Are Emerging Markets Different from Developed Markets? Human Capital, Sorting and Segmentation in Compensation of Information Technology Professionals

This study investigates how firms compensate IT professionals in an emerging market. Using data on compensation of more than 8000 Indian IT professionals, the study finds evidence that returns on MBA grow or stay constant with overall work experience for IT professionals, a finding consistent with the human capital view, than with the sorting view. We also find evidence for segmentation of labor markets based on firm origin because foreign firms pay significantly more to IT professionals than Indian firms. Finally, we find high returns on technical education but significant heterogeneity in returns on business education at master’s level in India. On the whole, returns on business education at master’s level are not significantly higher than that on experience suggesting a lack of financial incentive to pursue business education at master’s level in India. The returns to IT experience and non-IT experience are significantly higher in India than in the U.S

Information Technology and Inventories: Substitutes or Complements?

Is information technology (IT) a substitute or complement for inventories? This study answers this question by understanding substitution and complementarity of IT and inventories insofar as they impact profitability of a firm. We use data on IT expenditures and inventories of U.S firms and find support for the substitution between IT and overall inventories. Because overall inventories comprise raw-material, work-in-process and finished goods inventories, should we take this result to imply that substitution argument applies uniformly to all types of inventories? The answer is no. Our disaggregated analyses indicate that while IT can be a substitute for raw material inventories, IT is a complement for finished goods inventories. We discuss implications of these findings for research and practice

How Strategic Posture and Competitive Environment Influence Firms\u27 Information Technology Investments: Theory and Evidence

This paper examines how strategic posture in IT investment with respect to industry peers (i.e., level of IT investment compared to the industry norm for IT investments) and competitive environment influence IT investments of a firm. We synthesize prior literature on determinants of IT investments and competitive dynamics to develop our theoretical framework. Using archival data for about 380 firms for the 1999 to 2006 period, we find that firms increase their IT investments under higher competitive uncertainty and higher industry competition. The results also indicate that firms differentiate from the industry norm in IT investments under higher competitive uncertainty and higher industry competition but imitate the industry norm in IT investments under higher industry dynamism and higher industry growth. Collectively, these findings provide new insights on how the competitive environment of a firm shapes strategic actions related to IT investments

IT Investments, Alignment and Firm Performance: Evidence from an Emerging Economy

This study presents and tests a model in which the effect of IT investments on firm revenues is associated with the dimensions of IT-business alignment in an emerging market context. We disaggregate firms’ IT-business alignment into three dimensions: (1) IT investment-business strategy alignment, (2) IT delivery-business priority alignment, and (3) IT change-business change alignment. Using a secondary data set comprising more than two hundred Indian companies, we find that IT delivery-business priority alignment and IT change-business change alignment more strongly moderate the relationship between IT investments and firm revenues. Specifically, firms with IT change-business change alignment and IT delivery-business priority alignment have higher revenue at higher levels of IT investment than firms that display IT investment-business strategy alignment. Our additional exploratory analyses demonstrate firms with IT change-business change alignment outperform firms that show alignment at other dimensions of IT-business alignment at the high levels of software and service investment

How does Bond Market View IT investments of Firms? An Empirical Evidence of Bond Ratings and Yield Spreads

This study investigates the business value of information technology (IT) in terms of performance in bond markets, which constitute the single largest source for firms’ financing. We evaluate risk-adjusted benefits of IT investments in the bond market in the United States over the 1995-2002 period. We find a significant association between a firm’s IT intensity and bond ratings at issuance. The results also indicate that the impact of IT on the cost of debt is different across industries. IT investments have a favorable influence on the cost of debt in automate and informate industries but not in transform industries. This finding from the bond markets differs from that in prior equity market findings which report higher returns to IT investments in transform industries. These findings suggest that bondholders and shareholders have different perspectives toward IT investments

Effect of Information Technology Investments on Customer Satisfaction: Theory and Evidence

This research addresses the following questions: Do information technology (IT) investments have an effect on customer satisfaction? What are the causal mechanisms that mediate the effect of IT systems on customer satisfaction? Does the effect of IT on customer satisfaction differ across industry sectors? Based on an analysis of longitudinal data on 50 U.S. firms for the period 1994-2000, we document the association between IT investments and customer satisfaction. We find support for the hypotheses that the effect of IT investments on customer satisfaction is mediated through the effect of IT on perceived quality and perceived value. Our results also indicate that the effect of IT investments on customer satisfaction differs between the manufacturing and service sectors. While prior work on the business value of IT at the firm level focused on financial and accounting measures, our research establishes the effect of IT investments on overall customer satisfaction of a firm. We propose and validate a theory of mediation effects of perceived quality and perceived value. This proposal has the potential to synthesize information systems effectiveness and marketing literature towards an integrative understanding of the relationship between IT investments and customer satisfaction.http://deepblue.lib.umich.edu/bitstream/2027.42/39170/1/971.pd

Returns to Managerial and Technical Competencies of IT Professionals: An Empirical Analysis

In this study, we examine the effect of managerial and technical competencies of information technology (IT) professionals on their salaries. Based on a large nationally representative dataset of more than 55,000 IT professionals in the U.S. for the period 1999-2002, we find that both managerial and technical competencies have a significant effect on salaries of IT professionals. In contrast with findings of previous studies, we find that compared to firms in other industries, firms in the IT industry pay a significant amount of premium to IT professionals. Our results also show that IT professionals in the non-profit and governmental sector receive less compensation compared to their counterparts in the for-profit sectors of the economy. Similar to the dotcom effect for abnormal returns in stock markets, we observe a pronounced dotcom effect in salaries of IT professionals during the 1999-2002 period. Our findings provide evidence of pronounced wage inequalities on the basis of gender and male IT professionals receive 7.8% more in total compensation than their female counterparts. Finally, we estimate the causal effect of MBA education on the salaries of IT professionals using a matching estimator and demonstrate how bounding such a matching estimator provides an assessment of sensitivity of estimated causal effects with respect to selection due to unobservable factors.http://deepblue.lib.umich.edu/bitstream/2027.42/39153/1/888.pd

Antecedents of Onshore and Offshore Business Process Outsourcing

This paper proposes a theoretical framework for adoption of onshore and offshore business process outsourcing (BPO) by firms. Our analysis of data from 244 firms publicly traded in the United States indicates that firms with a stronger information technology infrastructure and business process knowledge are more likely to engage in onshore and offshore BPO. We also find a positive association between offshore BPO and cost-cutting business strategy, and between offshore BPO and IT department focus on innovation. This study makes three contributions. First, we integrate multiple streams of literature (transaction cost economics and capabilities) to create a theoretical framework to understand the drivers of BPO. This theoret- ical framework extends the emerging literature on BPO. Second, we establish a link between IT infrastructure and BPO, using contributions from the information systems literature on IT outsourcing and business process management. Third, we distinguish between onshore and offshore BPO, including contributions from the inter- national business literature on internationalization, to identify any differences between onshore and offshore BPO

Determinants of Inspection Effectiveness in Software Development: An Empirical Analysis

Software inspections are formal evaluations of the intermediate work products (artifacts) of the development process. These artifacts are examined to ensure that a high quality work-product is delivered to the testers and ultimately to the end-users of the software product. The crucial role of inspections in determining quality of the software makes it important to assess the effectiveness of inspections. While prior research has identified several factors that influence effectiveness of software inspections, our understanding of the influence of team composition (personnel mix and team size) and the type of the inspected artifact (project plan, requirements specification, design document, code) on effectiveness of inspections is minimal. We develop hypotheses for the factors affecting inspection effectiveness and attempt to validate these hypotheses in a field setting. Our preliminary results show that, during early stages of software development, an increase in the proportion of experienced reviewers (with greater domain experience) is associated with both an increase in the total number of defects discovered in the inspection process as well as an increase in the likelihood of detecting high severity defects. However, during later stages, we find that greater pro- gramming experience is associated with both an increase in the total number of defects discovered in the inspection process as well as an increase in the likelihood of detecting high severity defects. These results have important implications for both practice and research