical model in which usage of a collaborative system intervenes between teamwork quality and team performance for tasks that are supported by the system. We empirically validate the model in a setting where established teams voluntarily used a collaborative system over a four-month period to perform tasks with measurable outcomes. Our principal finding is that collaborative system use intervenes between teamwork quality and performance for tasks supported by the system but not for unsupported tasks.

Research Note---The Impact of Information Technology Investments and Diversification Strategies on Firm Performance

As companies continue to make large investments in information technology (IT), questions about how and in what contexts such investments pay off have gained importance. We develop a theoretical framework to explain how IT investments could pay off in the economically significant context of corporate diversification, and empirically find that the performance pay off to IT investments is greater for firms with greater levels of diversification. We also find that the performance payoff to IT investments is greater in related diversification than in unrelated diversification.

Employee Misuse of Information Technology Resources: Testing a Contemporary Deterrence Model

Recent research in information systems and operations management has considered the positive impacts of information technology (IT). However, an undesirable side effect of firms’ increasing reliance on IT to support the distribution and delivery of goods and services to customers is a greater exposure to a diverse set of IT security risks. One such risk is intentional employee misuse of technology resources. In this article, we draw upon modern deterrence frameworks to develop a predictive model of technology misuse intention that incorporates formal and informal sanctions as well as employment context factors. The model specifies previously untested relationships between formal and informal sanctions, thereby providing fresh insight into the role of sanctions in deterring technology misuse in organizations. Our results suggest that a predisposition toward the need for social approval and moral beliefs regarding the behavior are key determinants of technology misuse. Contrary to criminological research that has questioned the relative importance of formal sanctions in the deterrence process, we also found that the threat of formal sanctions has both direct and indirect influences on technology misuse intention. Further, from an employment context standpoint, employees who spend more working days away from the office (i.e., “virtual” mode) appear more inclined to misuse their organizations technology resources. The findings have implications for the research and practice of technology management.

Generic manufacturing strategies: an empirical test of two configurational typologies

Abstract The need to empirically test and validate typologies and frameworks that are derived deductively has been echoed repeatedly in the operations management literature. This paper reports on an empirical comparison of two configuration-based typologies: the Product–process matrix and the more recent generic manufacturing strategies model. Since there is substantial conceptual overlap between these models, a simultaneous examination provides insights about both models, and in particular, about the value-added of the generic manufacturing strategies model. We examine hypotheses derived from these typologies using data from manufacturing plants in the United States, Italy, United Kingdom, Japan, and Germany; and from the automotive, machinery, and electronics industries. The data were analyzed using multiple analysis of variance (MANOVA) and hierarchical regression techniques. Our results indicate support for the Product–process matrix — lending further strength to a growing base of empirical research on this model. Our findings also provide support for the generic manufacturing strategies model with respect to various measures of cost, cycle time/inventory, quality, and innovation performance. Furthermore, our findings suggest that the generic manufacturing strategies model is a useful augmentation to the Product–process matrix. These findings suggest that the generic manufacturing strategy model has merit but deserves further empirical and theoretical attention.

Does information technology investment influence a firm's market value? a case of non-publicly traded healthcare firms

Managers make informed information technology investment decisions when they are able to quantify how IT contributes to firm performance. While financial accounting measures inform ITs influence on retrospective firm performance, senior managers expect evidence of how IT influences prospective measures such as the firms market value. We examine the efficacy of ITs influence on firm value combined with measures of financial performance for non-publicly traded (NPT) hospitals that lack conventional market-based measures. We gathered actual sale transactions for NPT hospitals in the United States to derive the q ratio, a measure of market value. Our findings indicate that the influence of IT investment on the firm is more pronounced and statistically significant on firm value than exclusively on the accounting performance measures. Specifically, we find that the impact of IT investment is not significant on return on assets (ROA) and operating income for the same set of hospitals. This research note contributes to research and practice by demonstrating that the overall impact of IT is better understood when accounting measures are complemented with the firms market value. Such market valuation is also critical in merger and acquisition decisions, an activity that is likely to accelerate in the healthcare industry. Our findings provide hospitals, as well as other NPT firms, with insights into the impact of IT investment and a pragmatic approach to demonstrating ITs contribution to firm value.

E-loyalty: elusive ideal or competitive edge?

Business-to-consumer (B2C) e-commerce has grown at a phenomenal rate and the best may be yet to come. The steady growth of B2C e-commerce over the last three holiday seasons is indicative of the remarkable potential of online retailing as an alternative to the traditional bricks-and-mortar mode of shopping. However, many consumers are hesitant to adopt this new way of doing business. Their satisfaction with and loyalty toward online shopping have been stalled by multiple episodes of frustration with online transactions, as illustrated by the following quote from an industry publication: “Last season’s troubles were many. Some retail sites buckled under the weight of traffic, resulting in pages that loaded slowly or not at all. Others couldn’t keep up with customer service requests. Still others were spotty in fulfilling orders on time—Toysrus.com had to issue gift certificates when toys weren’t delivered in time for Christmas” [7]. Thus, while there seems to be a surge in online traffic, there is also a general consumer wariness about electronic shopping. For businesses, the equation is further complicated by high customer acquisition costs, low customer retention, and negative cash flows in B2C electronic commerce—all of which highlight the need to better understand customer interactions. This article aims to provide insights into the critical factors that create online customer loyalty. Jeff Bezos, founder and CEO of Amazon.com, stated that creating a compelling online experience for cyber customers is the key to attaining competitive advantage on the Internet [11]. Our focus in this article is on consumer experience with online shopping. Using a paired sample approach in which customers’ online shopping experience is contrasted with their conventional shopping experience, we address the dimensions along which they perceive similarities and differences between the two modes of shopping. We aim to accomplish three objectives:

A Test of Two Models of Value Creation in Virtual Communities

Does a firm get any extra value from investing resources in sponsoring its own virtual community above and beyond the value that could be created for the firm, indirectly, via customer-initiated communities? If so, what explains the extra value derived from a firm-sponsored virtual community and how might this understanding inform managers about appropriate strategies for leveraging virtual communities as part of a value-creating strategy for the firm? We test two models of virtual community to help shed light on the answers to these questions. We hypothesize that in customer-initiated virtual communities, three attributes of member-generated information (MGI) drive value, while in firm-sponsored virtual communities, a sponsoring firms efforts, as well as MGI, drive value. Drawing on information search and processing theories, and developing new measures of three attributes of MGI (consensus, consistency, and distinctiveness), we surveyed 465 consumers across numerous communities. We find that value can emerge via both models, but that in a firm-sponsored model, a sponsors efforts are more powerful than MGI and have a positive, direct effect on the trust-building process. Our results suggest a continuum of value creation whereby firms extract greater value as they migrate toward the firm-sponsored model.

A five-factor framework for analyzing online risks in e-businesses

Why is it that e-businesses have not performed in line with expectations in the past years? Despite very optimistic projections for business-to-business (B2B) e-commerce not long ago, businesses have been very cautious in embracing this technology. One of the critical factors playing a major role is the risk associated with online commerce. Thus, a framework for evaluating online risks is needed to analyze the impact of e-business in the B2B world. The traditional process of buying and selling can be viewed as a model with conventional risk mitigation instruments including escrow, insurance, and contracts. As global B2B trade progresses using the e-business as its medium of choice, an array of new business models, new processes, new fulfillment needs, new services, and new technologies have emerged, resulting in a new set of online risks. These new online risks have created an imbalance in the traditional buying and selling process. Against this backdrop, we present a new framework for examining the various risks in the online B2B buying and selling process. Are there fundamental flaws in the e-business models? E-business has paved a path for new growth potential for many businesses around the globe. E-business is emerging as the medium of choice in trade and is replacing traditional commerce. The quantum rise and then the fall of B2B vertical and horizontal exchanges within the electronic marketplace (E-marketplace) have been well documented. Current B2B models have three fundamental flaws: economics, not quality, is being pursued by the current models; sellers are being pressured by price wars, profitability, and customers; and customer priorities have not been considered [11]. Some of the brick-and-mortar companies have made e-business the solution of the future. Corporations can now trade goods and services, ranging from plastics to medical equipment, with potential unknown buyers and sellers using online technology. These trading hubs might be further enhanced in the future to deliver substantial value to their members, including greater liquidity, better pricing, good quality, better delivery time, faster transactions, and better quality assurance.