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The partial adjustment valuation approach with dynamic and variable speeds of adjustment to evaluating and measuring the business value of information technology

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  • Lin, Winston T.
  • Kao, Ta-Wei (Daniel)

Abstract

In this paper we develop the partial adjustment valuation approach in which the speeds of (partial) adjustment are assumed to be dynamic and variable, rather than fixed or constant, to assessing the value of information technology (IT). The speeds of adjustment are a function of a set of macroeconomic and/or microeconomic variables, observed and unobserved and, hence, become time-varying or dynamic and variable over time. The approach is illustrated by a practical application. The results imply that the constant speeds of adjustment may overestimate or underestimate the actual speeds of adjustment and, accordingly, may miscalculate the values of performance metrics. Thus, the partial adjustment valuation approach with dynamic and variable speeds of adjustment is more realistic and, more importantly, captures the changing patterns and trends of the adjustment speeds and the performance measures as well. As such, the partial adjustment valuation approach with constant speeds of adjustment fails to adequately explain the dynamic production process of a decision making unit. The empirical evidence also conflicts with the lopsided view that the productivity paradox does not exist in developed countries.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ejores:v:238:y:2014:i:1:p:208-220
    DOI: 10.1016/j.ejor.2014.03.019
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    References listed on IDEAS

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    Cited by:

    1. 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.

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