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Investigating and comparing the dynamic patterns of the business value of information technology over time

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  • Lin, Winston T.
  • Chuang, Chia-Hung

Abstract

The long-debated issue of the business value of information technology (IT) to the firm (country) has received a great deal of attention in the literature. But the studies have rarely examined the dynamic patterns of the IT value as measured by the firm’s productive efficiency over time. The objective of this paper is to apply the three-factor constant elasticity of substitution (CES) time-varying stochastic production frontier models and use the same data set as used in several previous studies to investigate the dynamic patterns of IT value over time in connection with the issues of inputs substitution and complement and the productivity paradox. This paper adopts two analytical skills, collective and individual, to analyze the empirical results. Collectively, we find that the dynamic patterns of IT value are closely related to the substitution and complement of three inputs and the IT productivity paradox. Individually, we identify five common dynamic patterns of the IT value measured by productive efficiency and interpret their implications for the productivity paradox as summarized in a two by two matrix of practical applications and strategies. This matrix accounts for four different scenarios of the relationship between the average productive efficiency and the IT productivity paradox, illustrates some practical applications by the analytical results, and provides some business insights and managerial strategies for IT decision makers and PO/IS managers. This represents a new contribution to the understanding of the dynamic influence of IT investments upon the value of IT over time.

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  • Lin, Winston T. & Chuang, Chia-Hung, 2013. "Investigating and comparing the dynamic patterns of the business value of information technology over time," European Journal of Operational Research, Elsevier, vol. 228(1), pages 249-261.
    • Handle: RePEc:eee:ejores:v:228:y:2013:i:1:p:249-261
    DOI: 10.1016/j.ejor.2013.01.023
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    Cited by:

    1. Mohamad, Amri & Zainuddin, Yuserrie & Alam, Nafis & Kendall, Graham, 2017. "Does decentralized decision making increase company performance through its Information Technology infrastructure investment?," International Journal of Accounting Information Systems, Elsevier, vol. 27(C), pages 1-15.
    2. Lin, Winston T. & Chen, Yueh H. & Chou, Chia-Ching, 2021. "Assessing the business values of e-commerce and information technology separately and jointly and their impacts upon US firms' performance as measured by productive efficiency," International Journal of Production Economics, Elsevier, vol. 241(C).
    3. Lin, Winston T. & Chen, Yueh H. & Shao, Benjamin B.M., 2015. "Assessing the business values of information technology and e-commerce independently and jointly," European Journal of Operational Research, Elsevier, vol. 245(3), pages 815-827.
    4. Gunasekaran, Angappa & Subramanian, Nachiappan & Papadopoulos, Thanos, 2017. "Information technology for competitive advantage within logistics and supply chains: A review," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 99(C), pages 14-33.
    5. Lin, Winston T. & Chen, Yueh H. & Hung, TingShu, 2019. "A partial adjustment valuation approach with stochastic and dynamic speeds of partial adjustment to measuring and evaluating the business value of information technology," European Journal of Operational Research, Elsevier, vol. 272(2), pages 766-779.
    6. Zhiguang ZHANG & Haiqing HU & Winston T. LIN, 2019. "Analyzing the Impacts of Unobserved National Characteristics on Economic Performance of Information Technology based on a Partial Adjustment Approach With Dynamic and Variable Speed of Adjustment," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 128-142, March.
    7. Lin, Winston T. & Kao, Ta-Wei (Daniel), 2014. "The partial adjustment valuation approach with dynamic and variable speeds of adjustment to evaluating and measuring the business value of information technology," European Journal of Operational Research, Elsevier, vol. 238(1), pages 208-220.

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