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
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
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
Success Rate
Governance of IT
assets
Definition
of ITL., assets
Source:
Soh, C. and Markus,
How IT Creates Business Value: A Process Theory Synthesis, ICIS 1995.
GOVERNANCE
Clear responsibility for the IT infrastructure
 Policies
 Acquisition
 information
Planning process
 Exists
 Aligned with business goal
 Assessment of new technology
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
IT infrastructure
Governance
Clarity of
responsibility
Connectivity
Compatibility
Scalability
Data
administration
definition
Level of
planning
Internal
performance
Market
success/
business
performance
Enterprise
model definition
IT personnel
competency
Training
Controlling for strategic type
Process
change
investment
Non-IT
personnel
competency
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)
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
Partial Least Squares
 Analysis of reliability
 Validity
 Convergent
 Discriminant
 Path analysis
RELIABILITY
Variable
Alpha
Responsibility
0,90
IT Planning
0,88
Connectivity
0,76
Scalability
0,91
Compatibility
0,76
Data administration
0,87
Enterprise model
0,86
IT personnel competency
0,91
Process change investments
0,75
Training
0,68
Non-IT personnel competency
0,85
Internal performance
0,67
Market performance
0,86
IT_PERS_COMP
,77
DATA_ADM
,402**
,75
ENTER_MODEL
,475**
,824**
,77
COMPATIBILITY
,390**
,517**
,549**
,76
RESPONSIBILITY
,497**
,485**
,551**
,442**
,88
IT_PLANNING
,482**
,538**
,631**
,446**
,649**
,84
CONNECTIVITY
,354**
,460**
,491**
,537**
,439**
,548**
,72
SCALABILITY
,502**
,479**
,530**
,558**
,482**
,480**
,487**
,86
NON_IT_COMPET
,418**
,373**
,403**
,395**
,393**
,450**
,367**
,422**
,72
,002
,248**
,235**
,149**
,090
,149**
,220**
,055
,143**
,55
TRAINING
,158**
,226**
,208**
,160**
,136**
,229**
,162**
,130**
,203**
,393**
,66
INTERNAL_PERF
,220**
,243**
,253**
,235**
,233**
,192**
,109*
,253**
,269**
-,065
,224**
,57
BUSINESS_PERF
,189**
,236**
,309**
,234**
,197**
,243**
,196**
,277**
,257**
,061
,209**
,357**
PROCESS_INVEST
BUSINESS_PERF
INTERNAL_PERF
TRAINING
PROCESS_INVEST
NON_IT_COMPET
SCALABILITY
CONNECTIVITY
IT_PLANNING
RESPONSIBILITY
COMPATIBILITY
ENTER_MODEL
DATA_ADM
IT_PERS_COMP
CORRELATIONS
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).
,57
IT INFRASTRUCTURE AS A SECOND ORDER
CONSTRUCT
Centralization
of
responsibility
Level of
planning
R2 = 0,51
R2
0,45
IT infrastructure
0,34
0,21
R2 = 0,21
= 0,22
Internal
performance
0,46
0,22
0,74
Scalability
Training
0,20
0,67
0,76
Compatibility
Data
administration
definition
0,87
0,70
Enterprise
model 0,63 IT personnel
competency
definition
Connectivity
Non-IT
personnel
competency
0,04 (n.s.)
Process
change
investment
Market
success/
business
performanc
e
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
DEPENDENT VARIABLE: PERFORMANCE
Base model
Interaction
Low
High
model
infrastructure
infrastructure
IT infrastructure (ITI)
0.218*
0.241*
Training
0.219*
0.216*
0.220*
0.247*
Non-IT personnel competency
0.198*
0.180*
0.258*
0.175*
Organizational changes
0.040
-0.236*
0.229*
0.224
0.181
-0.001
ITI x Training
-0.108
ITI x Non-IT pers. competency
-0.042
ITI x Organizational changes
Variance explained
0.187*
0.222
0.243
LOW IT INFRASTRUCTURE
R2 = 0,20
R2 = 0,22
Internal
performance
0,22
Training
0,26
Non-IT
personnel
competency
0,45
-0,24
Process
change
investment
Market
success/
business
performance
HIGH IT INFRASTRUCTURE (4+)
R2
= 0,18
Internal
performance
0,25
Training
0,17
Non-IT
personnel
competency
R2 = 0,14
0,38
0,23
Process
change
investment
Market
success/
business
performance
PROCESS CHANGES IMPLEMENTED (DECREASING
FREQUENCY)
Low infrastructure
High infrastructure
Reingineering
Integration between departments
Centralization
Job rotation/enrichment
Outsourcing
Increased inter-org collaboration
Flattening of the organization
Decentralization
Reengineering
Integration between departments*
Centralization
Increased inter-org collaboration*
Job rotation/enrichment
Outsourcing
Flattening of the organization
Decentralization *
*: significant difference between high infrastructure and low infrastructure (p<0,05)
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
THANK YOU
QUESTIONS?
GOVERNANCE (LEWIS AND BYRD, 2003)
Responsibility
RP1
1.
RP2
2.
RP3
3.
RP4
4.
Strongly
disagree
1
neutral
2
A person is responsible for corporate-wide information systems and
technology policy
A single person involved in IT is also involved in the corporate business
planning process
A person approves corporate-wide information systems and technology
acquisitions
A person is responsible for distributed information systems and technology
Strongly
agree
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
IT planning
PL1
5.
There is a plan for enterprise-wide information systems and technology
1
2
3
4
5
PL2
6.
Information systems/technology plan incorporates central system and
desktop
1
2
3
4
5
PL3
7.
Information systems/technology plan reflects business goals
1
2
3
4
5
PL4
8.
Planning process for IS/IT incorporates end users
1
2
3
4
5
Back to Measures
DATA ADMINISTRATION AND ENTERPRISE MODEL
LEVELS OF DEFINITION
Data administration level of definition
DA1
16.
DA2
17.
DA3
18.
DA4
19.
DA5
20.
DA6
21.
DA7
22.
Strongly
disagree
1
neutral
Strongly
agree
2
3
4
5
Formal data administration (policies, standards, corporate oversight)
A corporate data architecture (structure, framework, philosophy)
A quality assurance program for systems and facilities
A corporate policy on data ownership
A data dictionary
Data integration between applications
Data sharing between users and departments
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Enterprise model level of definition
EM1
9.
EM2
10.
EM3
11.
EM4
12.
EM5
13.
EM6
14.
EM7
15.
A documentation for corporate-wide information flow
An inventory of corporate data and information
An inventory of company IT facilities
A formal methodology for systems development
Corporate-wide adherence to information systems and technology standards
Corporate-wide adherence to information systems and technology standards
Data communications between central and distributed facilities (PCs)
Back to Measures
COMPATIBILITY AND CONNECTIVITY
Strongly
disagree
Compatibility
CM1
28.
CM2
29.
CM3
30.
CM4
31.
1
neutral
2
Software applications can be easily transported and used across multiple
platforms
The company offers a wide variety of types of information to end users
The user interfaces provide transparent access to all platforms and
applications
The company provides multiple interfaces or entry points (for example, Web
access) for external end users
Strongly
agree
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Connectivity
CN1
32.
CN2
33.
CN3
34.
CN4
35.
CN5
36.
Authorized data can be accessed by external parties through IT networks, regardless of
location
Authorized data can be accessed by internal users through IT networks, regardless of
location
All external parties (e.g. customers, suppliers) are electronically linked with the
organization through IT networks
Conferences within the organization can be held through IT networks, regardless of
location
All departments and branches are electronically linked together through IT networks
Back to Measures
SCALABILITY
Strongly
disagree
1
SC1
23.
SC2
24.
SC3
25.
SC4
26.
SC5
27.
neutral
2
Hardware/software can be easily upgraded on existing IT
infrastructure
Hardware/software can be easily scaled on existing IT infrastructure
Hardware/software can be easily and quickly adapted for changing
needs and standards
Hardware/software can support business growth in the future
Hardware/software can be added to, modified or removed from
existing IT infrastructure with no major overall effect
Strongly
agree
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Back to Measures
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?
PC1
54.
Greater integration among different functional areas
PC2
55.
PC3
56.
PC4
57.
PC5
58.
PC6
59.
PC7
60.
PC8
61.
Increase in the degree of centralization
Decrease in the degree of centralization
Re-engineering (redesigning processes to improve performance
and cost)
Reduction in the number of managerial levels (delayering)
Greater reliance on job rotation, multi-skilling
Greater reliance on external suppliers of products / services
(outsourcing)
Greater inter-firm collaboration in R&D, production or
marketing
None
Some
Extensive
























Back to Measures
TRAINING INVESTMENTS
In your organization, there is:
TR1
62.
TR2
63.
TR3
64.
TR4
65.
TR5
66.
Job rotation
Apprenticeship
Assigning trainee as a member of task force
Other form of on-site training (Lecture, group
discussion, role playing, on-line training, simulation,
video, etc.)
Off-site training (example: Part times college course)
None
Some
Extensive















Back to Measures
(CHANOPAS
KRARIT KHANG 2006)
IT PERSONNEL COMPETENCY
Strongly
disagree
1
IC1
37.
IC2
38.
IC3
39.
IC4
40.
IC5
41.
IC6
42.
IC7
43.
IC9
44.
IC10
45.
neutral
2
IT personnel understand the policies and goals of the organization
IT personnel are able to plan for future technological challenges
IT personnel are able to be IT project leaders
IT personnel are able to quickly learn and apply new technologies
IT personnel are eager to learn new technologies
IT personnel are able to interpret business problems and develop
appropriate technical solutions
IT personnel are knowledgeable about environmental constraints
within the industry
IT personnel are able to work cooperatively with users in a crossfunctional team
IT personnel are skilled in multiple technologies and tools (e.g.
programming languages , operating systems)
Strongly
agree
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Back to Measures
NON IT PERSONNEL COMPETENCY
(ADAPTED FROM CHANOPAS KRARIT
KHANG 2006)
Strongly
disagree
1
NC1
47.
NC2
48.
NC3
49.
NC4
50.
NC5
51.
NC6
52.
NC7
53.
neutral
2
Non-IT personnel are able to participate in planning for future
technological challenges
Non-IT personnel are able to quickly learn and apply new
technologies
Non-IT personnel are eager to learn new technologies
Non-IT personnel are able to correctly identify their problems and
convey their needs for technical solutions to the IT function
Non-IT personnel are knowledgeable about environmental
constraints pertaining to IT
Non-IT personnel are able to work cooperatively with IT in a crossfunctional team
Non-IT personnel are sufficiently competent in the technologies
and tools they need to do their jobs.
Strongly
agree
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
1
2
3
4
5
Back to Measures
INTERNAL PERFORMANCE (ADAPTED FROM HUDSON,
SMART, AND BOURNE 2001)
When comparing your company relative to your principal competitors:
BP9
75. Our product/service quality is:
76. Our process quality is:
Very low :__:__:__:__:__: Very High
Very low :__:__:__:__:__: Very high
BP12
77. Scrap or lost efforts is (are):
78. Defect or error rate is:
BP13
79.
BP10
BP11
BP14
BP15
BP16
The quality of inputs provided by our
suppliers/ collaborators is:
80. Our work in progress is running:
81. Our lead time is:
82. Our delivery time is:
Very low :__:__:__:__:__: Very high
Very low :__:__:__:__:__: Very high
Very poor :__:__:__:__:__: Very high
Smoothly :__:__:__:__:__: inefficiently
Very short :__:__:__:__:__: Very long
Very short :__:__:__:__:__: Very long
Back to Measures
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).
BP1 67.
BP3 69.
BP6 72.
BP7 73.
BP8
74.
BP2 68.
BP4 70.
BP5 71.
The sales growth position relative to our principal
Very low :__:__:__:__:__
Very High
:
competitors is:
The return on corporate investment position relative to our
Very low :__:__:__:__:__
Very high
:
principal competitors is:
The market share gains relative to our principal
Very small :__:__:__:__:__
Very large
:
competitors are:
The net profit position relative to our principal competitors
Very low :__:__:__:__:__
Very high
:
is:
The financial liquidity position relative to our principal
Very low :__:__:__:__:__
Very high
:
competitors is:
Very low :__:__:__:__:__
Very high
My satisfaction with sales growth rate is:
:
Very low :__:__:__:__:__
Very high
My satisfaction with return on corporate investment is:
:
Very low :__:__:__:__:__
Very high
My satisfaction with return on sales is:
:
Back to Measures
GOVERNANCE AND IT INFRASTRUCTURE
Level of
planning
Data
administrati
on definition
R2 = 0,33
Compatibility
R2 = 0,26
R2 = 0,46
0,261
Enterprise
model
definition
0,187
Connectivity
R2 = 0,35
Scalability
R2 = 0,29
IT personnel
competency
R2 = 0,29
0,386
0,287
0,480
0,454
0,273
0,243
Clarity of
responsibilit
y
0,247
0,277
0,316
0,349