Professional Documents
Culture Documents
MASTER'S THESIS
Ahmad Sobhani
MASTER'S THESIS
Impact of Information Technology on
Productivity
A case study in Telecommunication industry of Iran
Supervisors:
Dr. Mohammad.T. Hamidi Beheshti
Dr. Deon Nel
Referee:
Dr. Abbas Asosheh
Dr. Anne Engstrom
Prepared by:
Ahmad Sobhani
Tarbiat Modares University
Department of Industrial Engineering
Lule University of Technology
Department of Business Administration and Social Sciences
Division of Industrial Marketing and E-Commerce
Joint MSc. program in Marketing and Electronic Commerce
2008
Abstract
Productivity is an important economic factor which has a key role in evaluating the
economic growth. It is identified as the foundation for economic prosperity, a
prerequisite for national development and also an important indicator of organizational
competitiveness (Dedrick et al., 2003).
Information Technology (IT) is one of the important resources for increasing the
economic growth. It causes companies to use their input resources as much as possible
in an effective way. As investment in IT capital accounts for an ever-increasing share
of capital investment, it is important to understand how these investments might pay
off (Gilchrist et al., 2001).There has been much debate on whether or not the
investment in IT provides improvements in productivity and business efficiencies.
IT investment may make little direct contribution to overall performance of companies
until they are combined with complementary investments in business activities, human
capital, and company restructuring. Therefore, according to role of IT in Business
Process Reengineering, as a facilitator and enabler, BPR is valuable for companies to
increase the impact of IT on overall performance of companies. On the other word,
both IT and BPR investments, together, are able to improve productivity drastically.
In this research Cobb-Douglas model was used to examine the impact of Information
Technology investment on productivity at Telecommunication Company of Tehran
(TCT).44 financial and economic data were collected since 1997 up to 2007 for
driving the corresponding model. Weighted Least Square (WLS) was run by SPSS 15
to test hypotheses. The results have indicated that IT investment not only makes the
positive contribution to output of Telecommunication Company of Tehran but also this
contribution is positive after deductions for depreciation and labor expenses. Further
productivity analysis exposed the positive correlations between IT, Total Factor
Productivity and Labor Productivity.
In order to reveal the importance of BPR approach as a complementary investment for
improving IT influences, the appropriate questionnaires distributed through Employees
and Experts of TCT in the second phase of this study. Evaluation of BPR factors
proved
the
necessity
of
employing
this
complementary
investment
at
Acknowledgment
I would like to extend my sincerest thanks and regards to all those who supported and
encouraged me during my study.
First, I would like to express my Special gratitude to Dr. Amir Albadvi at the
Department of Industrial engineering, Tarbiat Modares University, and Dr. Esmail
Salehi-Sangari at the Division of Industrial Marketing and E-Commerce, Lule
University of Technology, for their continuous efforts in conducting this joint program
of Marketing and e-Commerce.
Additionally, I would like to express my gratitude to Dr. Mohammad.T.Hamidi
Beheshti, Professor at the Faculty of Engineering, for his supervision and valuable
assistance. Without his continuous encouragement and support, it would not have been
possible for this thesiss completion. I would also like to express my special thanks to
my Lule University of Technology supervisor; Dr. Deon Nel, who has given me this
pleasure to use his valuable comments, feedbacks and suggestions during the time that
I have been working on this thesis.
Separate thanks to experts at Iran Telecommunication Research center who give me a
lot of their working and even personal times.
My deep gratitude is expressed to my family and friends whose love and support have
made years of study an enjoyable and unforgettable experience. My father and mother
deserve special and heartfelt thanks for their support and patience during my work on
this thesis.
Ahmad Sobhani
February 15th, 2008
Table of content
Abstract
12
14
15
15
16
17
17
19
2-1. Introduction...
19
20
21
25
26
26
29
3-1. Productivity...
29
31
31
31
32
32
33
34
34
35
37
39
42
43
44
45
46
47
47
3-15. Reengineering.
49
50
50
52
53
53
55
56
56
56
57
58
60
62
63
3-26-2. Outsourcing...
63
63
3-26-4. Internet...
64
3-26-5. Intranet...
64
65
65
66
66
67
68
69
69
70
73
4-1.Research process....
73
74
74
75
75
75
75
76
76
76
77
78
79
79
4-9. Reliability..
81
4-10. Validity...
82
84
85
85
86
5-2-2. Hypotheses.
87
5-2-3. Methodology
88
88
5-2-3-2.Weight estimation
89
90
93
93
93
94
94
5-2-5-2.Labor Productivity.....
95
5-2-5-3. Correlation
97
98
5-3-1. Hypotheses...
100
100
5-3-3. Methodology.
101
101
5-3-4.Data analysis.
103
106
106
108
110
111
112
113
6-3. Conclusion
115
6-4. Implications..
116
117
Reference.
118
Appendix A.
126
Appendix B.
130
List of Tables
21
23
23
24
24
25
26
27
27
28
36
41
42
82
90
90
91
92
97
98
101
102
103
103
104
104
105
107
109
114
7
List of Figures
Figure 1.1 Thesis outline
18
37
39
52
62
67
71
74
95
95
96
96
99
108
109
Chapter One
Introduction and Problem Statement
This chapter begins with background in productivity as an economic factor and
Information technology. This will be followed by problem area discussion, the purpose
of the research and the main objectives and importance of the study. The main
questions which are investigated within scope of research will be introduced. Finally,
our contribution and overview of entire thesis are presented.
1-1. Background
Strong Competition causes the new technologies to be employed for improving
productivity level of companies resources. Productivity is one of the important factors
to evaluate the economic growth both at the industry and firm level. Its growth directs
companies to increase their market share (Tabatabae, 2000).
At the most basic level, productivity is based on the economics of the firms. It is
measured as the ratio of output to input. Historically, productivity is often defined as
the ratio of output to the most limited or critical input, with all the other inputs held
constant.
9
Measuring the productivity growth causes companies to evaluate the factors that affect
on value added such as IT, Innovation ant etc (NPC productivity report, 2003).
Current business activity is characterized by intense international, rapid product
innovation, increased use of automation, and significant organizational changes in
response to new manufacturing and information technologies (Dirks, 2005).
Information technology (IT) is one of the valuable resources to increase the economic
growth and customer satisfaction. It has a potential to impact on the structure of
organizations and improve the quality of organizational performance significantly.
In the 1980s, IT was heralded as a key to competitive advantage (Porter and Millar,
1985). Porter and Millar (1985) concluded that IT has influenced competition in three
ways: it has led to changes in industry structure and competition, it was used to support
the creation of new businesses, and companies using IT outperformed their
competition. Although IT as a critical factor to competitive advantage became less
certain in the recent years, the high percentage of top executives considered IT as a key
to a company's profitability and survival. This issue causes IT to pose a serious
10
dilemma for top management. On one hand, continuing IT innovations have the
potential of changing the competitive game for many organizations. On the other hand,
the size of the IT investment puts increasing pressure on managers to assess its
business value (Mukhopadhyay, et al., 1997).
For many years, there has been much discussion about whether the IT revolution was
paying off in higher productivity. Studies in the 1980s found no positive relationship
between IT investment and productivity, a situation referred to as the productivity
paradox (Dedrick et al., 2003). Since then, decades of studies at the firm and country
level has consistently shown that the impact of IT investment on productivity and
economic growth is significant and positive.
Albadvi and Keramati (2006) also provided the satisfactory evidences to show that IT
implementation increase productivity when supported by rational complementary
investment.
In the face of extreme competition and economic pressures, firms are changing their
fundamental unit of analysis from the business function to the business process. IT
investments may make little direct impact on the overall performance of the firms or
the economy until they are combined with complementary investments in business
activities, human capital, and companies redesigning. Therefore, according to the role
of IT in Business Process Reengineering (BPR), as an enabler, BPR is essential for
corporations to enhance the potential impacts of IT on their performances. On the other
word, both IT and BPR investments, together, are able to improve productivity
drastically.
Despite the fact that little more than 10 years ago Iran was backward technologically
among the Middle East countries, it has been considered as a successful example of
fast introduction of information technologies, recently.
The GDP growth of 6.9% in June 2005 places Iran among the fastest growing
economies in the region. The economy has grown by an average 5% every year since
1999. The continued growth of exports to Middle East and western markets,
integration with Asian countries, and institutional and regulatory reforms has thus laid
a strong foundation for sustainable economic growth. The economy is likely to grow
11
by 5- 6 percent per year in near future (Central Bank of the Islamic Republic of Iran,
30th June 2006; cited Pourmirza, 2006).
The Average of the annual economic growth has been calculated 8 percent in fourth
cultural, social and economic development plan of Iran (2005-09). 2.5% of the
mentioned growth should be obtained by productivity. Besides, in order to achieve the
above economic growth, all governmental sectors have to establish 31.3% of their
GDP growth via Total Factor Productivity (TFP). And labor productivity, capital
productivity and TFP would be at least 3.5%, 1% and 2.5% raised annually. Therefore,
all activities and investments cause to achieve the above goals and extract the
resources of organizations in the optimum ways are considered.
Telecommunication Company of Tehran (TCT) is one of the powerful companies
which have continued business activities independently since 1995. TCT serves
communication services and infrastructures. It is identified as a government company
which has positive balance of finance. Therefore, TCT has a key role in the economic
growth of Iran. The positive impact of IT investment on productivity causes TCT to
increase its capacity for stay in competitive telecommunication market.
This research identifies and describes the impact of IT investment on productivity at
Telecommunication Company of Tehran. Furthermore, the situation of BPR approach
in TCT, as a method to improve the IT influences, is evaluated.
margins. The beneficiaries will then be consumers, who get more value added for the
price paid (Dedrick et al., 2003).This phenomenon is defined as consumer surplus.
IT has made rationalization possible in organizations by minimizing human
involvement. These aspects of IT are labeled as automational (Zuboff, 1988).
Increased access to information and enhanced means of accessing, analyzing, storing
and communicating information can result in effects in addition to pure rationalization.
These aspects are defined as informational (Zuboff, 1988) informational aspects
empower
employees
and
enrich
quality
of
decisions
and
performances.
Transformational is the third type of effects which encompasses the changes observed
in process innovation and transformation. Another type of effects is identified by Hitt
& Brynjolfsson (1996), who discuss the importance of the increased value perceived
by consumers as a result of technological improvements. This phenomenon is defined
as consumer surplus (Mooney et al., 1996).
IT is known as the productive resource to increase the economic growth, productivity
and customer satisfaction. It has an effective role to enhance the quality of
communication services. IT can be gainful in the communication services when
appropriate successful BPR is implemented in the different parts of companies
(Limayem, 2006). Moreover telecommunications service providers survival depends
on its ability to prepare for changes in customer needs, as well as changes in regulation
and technology (Fornell and Wernerfelt, 1987; Reichheld and Sasser, 1990).
BPR begins with process redesigning which leads to fundamental changes in many
aspects of an organization, including organizational structure, job characteristics,
performance measures and the reward system. BPR relies heavily on the IT uses to
create radically different working methods to achieve improvements of the order of
magnitude required. Furthermore, BPR facilitates the change in corporate
managements perception of technology. It also confirms an alternative channel
through which IT solutions are being scrutinized and selected (Soliman, 1997).
Productivity growth arises from the development of new work methods based on new
technology and production techniques. Consequently, when the new technology of IT
was introduced in working life, productivity growth was expected. But, because
computers were initially used in a situation where productivity growth had been low
13
and unemployment had been high since the mid-1970s, it was initially difficult to
prove positive effects of investments in IT (Lundgren and Wiberg, 2001). Solow
referred to this situation when he stated, You can see the computer age everywhere
but in the productivity statistics (Solow, 1987). This phenomenon was later defined as
the productivity paradox (Horzella, 2005). Of late, however, firm-level studies, in the
manufacturing and service sectors, have shown that there are significant positive
contributions from IT investments toward productivity (Harker, 2000).
14
In this research the production function model is used to assess impact of IT capital
and labor in a government company and evaluate the BPR factors such as team
working, paperwork and etc in order to obtain clear view about future investments and
organizational change.
Calculating
the
productivity
during
the
specific
period
of
time
at
Company of Tehran.
15
Therefore, bright view of IT capital makes companies to better manage their recourses
and future investments.
Rational complementary investments increase the positive impact of IT implantation
(Albadvi and Keramati, 2006). Companies have implemented BPR approach to shift
their fundamental unit of analysis from the business function to the business process,
achieve remarkable improvements in critical, contemporary measures of performance
and employ the real potential of IT investment through their organizations. BTN,
British company in telecommunication area, is pioneer in implementing BPR. Thus,
BPR approach can be an essential way for Telecommunication Company of Tehran to
streamline its business activities.
In order to prove the importance of BPR in Telecommunication Company of Tehran,
evaluation of its indicators is the first step.
Evaluating the impact of IT on productivity causes at least the following results:
added.
Future planning for the value level of Telecommunication Company of Tehran can
be facilitated.
facilitated.
16
Study of different methods to find an appropriate model for the first phase analysis.
Start field work with gathering financial and economic data for the first phase
17
Chapter 1: Introduction
Chapter 4: Methodology
Chapter 6: Conclusion
18
Chapter Two
ICT in Iran
This chapter presents the situation of Communication and Information Technology in
Iran. Also a brief introduction of Telecommunication Company of Tehran will be
review at the rest of this chapter.
2-1. Introduction
Information and communication Technologies (ICTs) causes economic variables to
improve. These influences are considerable in developing countries (Qabadi, 2006).
Developing digital networks, computers, Mobile communication, TV and etc have
created unique capacity to enrich the knowledge in ICT area.
In millennium, 80% of ICTs market was covered by the top ten countries of the world.
And the bottom ten underdevelopment countries just employed 1% of the market.
Digital Divide is defined as the difference between developed and underdevelopment
countries in using ICT to improve productivity and efficiency of processes and to make
appropriate infrastructures for creating Knowledge of ICT and consuming the digital
goods and services. China, Vietnam, Poland and some others are able to fill digital
divide. China has tried hard to change traditional economy and improve its national
19
economy level by employing High Technologies. So, these investments let china had
27% annual economic grow in 1992 and more than 220 Billion dollar ICTs
expenditures in 2006 (Witsa, 2003).
Nations worldwide have recognized developmental opportunities and challenges of the
emerging information age characterized by ICT. These technologies are driving
national development efforts worldwide and a number of countries in both developing
and developed world are exploring ways of facilitating their development process
through development, deployment and the exploitation of ICT within their economies
and societies.
Number of telephones
Content
2000
2001
2002
2003
2004
2005
2006
2007
unit Oct
Online
phone
9486260
10896572
129344167
15340805
17798809
20340060
22626944
23681454
Penetration
Coefficient
14.9
16.78
19.73
23.06
26.32
29.71
32.57
33.15
100793
116776
128558
144145
168075
190017
Public
86999
94311
Telephone
Source: www.tci.ir
21
Development of mobile phone is introduced through the economic, Cultural and social
plans.
First economic, cultural and social plan (1990-94): in this period of time, GSM
technologies were introduced in Europe. Without any scientific marketing research, the
small mobile network was established by government to Cover Tehran. Capacity of
this network was about 10000 mobile lines.
Second economic, cultural and social plan (1995-99): Iranian customers welcome this
new
communication
technology.
Therefore,
government
presented
mobile
communication for 450000 customers in Tehran and 220000 customers in other cities.
Third economic, cultural and social plan (2000-04): In 2000, 900000 online mobile
lines were established and about 337 cities were covered across Iran. Capacities of
mobile networks were augmented and about 3.5 million customers and 937 cities were
covered up to end of this period of time.
Fourth economic, cultural and social plan (2005-09): Capacity of mobile services have
increased in this period however, the quality of mobile communication has felt down.
Government executes some projects to overcome the problem.
Irancell and Taliya are non government companies which have initiated mobile
services in recent years.
Table 2.2 introduces the status of mobile phone indicators in Iran since 2000 up to
2007.
22
Content
2000
2001
2002
2003
2004
2005
2006
2007
unit Oct
Online Mobile
phone
962595
2083353
2279143
3449876
5075678
8510513
15385289
21561954
Penetration
Coefficient
1.51
1.72
3.48
5.19
7.49
12.43
22.20
31.15
Cities covered
337
493
594
708
851
999
1016
1016
covered roads
(KM)
800
8500
9000
10000
25000
26000
32000
Countries have
international
rooming
30
58
80
80
Number of Computers
According to the last issued report, in 2001, about 4.5million computers were used by
Iranian people. These computers were increased up to 7 million in 2004(penetration
coefficient: 10.4%). Table 2.3 exhibits the situation of computers diffusion among
various user groups
BUSINESS USERS
19%
GOVERNMENTAL USERS
26%
DOMESTIC USERS
55%
Furthermore the annual computer sale is about 1.2 million in Iran (Tabesh, 2004).
In recent years, Government attempts hard to enhance internet access for the public
people. Cheap and easy access to the internet is the main goal of Iranian government.
Increasing the rate of internet from 9.74% to 30% indicates these kinds of endeavors.
Table 2.4 shows the number of internet users in Iran.
23
Year
2000
2001
1,700,000
2002
3,200,000
2003
5,500,000
2004
6,600,000
2005
6,750,000
2006
7,350,000
2007
11,260,000
Internet penetration
coefficient(2005)
Growth
(2000-05)
China
Denmark
Egypt
France
Hong Kong
India
Iran
Iraq
Israel
Italy
Kuwait
Japan
Pakistan
7.9%
69.9%
6%
42.2%
70.7%
3.6%
10.8%
0.1%
45.8%
49.3%
23.7%
60.9%
5.7%
357.8%
92.9%
833%
201.4%
113.7%
684%
2900%
188%
152%
118.7%
300%
65.8%
5522%
Saudi Arabia
South Africa
South Korea
Spain
Sweden
Turkey
11%
9.9%
65.2%
37.1%
75.2%
13.9%
1170%
99.9%
71.1%
199%
68%
411%
24
Based on WSIS report (2003), the e-commerce indicators have shown that ICT
employment, at the firm level in Iran, is far from the desired situation. According to
table 2.6, just 3 percent of Companies in Iran employed website through their business
in 2005.
There is no accurate information about using internet in Iranian companies. However
Iran small industries and Industrial parks organization issued that lack of Internet
equipments is considerable in some industrial parks.
Indicators
2004
2005
(base)
-
3%
9%
16%
23%
30%
1%
2%
3%
4%
5%
2%
4%
6%
8%
10%
Company
of
Tehran
(TCT)
has
separated
from
Year
1998
1999
2000
2001
2002
2003
2004
2005
2006
Penetration coefficient
20.9
22.24
22.24
34.88
39.08
44
46.03
Operation coefficient
85
86
88
89
86
84
86
83
84
Table 2.8 demonstrates the number of online mobile phones. According to the total
mobile phones in Iran, about 50% of them are served in Tehran province.
26
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Source: www.TCT.ir
Table 2.9 is the last table which exhibits the main ICT indicators of TCT.
Indicators
Number of Set up telephones
2004
5496886
2005
6400765
2006
6796552
4742703
5331262
5704273
34783
36595
35715
1151
1181
1214
665704
733131
758081
Number of ADSL-clients
6700
28691
997
8283
4.5
0.47
27
Thousand IR Rials
Year
Revenues
Total Costs
Profits
1997
370397793
33407663
3670501130
1998
450793397
406588691
44204705.4
1999
50 030 000
2000
2001
2002
2003
2004
2005
2006
2007
28
Chapter Three
Literature Review
During the last few decades, organizations have made immense investments in IT. The
implications of these investments for productivity have been widely discussed in
business and academic communities. Besides, according to the role of IT in Business
process reengineering, BPR is essential for companies to increase potential impact of
IT to overall performance of a company. This chapter will frame the study in the
theoretical context and provides an overview of relevant literature, relating to
productivity, to direct theoretical contexts toward research questions.
3-1. Productivity
Productivity growth is identified as the foundation for economic prosperity, a
prerequisite for national development and also an important indicator of organizational
competitiveness (Dedrick et al., 2003). Measured productivity therefore shapes the
political decisions of national governments and management decisions within
organizations.
29
The word productivity has become such a buzz word these days. It is almost
mentioned in different fields such as commercial magazine, newspapers, political
speeches, TV news, business news, social magazine and etc
In a formal sense, probably, the first time the word productivity was mentioned in an
article by Quensay in the year 1766. In 1833 Littre defined productivity as the faculty
to produce , that is, the desire to produce. In 1950, the Organizational European
Economic cooperation (OEEC, 1950) offered the more precise definition of
productivity: Productivity is the quotient obtained by dividing output by one of the
factors of production. In this way it is possible to speak of the productivity of capital,
investment, or raw materials according to whether output is being considered in
relation to capital, investment or raw materials After this time many economic
specialists offered other definition from productivity. Sumanth offered that total
productivity is the ratio of tangible output to tangible input (Sumanth, 1984) and Siegel
said productivity is a family of ratios of output to input(Tabatabae, 2000).
Finally, productivity can be defined as the below formula:
(Output obtained)
(Input expended)
Or
(Performance achieved) / (Resources consumed)
Traditional economic studies of productivity focused on labor and capital such as
plants and equipments. In order to measure capital, all component categories are
considered. This issue is also considering about measuring labor. In some cases the
number of the labors is used and in some other cases the person- hour for special
period of time is regarded.
Increasing the productivity growth causes that:
Inflation is decreased.
inputs, but also the importance of changes in costs of inputs such as human
resources(Rapp, 1999) .In this study, however, no difference is made between
productivity and efficiency and the term productivity will primarily be used.
acquisition
of
efficient
management
techniques
and
know-how,
The organizations access to the conversion efficiency of their resources. Hence, more
goods and services are produced for a given amount of expended resources. Also
resource planning can be facilitated. The economic and none economic objectives of
the companies can be re organized by the priority in the light of the productivity
measurement efforts.
Measuring and investigating the productivity create the competition action among
companies. Strategies to improve productivity would be determined based on the
extended distance (gap) between the planned level and measured level of productivity
(Sumanth, 1981).
for firms. A more productive firm will either produce the same output with fewer
inputs and thus experience a cost advantage, or produce higher quality output with the
same inputs, enabling a price premium. Sustaining higher profits through productivity
gains requires a firm to maintain productivity levels higher than its competitors.
Therefore, over time, profits might be competed away with result that consumers
benefit (Gurbaxani et al., 2003).
35
Kamil (2001) Declared that appropriate use of IT in the companies increase the
productivity by three ways: (a) Increasing the volume of capital used per worker
(capital deepening), when firms invest in IT (b) A speedup of growth of Total Factor
Productivity in industries producing information technologies, thanks to technological
progress (c) A speedup of growth of TFP in industries using information technologies.
Table 3.1 shows the labor productivity growth in different industries in US. Also at
this table intensity of IT use in us industry also compared between corresponding
periods of times.
Industry
Private industry
Agriculture,forestry,fisheries
Mining
Manufacturing
Durable Goods
Nondurable Goods
Transportation
Trucking and Warehousing
Transportation by air
Other Transportation
Communications
Electric, gas and sanitary service
Wholesale trade
Retail trade
Finance, insurance and real state
Finance
Insurance
Real state
Services
Personal Services
Business Services
Other services
Industry by intensity of IT use
Intense IT use
Less intense IT use
19989-1995
.88
.34
4.56
-.10
3.18
1.65
2.48
2.09
4.52
1.51
5.07
2.51
2.82
.68
1.70
3.18
-.28
1.38
-1.12
-1.47
-.16
-3.03
1995-1999
2.31
1.18
4.06
-.89
4.34
1.07
1.72
-.78
4.52
2.14
2.66
2.42
7.84
4.93
2.67
6.76
.44
2.87
-.19
1.09
1.69
-1.76
Change
1.43
.84
-.50
-.79
1.16
-.59
-.76
-2.82
0.0
.63
-2.41
-.09
4.99
4.25
.97
3.58
.72
1.49
.93
2.55
1.85
1.27
2.43
-1
4.18
1.05
1.75
1.15
As shown on table 3.1, we understand that by increasing the rate of IT use in variety
industries, approximately labor productivity in the most of corresponding industries
increased too (Kamil, 2001).
36
Sour
ce: (Triplett, 2000)
Loveman, 1994).
Some experts claimed that inconsistent findings from IT productivity research were
due to interchanging terms between productivity and financial performance and also
lack of adequate data. However, recent studies have claimed that IT productivity
paradox no longer exists (sa Horzella, 2005) and there is a positive correlation
between appropriate use of IT and economic growth. To prove this issue, figure 3.2
presents the contribution of IT and non IT capital in GDP (from 1948 to 1999).
educational system and learning to benefit from long-distance teaching in the near
future; (b) developing the communication system through the provision of cheaper,
easier, faster and more efficient services; (c) Upgrading skills and developing human
resources through improved educational and training systems and enhancing the
capability of people.
39
and facilitate efforts to bridge the gap with the advanced countries.
research institutes and organizations in the region, thus promoting research activities in
the region.
commerce. Both Internet and the recent growth in e-commerce can help facilitate the
fast delivery of products or services to large number of consumers (Satti and. Nour,
2002).
Table 3.2 shows the average of annual percentage of GDP devoted to expenditure on
ICT in different countries (from 1998- 2004). By considering the requested table,
importance of ICT opportunities for development is tangible as much as pervious.
40
Country
New Zealand
Singapore
Australia
UK
USA
Japan
Canada
Switzerland
Sweden
Czech Republic
Denmark
Hong Kong
South Africa
Netherland
Colombia
Malaysia
Finland
Korea
Hungary
Germany
France
Austria
Slovakia
Norway
Portugal
Brazil
Ireland
Vietnam
Italy
China
India
Iran
Percentage
10.3
9.6
8.7
7.9
7.8
7.8
7.7
7.6
7.5
7.4
7.3
7.3
7.1
7
7
7
7
6.6
6.2
6
5.9
5.8
5.6
5.5
5.5
5.4
5.3
4.7
4.6
4.3
4.27
2
and manufacturers can now use detailed real-time information about customer
purchases to make business decisions.
automated and flows almost instantaneously between business units and companies.
Smaller and more accurate inventories At all stages of the value chain
41
Sharp declines in operating margins and real consumer prices These are the
ultimate rewards of the investment, and many of the gains are passed on to the
consumer.
Increased firm and store size The technology rewards scale and scope, enabling
Oliner and
Sichel
Labor productivity
Cycle
Trend
Capital per worker
IT capital
Other Capital
Labor Quality
Multi factor productivity
Jorgenson
and
Stiroh
0.9
n.a.
0.9
0.0
0.3
0.0
0.0
0.7
Robert
Gordon
1.2
n.a.
1.2
0.3
0.5
-0.2
0.0
0.8
Concil
Economic
Advance
1.5
n.a.
1.5
0.5
n.a.
n.a.
0.1
0.9
Production of IT
Other sectors
0.3
0.4
0.3
0.5
0.2
0.7
0.3
0.0
1.4
0.7
0.7
0.3
n.a
n.a.
0.1
0.3
42
often-used criterion, managers also use measures such as profitability, market share,
margins, and product variety and quality as justifications for investment in IT systems.
In order to understand the overall impact of IT at the firm level, it is useful to begin by
thinking about the qualitative impacts of introducing IT into a firms production
processes. Past research has distinguished among using IT to automate processes, to
provide better information, and to transform entire processes. For example, a cashier at
a retail chain store using a computer-based information system such as a scanner can
process a transaction in less time.
Impact of improved information allows workers and managers to make decisions more
effectively. For instance, information provided by the store-based system allows the
managers to better manage inventory. Transformation impacts occur when a firm
redesigns a process to achieve significantly higher levels of productivity. One key
difference between IT capital band other forms of capital is the dual roles that IT can
play in a firm. First, like other types of capital, IT can be used directly as a production
technology to improve labor productivity, as in the case of a banks transaction
processing system. However, research suggests IT has its greatest impact in its second
role as a technology for coordination also it has important role on effective integration
of business process of the company for increasing the productivity of the firms
(Brenham 1997; and Whang 1991; cited by Vijay Gurbaxani et al., 2003).
43
(1999) pointed out, there is much evidence that workers with the best skills are given
the best technology to use (Gurbaxani et al., 2003).
its own productive activities and then interacting with one another to acquire the actual
goods and services they desire (Milgrom and Roberts 1992). When organizations are
specialized producers that need to trade, their decisions and actions need to be
coordinated to achieve these gains. A key problem in achieving coordination is that the
information needed to determine the best use of resources is not freely available. By
providing better means of communication, information processing, and searching, IT
reduces coordination costs, improves the coordination cost efficiency, and contributes
to firm productivity. The microeconomic theory of production considers the firm as a
producer of goods and services. The production process requires a set of inputssuch
as capital, labor, materialsin order to produce output.
The theory of production assumes that a competitive firm will adopt the most
productive bundle of inputs by substituting more productive inputs for less productive
inputs. The most efficient economic output is produced by combining inputs in the
most efficient manner over time. From this perspective, IT can be regarded as an input
equivalent to capital, labor, or other production factors. As an input, IT contributes to
an increase in firm output by improving the cost efficiencies of labor and capital. As
mentioned above, productivity gains can be achieved by coordination cost efficiency,
as well as production cost efficiency. Thus, coordination (costs) will be considered
here as an important factor in the analysis of the impact of IT on firm productivity
(Namchul Shin, 2000).
At the rest of this part the methods that used for investigating the impact of IT on
output of the companies and productivity will be introduced.
economy to the inputs based on estimation models derived from the production
function. Inputs typically accounted for in this approach include labor and capital,
including both IT and non-IT capital. Most of the studies at the firm level use this
approach. The primary approach used to model the production process inherent in an
economy (or industry) is growth accounting (Oliner and Sichel 2000; Jorgenson and
Stiroh 1999, 2000). This method also assumes specific properties of the production
process and, based on these assumptions, allocates shares of output to the various
inputs to production. Output growth in firms, industries, and the economy may arise
from increases in input levels, improvement in the quality of inputs, and growth in the
productivity of inputs (Gurbaxani et al., 2003).
The production function framework has been the most widely used methodology in the
study of returns to IT investment (Loveman 1994; Lichtenberg 1995; Brynjolfsson
1996). In the absence of measures of actual benefits associated with IT, it is not
possible to perform cost-benefit analyses of IT investment and thus, production
functions which relate IT spending to overall productivity or output measures are seen
as the best alternative (Parsons et al., 1993).
Production function techniques have been shown to be valid and quite successful
through hundreds of empirical studies. The choice of the form of the production
function is constrained by economic theory which requires that conditions such as
monotonicity and quasi-concavity be satisfied. One of the simplest production
functions that satisfies such conditions and has been used for about a hundred years is
the Cobb-Douglas function (Berndt 1991). Most of the studies on IT-based
productivity have used this model (Lichtenberg 1995, Brynjolfsson and Hitt1996).
46
Where:
Q = total production (the monetary value of all goods produced in a year)
L = labor input
K = capital input
A, and are constants determined by technology.
If + = 1, the production function has constant returns to scale. That is, if L and K
are each increased by 20%, Q increases by 20%.
If
+ < 1, Returns to scale are decreasing, and if + > 1 returns to scale are
i , j = 1,2,.n
Where:
Y = Total production
Xi and Xj = inputs efficiency parameter
By increasing the number of inputs, the elastisities (ij) are increased dramatically .So
this issue is the important problem to use this model.
knowledge structure in data mining activities is the decision tree (DT). A DT is a tree
structure representation of the given decision problem such that each non-leaf node is
associated with one of the decision variables, each branch from a non-leaf node is
associated with a subset of the values of the corresponding decision variable, and each
leaf node is associated with a value of the target (or dependent) variable. There are two
main types of decision trees (DTs): 1) classification trees (CT); and 2) regression trees
(RT). For a classification tree, the target variable takes its values from a discrete
domain, and for each leaf the DT associates a probability (and in some cases a value)
for each class (i.e. value of the target variable).
The class that is assigned with a given leaf of the classification tree results from a form
of majority voting in which the winning class is the one that provides the largest class
probability even if that probability is less than fifty percent (50%). For the regression
tree (RT), the target variable takes its values from a continuous domain, and for each
leaf the DT associates the mean value of the target variable. Thus, a DT is an
alternative approach to continuous linear models for regression problems and to linear
logistic models for classification problems (Clark and Pregibon, 1992).
To generate a DT, the model dataset is partitioned into at least two parts: the training
dataset and the validation dataset (commonly referred to as the test dataset). Then it
undergoes two major phases of process: the growth phase and the pruning phase (Kim
and Koehler, 1995).
The growth phase involves constructing a DT from the training dataset in a top-down
recursive manner (Han and Kamber 2001; Hand et al., 2001). In this phase, either each
leaf node is associated with a single class or further partitioning of the given leaf
would result in the number of cases in one or both child nodes being below some
specified threshold.
The pruning phase aims to generalize the DT that was generated in the growth phase in
order to avoid over fitting. In this phase, the DT is evaluated against the test (or
validation) dataset in order to generate a sub tree of the DT generated in the growth
phase that has the lowest error rate against the validation dataset. The DT that results
from this two-phase process is the sub tree of the pruning phase that had the smallest
error (i.e. average squared error for RT) when applied to the validation dataset. It
48
follows that this DT is not independent of the training dataset or the validation dataset.
There are several criteria for measuring performance of RTs. Although the predictive
accuracy (R-squared, average squared error) is the most commonly used performance
measure for an RT, simplicity and stability are also important measures for an RT.
Simplicity refers to the interpretability of the RT and is often based on the number of
leaves in the RT, but the chain lengths of the corresponding rules could also be used to
determine this criterion of the RT. On the other hand, a stability of an RT refers to
obtaining similar results for the training and validation datasets (Myung Ko, KwekuMuata Bryson, 2002).
3-15. Reengineering
Competitions among companies oblige them to employ the new technologies for
improving productivity level at their resources. Productivity growth directs companies
increase market share. Business process reengineering has been adopted by many firms
in an effort to improve their competitive position and enhance their ability to provide
customer satisfaction and delight.
Nowadays, demands of customers change continually, and strong competition makes
companies retain their customers and delight them. So, hierarchy structures do not able
to fulfill companies competitive requirements any more (Javanmard, 2002) and
organizational modification is necessary for companies to stay in the competitive
market.
Radical changes are the main characteristics of BPR to alter organizational structures
from duty orientation to business process approach. Therefore reengineering is one of
the important necessities for companies to fortify their situation in market.
BPR involves the fundamental redesign of a business process. It has been called the
new industrial engineering in contrast to the old Taylorian industrial engineering
based on task decomposition and specialization .BPR could involve a change in the
way the process is organized, the roles of the participants involved in the process,
elimination of steps in the process or a change in their temporal sequence. In its purest
sense BPR initiatives should start with a clean slate (Grover et al., 1994).
49
Have partners
Are repeatable
Are measurable
time reduction program. These activities typically focus on improving the existing
process, whereas re-engineering has the goal of radically changing the processes.
Business Process Reengineering (BPR) concerns the fundamental rethinking and
radical redesign of a business process to obtain dramatic and sustained improvements
in quality, cost, service, lead time and productivity (Gunasekaran et al., 2002).
Hammer (1990), defined BPR as the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical measures of
performance-cost, quality, capital service and speed.
BPR involves the fundamental redesign of a business process. It has been called the
new industrial engineering in contrast to the old Taylorian industrial engineering
based on task decomposition and specialization .BPR could involve a change in the
way the process is organized, the roles of the participants involved in the process,
elimination of steps in the process or a change in their temporal sequence. In its purest
sense BPR initiatives should start with a clean slate (Grover et al., 1994).
Moreover, the strategic importance of customer satisfaction and delight has prompted
many firms to begin examining core processes from the perspective of the customer
(Scherr, 1993). Thus, reengineering programs must first concentrate on processes that
have an impact on providing customer value, satisfaction, and delight while enhancing
a firms strategic advantage over its competitors (Holland and Kumar, 1995).
Therefore, the driving force behind effective business process reengineering efforts
must be those critical factors which influence the customers perception of value, and
improve the firms competitiveness.
BPR focuses on the whole process starting from product conceptual stage to final
product design. It provides the opportunity to reengineer the process or to reduce
radically the number of activities it takes to carry out a process with the help of
advanced Information Technology, (Hammer and Champy 1993). Business Process
Reengineering Aims to achieve quantum improvements and IT is the primary
facilitator to achieve the requested goal of BPR (Limayem, 2006). In figure 3.3, the
schematic form of BPR has been shown.
51
In the face of intense competition and economic pressures, corporations are shifting
their fundamental unit of analysis from the business function to the business process.
Organizational structures in the old companies and the majority of governmental
organizations are pyramidal. Specified responsibilities and duties are assigned to each
department. It means that each department just responsible for duties, which are
delivered by the upper parts. These organizational levels make the hierarchy structures.
Pyramidal structures lead companies to satisfy the mangers rather than customers.
Besides, the connections of departments would be at the lowest level.
53
BPR approach focus on business process. It cuts organization levels horizontally and
connects different departments to customers. This performance causes to all
components and departments, which work under definition of business process, try to
cooperate together and to achieve goals of business process and satisfy customers,
without paying attention to departments boundaries. Team working is established and
all the duties are aligned the business process, and related members are responsible for
the performance of business process and organization. BPR approach makes
companies to distinguish the excess activities through the business process and omit
them. Therefore, the final costs are decreased remarkably (Davenport, 1995).
54
Information Technology
IT is the primary enabler of new business process. BPR does not aim to automate an
existing business process but to deploy IT to enable a new business process. Therefore
we define BPR as a complex, top-down driven and planned organizational change task
aiming to achieve radical performance improvements in one or several crossfunctional, inter- or intra-organizational business processes whereby IT is deployed to
enable the new business process(es) (Barothy et al., 1995).
Radical changes through BPR approach alter the approach of the employees and
managers. Relationships among employees, mangers and departments are changed.
Besides, evaluation of employees and role of top mangers change dramatically.
55
operations.
One-time change
requested enabler and successful BPR, companies employ and manage their resources
more profitable.
BPR causes that not gainful activities throughout the business process are
Reengineering the business process and using IT cause companies to use their
Streamline
By streamlining the business process, the wasting activities will be omitted. Also this
tactics let companies simplify their business process.
56
Lose Wait
Squeezing out the waiting time in the business process is one of the important factors
for successful BPR. Furthermore this principle assists companies to modify upstream
practice to relieve downstream bottlenecks.
Orchestrate
Synchronizing the physical and virtual parts of the process is the goal of this tactic.
Mass Customize
In order to retain customers, Companies not only satisfy customers but also try to
delight them. So, they should push customization to occur closest to the customers.
Digitize
The important and effective tactics that have to be used in BPR is digitizing the
resources and organizational information and distributing digital information flow
through supply chain.
Vitrify
This principle Provides glasslike visibility through fresher & richer information about
the process.
Sensitize
Personalize
By employing IT- enabler, companies direct their activities through personalizing the
products or services to much more satisfy their customers.
example, would not have been able to reengineer the process used to procure and
distribute mass-market retail goods without IT. Ford was able to decrease its headcount
in the procurement department by 75% by using IT in conjunction with BPR, in
another well known example.
60
parallel one reduces the processes cycle time, problems resulting from delays, process
disruptions, and handoffs.
Facilitating integration. Moving from the division of labor approach into the case
intermediaries at different levels and reduces time and distance in the exchange of
information required in any process (Al-Mashari and Zairi, 2000).
Kobu (2002) conceptual model expresses the relationship between IT and BPR and
level customer service. At this model other elements such as organizational structuring
and behavioral changes for serving better result is declared. Organizational
restructuring by simplification eliminates barriers for a smooth flow of information and
materials along the supply chains. The smooth flow of information can be facilitated
by the use of various ITs to improve the integration of various functional areas. Deliver
quality goods at competitive prices in a timely fashion is the basic aim of BPR so the
coordination through the supply chain is the important point for achieving the
requested aim and IT is the enabler for coordinating all parts of supply chain. The
behavioral changes should precede the reengineering. Therefore, issues such as
training and education, employee empowerment, teamwork and incentive schemes
should be given priority in BPR. As shown in figure 3.4, IT is the important point for
improving the customer level because this element has direct influence on BPR and
other elements of Successful BPR.
61
Organizational
Structuring
Behavioral
Changes
Information
Technology
Business process
Reengineering
Improved Customer
Service Level
Source: (Kobu, 2002)
62
3-26-2. Outsourcing
Outsourcing the projects or some activities of the business process is an attractive
choice and effective way for the corresponding companies. This procedure allows
companies to implement new technologies quickly, cut costs or improve IT services.
However, the reality of outsourcing falls short of the perceived advantages. One of the
important problems with outsourcing is the high relationship between technology and
internal business processes. When systems are outsourced, systems and processes can
often become dysfunctional (Caldwell and McGee, 1997). Companies seeking radical
change will not find outsourcing a source of substantial productivity gain. Moreover,
for smaller projects, outsourcing can be a cost-effective solution (Jafari et al., 2006).
Reengineering and information technology supplier issues and are often more
affordable than larger, more functionally integrated systems like SAP. Sales and
business process automation is becoming an increasingly popular area for
reengineering. Although some of these software applications are limited in capabilities,
the majority of packages will give companies a good start with the planning aspects of
a reengineering project. Software prices begin at low prices for simple flowcharting
and can go up to tens of thousands of dollars for sophisticated simulation/modeling
software. Depending on the size of the company and the size of the reengineering
project, BPR software is well worth investigating ( Ali-Ahmadi et al., 2006).
3-26-4. Internet
Companies have been investing heavily in the internet. Many companies agree that
using the internet provides a competitive advantage to their business. Communication
and customer service area through the internet are the popular areas that companies
tend to address their internet applications.
For instance, in the computer industry, the use of the internet has had a severe impact
on improving margins. With the internet, a single point of distribution to all customers
could be created at a fraction of the cost. Essentially, the internet allows the barrier
between the company and customer to be demolished. Some other benefits of using
internet include: better communication, cost reduction, increased productivity and a
flattening of the organization. Understanding the technical hurdles surrounding the
internet are pivotal before any business process strategy can be developed. Security,
employee productivity and support are just a few of the main IT concerns. A
companys decision to outsource its internet business or develop a strategy internally
using existing IT can have severe financial repercussions on a company. Other
technical concerns include the reliability of internet-based systems and management
concerns.
3-26-5. Intranet
An intranet is like an internal internet for the companies. An intranet is a software/
hardware/network system that is accessible to the entire company. The term intranet is
used because the information on the system is only accessible to employees within the
company. Sophisticated security prevents people from outside the company from
64
primarily from productivity improvement, labor savings and cost reductions (Mooney
et al, 1996).
Consumer surplus refers to the difference between the price that a consumer is
willing to pay for a product and the market price (Hitt and Brynjolfsson, 1996).
In figure 3.5, the impacts of using Information Technology (digital information) on the
business benefits are showed.
development
and
also
an
important
indicator
of
organizational
correlation, but recent studies have shown significant relationship between IT and
Productivity. Harzolla (2005) stated that there is no productivity paradox any more.
69
Q = A .C
. K
. S
. L 4
C = IT Capital
Employing IT through the organizational levels is one of the important applications.
Therefore according to the above definition of IT, IT equipments, which are employed
through the organizational levels, communication centers and office automation, are
considered in this research rather than other equipments which contribute in producing
products.
K = non-IT Capital
S = IT Labor
L = Non-IT Labor
A = defined as the Total productivity and calculate by the regression.
1, 2 , 3 and 4 are the associated output elasticities.
In order to examine the research questions, an appropriate research model was built to
conduct the data collection process in the second phase. In this phase, the indicators of
BPR approach were evaluated by the experts and employees of Telecommunication
Company of Tehran. The reference frame of the second phase has emerged in figure
3.6.
70
BPR approach
Performance Quality
Information Technology
Complex duties.
Office automation.
72
Chapter Four
Research Methodology
Proper research method is important to start scientific research. Research
methodology presents the route map to continue the scientific investigation. At the end
of the pervious chapter a framework on literature review and related theories to the
purpose and research questions of the thesis has been presented. This chapter
describes research process, research design and also explains type, approach and
strategy of this research. Sample selection, method of collecting data, reliability and
validity of this study are other issues which are discussed in this chapter.
73
The conclusion of studies usually generate new ideas for future research .So, it makes
research process cyclical.
between IT and productivity and explore the high interrelation between IT and BPR. In
the first phase of research, the relationship between IT and productivity at
Telecommunication Company of Tehran (TCT) has been investigated. Three
hypotheses were tested in order to explain the relationship among IT and the main
economic factors of TCT. In the second phase, the BPR factors have been evaluated.
Based on hypotheses and cross analysis, the indicators of BPR and expected
improvement in each factor have been explained. Therefore, based on data analysis the
situation of BPR factors at TCT were discussed.
of understanding how things happen and how they are related rather than only
measuring the relationship between variables. Consequently, the qualitative
methodology can provide the investigator with meaningful insights by delivering more
deeply and examine the intangible aspects of complex issues of the process (Rusli and
Noor Azman, 2003).
According to the above explanation, this study is a quantitative research. In the first
phase, the quantitative data, which are related to the value of IT capitals and non IT
capitals, have been collected from Iran Telecommunication research center,
Telecommunication Company of Tehran, Management and Planning Organization and
Telecommunication Company of Iran. On the second phase, the questionnaires
distributed through the employees and experts of TCT in order to evaluate BPR
factors. Finally, information was analyzed as the numerical findings.
Interview
There are different form of interview, such as open ended, focus interview and survey.
Open ended interviews are performed in a conversational manner. The investigator can
ask key respondent for the facts of matter as well as for respondents opinion about
events (Johansson and Sparredal, 2005).With the focused interview the main purpose
is to confirm facts that already have been established and not ask questions of boarder
79
nature and the respondents are interviewed in the short period of time such as an hour.
In survey the questions are more structured (persson, 2004).
Physical artifact
In this king of data collection the physical evidences, which are needed, such as
technological device, work of art instruments and etc are observed or collected by
visiting the site of case study.
Direct observation
This can involve observation of meeting, side walk activities, factory works
classrooms and etc. Observational evidence is often useful in providing additional
information about the topic being studied (Yin, 1994 ; cite: Sparredal, 2005).
Archival records
This data collection method include organizational records, charts and maps and
survey data previous collected. Also the secondary data can be used in this kind of
collection.
Documentation
Questionnaire
The data in this method will be gathered by sending questions to the respondents.
Questionnaires can be distributed in paper form or by email, fax and etcthere is no
explanation or influence of researcher in this method .Also, questionnaire is not to be
more long and exhaustive, because these happens cause the questions not to be
answered.
Different methods were used to gather information. The archival records and different
documents were used in the first phase. The economic and financial data were
collected
from
Management
and
planning
organization,
TCTs
databases,
the desirable situation independently. Second part asks respondents to evaluate the
current situation and the desirable situation of IT indicators at their organization
separately.
The five points Likert scale was used, ranging from very low to very much for
statements of the mentioned parts of the questionnaire.
4-9. Reliability
Reliability is concerned with the question of whether the results of a study are
repeatable. The term is commonly used in relation to the question of whether the
measures that are devised for concepts in business are consistent. One factor that might
run the disc of affecting the reliability of the study is the respondents lack of
knowledge. It is further suggested that if a respondent at the moment is tired or
stressed, or have attitudes toward the questionnaire / interview it can impact negatively
on the reliability of the study (Eriksson and Wiedersheim-Paul, 2001). Moreover
reliability is particularly an issue in connection with quantitative research. The
quantitative researcher is likely to be concerned with the question of whether a
measure is stable or not.
The main concern of the second phase of this research is evaluating the BPR factors at
telecommunication Company of Tehran. After consulting with my Iranian supervisor
and Iran telecommunication research centers experts, some modifications and
adjustments were done. After the final confirmation, a pilot test was conducted by
distributing the questionnaire among 21 experts of TCT which ensured that the
questionnaire is appropriate and the statements are generally understandable.
In order to check reliability of the results, researcher used cronbachs alpha
methodology, which is based on internal consistency. Cronbachs alpha measures the
average of measurable items and its correlation. The current and desirable situation
were tested for IT and performance quality separately. Table 4.1 presents the values of
cronbachs alpha.
81
SPSS software was used to verify the reliability of collected data. Overall scales
reliability of the present situation and the desirable situation were tested by Cronbach's
alpha, which were 0.894 for the present situation and 0.896 for the desirable situation
and above the acceptable level of 0.70 (Hair et al., 1998).
4-10. Validity
The most important criterion of research is validity. Validity is concerned with the
integrity of the conclusions that are generated from a piece of research.
Validity is concerned with whether or not the item actually elicits the intended
information. Validity suggests fruitfulness and refers to the match between a construct,
or the way a researcher conceptualizes the idea in a conceptual definition, and the data.
It refers to how well an idea about reality fits in with actual reality. Actually,
qualitative researchers are more interested in giving a fair, honest, and balanced
account of social life from the viewpoint of someone who lives it every day (Neuman,
2003).
On the other words, Validity is concerned with whether the findings are really about
what they appear to be about. Validity defined as the extent to which data collection
method or methods accurately measure what they were intended to measure (Saunders
et al., 2003). Yin (2003) states, no single source has a complete advantage over all
others. The different sources are highly complementary, and a good case study should
use as many sources as possible. The validity of a scientific study increases by using
various sources of evidence (Yin, 2003).
The first phase of this research employed the econometric technique to investigate the
relationship between IT investment and productivity at TCT. The data were collected
82
83
Chapter Five
Data analysis
In the previous chapter the research methodology was discussed. In this chapter the
empirical findings and data analysis from Telecommunication Company of Tehran
(TCT) have been investigated. At the first phase analysis, the details of the production
function model were introduced and also the data collection procedure was followed
by gathering data from different databases of Telecommunication Company of Iran,
Iran Telecommunication research center, Telecommunication Company of Tehran and
Management and Planning Organization. Then, the related hypotheses were
introduced and the results of data analysis were achieved. In the second phase, the
data collected from employees and experts of TCT were presented. After that the
relevant hypotheses tested and data analysis procedure was completed. All the
empirical findings are in a manner that addresses the research questions.
84
Q = A .C
. K
. S
. L 4
Q = Total income which have been earned by TCT since 11 years ago. (Output)
C = Value of PCs , hard wares
infrastructures data bases (which are used for storing and exchanging information
85
through the Departments and agencies) and value of automation equipments and
infrastructures which were employed through TCTs organizations to integrate official
and organizational affairs such as Integrated financial system and MAN system
(Input).
K = Total Capitals of TCT. IT capital and budgets of IT and non IT labors have been
subtracted.
S = Budget which is devoted to IT staffs. IT staffs are defined as the personnel who
work in computer centers (Input).
L = Total labor expenses. The budget of IT staffs has been subtracted (Input).
A = defined as the Total Factor Productivity and calculate by the regression.
1, 2 , 3 and 4 are the associated output elasticities.
To estimate the purposes, the original form of Cobb Douglas model was linearized
by taking logarithm of its equation and adding an error term.
Ln Q = A + 1Ln( C)+ 2 Ln (K)+
3 Ln (S)+ 4 Ln( L) +
Where A, Q, C, K, S and L and 1 - 4 were defined before and is the error term.
86
5-2-2. Hypotheses
Three hypotheses were tested to investigate the impact of IT investment on
productivity at Telecommunication Company of Tehran.
Hypotheses are:
H1: IT Capital makes positive contribution to output (i.e., the gross marginal product
is positive) 1 > 0; 3 > 0 versus the null hypothesis that 1= 3 = 0
H2: IT investment makes positive contribution to output after deductions for
depreciation and labor expenses (i.e., the net marginal product is positive)
H3: The ratio of the marginal product to the investment in IT capital and labor is
higher than it is for the corresponding non-IT investments.
1 - (IT Capital Expenses / Non-IT Capital Expenses)* 2 > 0;
and
3 - (IT Labor Expenses / Non-IT Labor Expenses)* 4 > 0.
Second hypothesis allows us to verify that IT investment (IT capital and IT labor) is
not just positive, but that it pays more than what we spend on it. This is a stronger test
than first one, which only tests for the gross benefits, since we estimate whether there
are any positive net benefits (i.e. benefits after we have subtracted the costs from the
gross benefits) associated with IT. To direct the second hypothesis, Marginal Product
has been defined.
Marginal product for IT capital is:
= 1. A.
The above equation identifies that how much output will change instead of changing
one unit in IT Capital.
87
= 3. A.
5-2-3. Methodology
To conduct the study and validate our results, 44 samples have been extracted from
data bases since 1997 up to 2007. By employing these samples in Cobb Douglas
model, the hypotheses were tested with acceptable confidence interval.
The influences of inflation have to be decreased as much as possible in order to
achieve accurate and scientific results, Thus, Time Value of Money (TVM) equation
was used to remove negative influences of inflation from the values of all mentioned
factors.
TVM:
P=
for the past eleven years are 11% (IT capital), 15% (Non IT capital),10% (IT and Non
IT labor) and 11% (output). This technique assisted us to diminish the negative
influences of inflation.
By employing the above equation values of samples (IT Capital, Non IT Capital, IT
Labor and Non IT labor) were calculated based on the constant value in 1997.
Weighed Least Square is the method which was used to overcome effects of
heteroskedacity and make linear regression to calculate elasticities.
88
For the purpose of testing hypotheses about the values of model parameters, the linear
regression model also assumes the following:
The variance of error term is constant across cases and independent of the variables
The value of error term for a given case is independent of the values of the
variables in the model and values of error term for other cases.
Sig.
Elasticities
IT Labor
Std. Error
0.023
0.164
0.8800
Non IT Labor
0.199
2.287
0.0188
IT Capital
0.067
1.114
0.0386
Non IT Capital
0.726
4.426
0.0000
Table 5.1 shows the coefficients of IT Capital, non IT capital, IT Labor and non IT
Labor. Based on the results, each coefficient indicates the portion of corresponding
input in output of TCT. For example, 72.6% of total revenue of TCT is obtained by
non IT capital.
Significant Std. errors points out that the value of each coefficient has enough and
approvable contribution to the model and their values are acceptable.
Multiple R
.949
R Square
.901
Adjusted R Square
.891
90
Table 5.2 shows the strength of the relationship between the model and the dependent
variable. R, the multiple correlation coefficient, defines the linear correlation between
the observed and model-predicted values of the dependent variable. Its large value
indicates a strong relationship .R Square, the coefficient of determination, is the
squared value of the multiple correlation coefficient and its value demonstrates the
vigorous relationship between observation and model predicted value. About 91% of
variations are explained by the model.
According to the H1, its null hypothesis is rejected. So IT Labor and Capital make
positive contribution to output. (1 = 0.067 > 0; 2 = 0.023 > 0)
In order to test the second hypothesis, marginal products of IT Labor and IT Capital
were generated.
So:
Aspect
Marginal Product
Annual IT Expenses
IT Capital
0.3083
0.146
Labor Capital
1.02
Table 5.3: Findings for relationship between IT and productivity after deducting the IT costs
Table 5.3 indicates that 0.3083 unit of output (total revenue) increase instead of
investing 1unit in IT capital. Furthermore 1 unit augmentation in IT Labor makes the
output increased about 1.02.
IT depreciation costs are considered as the expenses of IT capital. So, with regard to
the total depreciation costs of Telecommunication Company of Tehran, the ratio of IT
capital to non IT capital and getting advice from experts, the average of annual
depreciation of IT Capital was calculated about 14.6% .It means that 14.6% of IT
capital in each year is equal to its depreciation costs. On the other words, after 6.8
years the depreciation costs covers the IT capital. Thus, after converting the value of
91
annual depreciation to constant value 1997, the net marginal product of IT capital was
achieved:
Annual depreciation: 15,832,485,300
IR Rials
(constant value)
Avg. IT capital
Avg. IT labor
3,622,829,370,000
108,441,680,300
11,228,339,480
131,661,411,200
By using the figures from table 5.4 and the coefficients from table 5.1, the net marginal
product is:
0.067 0.0217 = 0.0452
In the same way, the third hypothesis for IT labor is:
0.023 - .016 = 0.07
Therefore, the null hypothesis is also rejected. So, the ratio of the marginal product to
investment in IT capital and labor is higher than it is for the corresponding non-IT
investments.
92
In the first phase of data analysis, the relationship between of IT investment and output
(productivity) of TCT was tested. According to the hypotheses ,not only the positive
impact of IT investment on output were found out but also its positive contribution
were proved after deductions for
Besides, in the third hypothesis, the positive returns of IT investment were found
higher than non IT capital and labor. All these results points out the positive impact of
IT investment in economic growth and productivity of TCT.
Another important conclusion of this part is about non -IT investments. Although 70%
of Total income of TCT is earned by non- IT capital, the productivity level of non-IT
capital is lower than IT capital.
Q
L
t
t
or V t
+ K
K = Real Capital
TFP
Q t or V t
L t K
TFPt = Qt Lt K t
According to the above equation, if labor and capital stay constant, the output will be
changed only by Total Factor Productivity.
By taking logarithm from the Dujea model and then using differentiation, Solow
approach will be achieved.
The Cobb Douglas model is an appropriate method to identify the portions of the
labor and capital which are remarked in the last two patterns.
94
In order to direct the productivity analysis of TCT, Dujea method was designated to
employ in this research. Therefore, figure 5.1 and 5.2 indicate TFP in
Telecommunication Company of Tehran.
* 2001 has been identified as the basis year and other years have been
compared with 2001.
As shown in Figure 5.2, although TFP had negative growth during 2001 and 2005, the
average growth of TFP was about 16.2% during the past 11 years. Also, the average of
annual growth of TFP has been about 8.6% since 2005.
Labor productivity is regarded useful as it is relatively easy to apply and reflects the
degree of efficiency in the combination of labor and other resources (OECD Statistics
Directorate, 2001) besides it is identified as one of the effective economic factors in
Iran. Based on the fourth cultural, social and economic development plan (2005-09),
3.5% annual growth in labor productivity is one of the main goals to achieve 8%
economic growth in Iran.
Labor productivity is the ratio of output to labor input (number of persons or total
working hours of labors). In order to obtain the labor productivity of TCT, the ratio of
total revenue of TCT to the number of personnel was calculated. All data were
converted to constant value-1997 to reduce the influences of inflation. Figure 5.3
shows the Labor productivity results of TCT.
96
*2001 has been identified as the basis year and other years have been compared with 2001.
As shown in Figure 5.4, the average of annual growth of labor productivity was about
29.8% during 11 years ago. Besides, the average of annual growth of labor
productivity has been 16.4% since 2005.
5-2-5-3. Correlation
The annual economic growth of Iran was determined 8% in the fourth plan of
economic, social and cultural development (2005-09). 5.5 percent of this growth has to
be obtained by developing and creating new investment resources and 2.5 percent of
growth must be created by productivity growth. So, based on corresponding plan, 31.3
percent of GDP growth of each government organization has to be conducted by TFP.
By considering these two goals, Labor productivity, Capital productivity and TFP of
each company have to be ,at least, 3.5, 1 , 2.5 percent growth in each year (Iran
Productivity Association, 2006).
According to the economic indicators which were issued by Management and Planning
Organization, TCT is one of government companies which has positive balance of
finance in recent years (profitable). Hence, in order to achieve the mentioned economic
factors, the annual growths of TFP and Labor productivity of TCT have to be more
than 3.5 and 2.5 percent to compensate the other companies which are not profitable.
97
Therefore, productive resources which direct TCT to achieve the above goals are
considered by Top managers.
The correlations between Labor productivity, TFP and IT capital are indicated in table
5.5 and 5.6.
Pearson Correlation
Sig. (2-tailed)
N
IT Capital
Pearson Correlation
Labor Productivity
Sig. (2-tailed)
N
IT Capital
Labor productivity
0.430
0.032
44
44
0.430
0.032
44
44
IT Capital
Pearson Correlation
TFP
Sig. (2-tailed)
N
Pearson Correlation
Sig. (2-tailed)
N
IT Capital
TFP
0.869
0.002
44
44
0.869
0.002
44
44
As shown in 5.5 and 5.6, IT capital has approximately the considerable correlation
with labor productivity and the significant correlation with TFP. The above results
confirm that IT capital is able to make the meaningful impact on productivity level of
labors and capitals.
According to the economic report ,which was issued by Telecommunication Research
Center, the labor productivity and TFP of Telecommunication industry in Iran have
strong correlations with valueadded (0.99 , 0.98).Therefore, investing on IT should
be considered as much as possible.
98
Information
Technology
BPR approach
Performance
Quality
Information Technology
Performance quality
5-3-1. Hypotheses
Based
on
the
conceptual
framework,
the
BPR
factors
were
tested
at
5-3-3. Methodology
Questionnaires were distributed randomly through the experts of head offices of
communication zones in Tehran province. These offices are controlling and supporting
organizational and business activities throughout Tehran province. 245 questionnaires
were distributed and 215 of them were completed and delivered to the researcher. The
response rate is about 87.75%. After initial analysis and dada cleaning 201
questionnaires were prepared to final analysis.
Table
5.7
presents
the
preliminary
information
about
respondents
at
Classification
of variables
Administrative
and financial
affairs
Freq
Per
Clients
affairs
Freq
Per
Contracts
Computer
Engineering
&
procurement
Center
affairs
Fre
q
Per
Freq
Per
Fre
q
Per
101
%
Gender
Education
level
Male
59
93.7
60
87
33
94.3
18
85.8
13
100
Female
Diploma
4
3
6.3
4.76
9
5
13
7.24
2
4
5.7
11.42
3
1
14.2
4.7
0
0
0
0
Junior college
12.69
13.04
12
34.28
4.7
46.15
Bachelor
45
6
71.48
50
72.46
17
48.57
15
71.43
53.84
9.54
10.14
2.5
14.28
Masters
Work
experience
PhD
1-10
11
0
17.46
19
0
27.53
12
0
34.28
1
10
4.7
47.61
0
38.46
10-20
42
66.66
39
56.52
15
42.85
28.57
46.15
> 20
10
15.87
11
15.94
22.85
23.80
15.38
(Year)
Yi
di (xi-yi)
X1
Y1
d1
Xn
Mean
Yn
Mean
dn
Mean
Parameter
Sample
d =
d2 =
(d
d2 =
di
d=
d )
S d2 =
2
d
d
n
(d
S d2 =
d )2
n 1
S d2
n
Similar paired samples for specific variables cause to reduce the numbers of outside
resources of variance, as much as possible (Azar,1998).
Performance
Mean
Standard
Std. Error
Samples
103
Quality
Deviation
Mean
Correlation
Current situation
201
16.69
1.314
0.093
0.032
Desired Situation
201
33.29
1.325
0.093
0.032
Paired Differences
Performance
Quality
t
Mean
Standard
Deviation
Desired
situation
Current
situation
16.602
1.836
Std.
Error
Mean
0.129
df
95%confidence
interval of
difference
Lower
Upper
16.347
16.857
128.21
200
Sig
Maximum
(2tailed)
Difference
0.00*
32
As shown in table 5.11, the difference between the current situation and the desired
situation of performance quality has been calculated as 16.602. By considering the
maximum difference, the presented difference covers more than 50% of the maximum
(16.602/32 = .5188). Besides, based on t distribution table, the exploratory rate of t for
104
95% confidence interval and related degree of freedom (200) is about 2, but the real
rate of t has been substituted by 128.21.So, the difference is Significant.
By taking in to account the significance (2-taield), it could be concluded that the
average of differences is not due to the chance variation and it can be attributed to the
respondents believe.
Therefore, null hypothesis of H4a is rejected and there is a meaningful difference
between the current situation and the desired situation with the respect of Performance
Quality.
Information
Technology
Mean
Standard
Deviation
Std. Error
Mean
Samples
Correlation
Current situation
201
11.94
1.660
0.117
0.043
Desired Situation
201
24.63
2.359
0.166
0.043
Paired Differences
Information
Technology
Mean
Desired
situation
Current
situation
12.692
Standard
Deviation
2.826
Std.
Error
Mean
0.199
df
Sig
(2tailed)
Maximum
Difference
63.678
200
0.00*
24
95%confidence
interval of
difference
Lower
Upper
12.299
13.085
Table 5.12 and 5.13 demonstrate the relationship and difference between the current
situation and the desired situation of Information Technology at TCT. Based on
results, more that 50 percent of the maximum difference, in the field of Information
Technology, is also covered by the difference between the current situation and the
desired situation of Information Technology (12.692/24=.52).
105
Moreover, based on t distribution table, the exploratory rate of t for 95% confidence
interval and related degree of freedom (200) is about 2, however the real rate of t, was
substituted by 63.678. So, there is a meaningful difference between them.
According to significance, it could be concluded that the average of differences is not
due to the chance variation and it can be attributed to the respondents believe.
Therefore, the null hypothesis of H4b is rejected and there is a meaningful difference
between the current situation and the desired situation, based on Information
technology.
As a consequence, H4a and H4b confirm that there is a meaningful difference between
the present situation and the desired situation of Telecommunication Company of
Tehran, with the respect of BPR approach. On the other word, BPR is identified as an
important complementary investment for Telecommunication Company of Tehran.
Furthermore, the above analysis reveals that IT investment through TCT is not enough.
Thus, According to the deep relationship between IT and BPR, reengineering improves
the present situation of IT investment at TCT.
106
concluded that the average of difference of each factor is not due to the chance
variation and it can be attributed to the respondents believe.
Difference based on
Likert scale.
(Desired Present )
Performance Quality
indicators
Paired Differences
t
Mean
Standard
Deviation
Std.
Error
Mean
95%confidence
interval of
difference
Lower
df
Sig
(2taield)
Upper
107
Establishing different
work forces in the
organization
1.83
0.882
0.062
1.71
1.95
29.50
200
0.00*
Rate of cession of
decision making power
to skillful personnel
2.28
1.08
0.076
2.13
2.43
30.06
200
0.00*
Distance among
executive employees
and senior managers
1.78
0.861
0.061
1.66
1.90
29.38
200
0.00*
Rate of unnecessary
and parallel activities
2.62
1.01
0.071
2.48
2.86
36.78
200
0.00*
1.53
0.975
0.069
1.40
1.67
22.36
200
0.01*
1.78
0.838
0.059
1.66
1.89
30.142
200
0.00*
Complex Duty
1.79
1.10
0.058
1.64
1.94
23.11
200
0.00*
Rate of overall
customers satisfaction
1.91
0.938
0.070
1.77
2.04
27.47
200
0.00*
Figure 5.6 shows the desired improvements which are expected by experts and
employees of TCT. The maximum of desired improvement is about unnecessary and
parallel activities (178%). Experts and employees of Telecommunication Company of
Tehran believe that there are a lot of unnecessary and excess activities through their
company. With the respect of evaluated factors, Respondents expect BPR approach to
improve the present situation 102% averagely.
108
Fig
ure 5.6: Expected performance quality improvements
109
Difference based on
Likert scale.
(Desired Present )
Paired Differences
Mean
IT indicators
Standard
Deviation
Std.
Error
Mean
df
Sig
(2taield)
95%confidence
interval of
difference
Lower
Upper
Accessible Information
Networks
1.40
0.945
0.051
1.27
1.51
269.94
200
0.00*
Rate of Accessibility to
necessary information
of team working
2.05
0.947
0.067
2.18
1.91
30.67
200
0.00*
2.04
1.00
0.071
2.18
1.89
28.65
200
0.00*
Rate of accessibility to
feedback information
1.82
0.908
0.055
1.69
1.94
32.86
200
0.00*
Rate of immediate
accessibility to updated
information
1.80
0.870
0.061
1.68
1.92
29.42
200
0.00*
Office automation
1.90
0.917
0.064
1.02
1.77
29.57
200
0.00*
Figu
re 5.7: Expected Information Technology improvements
110
According to figure 5.7, experts and employees of TCT expect BPR approach to
create about 90.5% improvement in the current situation of IT factors.
111
Chapter Six
Conclusions and Future suggestions
In this chapter answers of the main research questions will be provided, based on the
relevant data analysis. First of all results and findings for each research questions will
be provided and after that, the conclusions that I have drawn based on data analysis
will be presented. Finally, managerial implications and future research will be
suggested.
The aim of this research was to shed light on the relationship between IT investment
and productivity. Telecommunication Company of Tehran is not only pioneer in
telecommunication industry, but also identified as one of the successful government
companies in economy environment of Iran. Evaluation of IT investment provided an
insight into the role of IT for improving economic factors of Telecommunication
Company of Tehran.
112
The results indicate that the correlation between IT capital and labor productivity is in
medium level however, TFP has strong correlation with IT capital. Besides, the
previous studies have proved the significant correlation of value added with TFP and
Labor productivity in Telecommunication industry of Iran. Therefore, IT capital not
only improves TFP and labor productivity growth of Telecommunication Company of
Tehran but also, has strong potential to create value added.
and
the
desired
circumstances
of
Variable
Value
(percentile)
Average of LP growth
(1997-07)
29.8%
Average of LP growth
(2005-07)
16.4%
16.2%
8.6%
43%
86.8%
97.2%
102%
90.5%
115
6-3. Conclusion
Based on fourth plan of cultural, social and economic development (2005 -2009),8%
has been calculated as the annual economic growth of Iran.5.5 % of the mentioned
growth should be achieved by new investments and developing resources and 2.5% of
it have to be created based on productivity growth. Hence, government companies and
organizations must cover 31.3% of their GDP growth from TFP. Besides, in order to
achieve the above economic factors, companies should at least 1%, 2.5% and 3.5%
growth in their capital productivity, total factor productivity and labor productivity in
each year.
According to the fourth economic development plan, ICT sector has the considerable
impact on economic growth of Iran. Hence, 7.9%, 9% were calculated as the annual
growth of TFP and labor productivity in this sector. Moreover, TFP and labor
productivity have remarkable correlation with value added in ICT sector (correlation
coefficient: 0.98 and 0.994).
Telecommunication Company of Tehran (TCT) is one of the powerful government
companies in Iran. Based on this research, the impact of IT investment in economic
factors of TCT was investigated in the first phase. The findings show that IT
investment not only makes positive contribution to productivity but also its return is
higher than non IT investments.
The correlation between IT capital and labor productivity is in the medium level
(0.430) however, TFP has considerable correlation with TFP (0.868).
As shown in table 6.1, Although the average of labor productivity growth in the last
two years has been obtained more than standard level specified in forth development
plan(2005-09),it is lower than the average of its growth in the past 11 years (19972007).This issue can be concluded for the average of TFP growth too. These symptoms
may cause worry for TCT in future. Finally, Based on the mentioned correlations, IT
investment is able to reduce the uncertainties in future.
Although IT investment makes the positive contribution to overall performance of
Telecommunication Company of Tehran, combining the complementary investments
116
in work practices with IT investment is essential to stabilize and support the positive
contribution in future. Therefore, the factors of BPR were tested by the experts and
employees of TCT in the second phase of this research. After final analysis, a
significant difference between the present situation and the expected situation were
proved, with regard to BPR approach.
According to table 6.1, the experts and employees of TCT expect 97.2% improvement
in the current IT and performance Quality situations.
As a consequence, by considering the positive return of IT investment and the average
rate of IT capital to non IT capital in TCT (2.99%), IT investment should increase to
achieve goals of the fourth development plan, create much more value added and gain
more profits. Moreover, BPR approach is a necessity, as a complementary investment,
for TCT to improve the current IT and performance quality situation.
6-4. Implications
Top managers play the critical role in employing IT and radical organizational change.
They have to think strategically. It means that they should recognize their companies
resources and assess the target market and its characteristics .Finally they are able to
make an image for new future. Therefore the managerial implications are:
Iranian top managers should consider IT usages through their organizational levels
and try to expose the positive influences of IT in their organizations. Moreover, this
research indicates that the return of IT investment can be higher than non IT capitals
so, it is the time to employ this remarkable power. On the other words, IT should be
developed its usages from the new technologies to produce products towards the
effective enabler for increasing productivity growth.
Although IT implementations through organization are able to improve
productivity, managers should aware that without complementary investment this
opportunity may change to threat.
Many companies in Iran are using continuous improvement methods such as Total
Quality Management and etc. So ,top managers of Iranian companies should consider
that Business process reengineering is the essential issue because, continuous methods
make little improvements in the current process, however the successful BPR efforts
117
118
Reference
Albadvi, A. and Keramati, A. (2006) A proposal for a framework or research
approach on Information Technology impact on corporate level productivity
Information technology journal,.
Al-Mashari, M. and Zairi, M. (1999) BPR implementation process: An analysis of
key success and failure factors Journal of business process management.
Al- Mashari, M. and ZairiI, M. (2000) Creating a Fit Between BPR and IT
Infrastructure: A Proposed Framework for Effective Implementation International
Journal of Flexible Manufacturing Systems.
Akhavan, P. Jafari , M. and Ali-Ahmadi Ali, R. (2006) Exploring the interdependency
between reengineering and information technology by developing a conceptual model
Business Process Management Journal.
Azar, A. (1998) statistics and its application in management Samt publication. IR.
Baily, Barua, A. , Kriebel, C. and Mukhopadhyay, T. (1991) Information Technology
and Business Value: An Analytical and Empirical Investigation, University of Texas
at Austin Working Paper, Austin, TX, May.
Barrett, J.L. (1994) Process visualization: getting the vision right is the key Journal
of Information Systems Management.
Becker, S.W. and Gordon, G. (1996) An entrepreneurial theory of formal
organizations Journal of Information systems management.
Bengtsson, Anna. and Paskhina, A. (2004) Designing a new storage facility in health
care industry: A case study at the Surgery Department of Varberg Hospital School of
Economics and Commercial Law, Gothenburg University.
Berndt, E. (1991) The Practice of Econometrics: Classic and Contemporary, AddisonWesley, Reading MA.
Breiman, L. and Friedman, J.H. (1984) Classification and Regression Trees
Belmond, California, Wadsworth International Group.
Broadbent, M., Weill, P., OBrien, T. and Neo, B.S. (1996) Firm context and patterns
of IT infrastructure capability, Proceedings of the Seventeenth International
Conference on Information Systems, Cleveland, OH.
Briynolfsson, E. (2003) The Information Technology productivity gap Journal of
economic performance perspectives.
Brynjolfsson, E. (1993) The Productivity Paradox of Information Technology
Communications of the ACM.
119
Hastie, T.J. and Tibshirani, R.J. (1990) Generalized Additive Model, Chapman &
Hall, London.
Hewitt, F. (1995) Business process innovation in the mid-1990s.Integrated
International journal of flexible manufacturing Systems.
Hitt, L. and Brynjolfsson, E. (1996) Productivity, Business Profitability, and
Consumer Surplus: Three Different Measures of Information Technology Value MIS
Quarterly.
Horzella, Asa. (2005) Beyond IT and productivity Linkoping Studies in Science and
Technology Department of Computer and Information Science, Linkoping university,
PhD Thesis.
Islam Sheikh, Shahidul. (2006) Mobile Commerce Department of Business
Administration and Social science, Lulea University of Technology, Master thesis.
Jackson, N. (1997) Business process re-engineering, Journal of Management
Services, February.
Jahangard, E. (2004) Impact of ICT on economic growth and productivity: Evaluation
at industry level of Iran Department of Economics, Allameh Tabatabae University,
PhD thesis.
Johansson, J. and Sparredal, J. (2005) CRM in e-business Department of Business
Administration and Social science, Lulea University of Technology, Master thesis.
Jorgenson, Dalew. and Stiroh, Kevin. J. (1999) Information Technology and growth
American economic review, papers and proceedings.
Jorgenson, Dalew. and Stiroh, Kevin. J. (2000) Razing the speed limit: As economic
growth in the information age Brooking papers on economic activity.
Kim, H. and G. J. Koehler (1995). "Theory and Practice of Decision Tree Induction."
Omega 23
Kraemer, Kenneth, (1998) International dimension of productivity paradox The
Communication journal of ACM , August.
Lichtenberg, F. (1995) The output contributions of computer equipment and
personnel: A Firm Level Analysis Journal of Economics of Innovation and New
Technology.
Limayem, M. (2006) E-strategy course Tarbiat Modares University.
Lockamy, A. and Smith, W. (1997) A strategic alignment approach for effective
business process reengineering: Linking strategy, processes and customers for
competitive advantage International journal of production economics.
122
123
OLiner, S. D. and Sichel , D. E. (1994) Computers and output growth revisited: How
big is the puzzle? Brookings Pap. Econ. Act.
Oliner, S. D. and Sichel, D. E. (2000) The resurgence of growth in the late 1990s: Is
information technology the story? Journal of economic perspectives.
Oliner, S. D. and Sichel , D. E. (2003) Information technology and productivity:
Where are we now and where are we going? Journal of economic perspectives.
Pad, A. (1995) Redesigning Companies: Commercial revolution Industrial
management organization.
Parsons, D., Gotlieb, C.C. and Denny, M. (1993) Productivity and computers in
Canadian banking in Griliches, Z. and maresse, J. (Eds) productivity issues in
services at the micro level, Klumer,Boston.
Peppard, J. and Rowland, P. (1995) The Essence of Business Process Reengineering
Hertfordshire, UK: Prentice-Hall Europe.
Persson, Petra. (2004) Customer Relationship Management Department of Business
Administration and Social science, Lulea University of Technology, Master thesis.
Pohjola, M. (2001) Information technology and economic growth: A cross-country
analysis. In Information Technology and Economic Development Pohjola, M., Ed.
Oxford University Press, Cambridge, U.K.
Porter and Miler E. (1985) How Information gives you competitive advantage
Harvard business review, July.
Pourmirza, A. (2006) Adoption of Internet banking by Iranian Customers
Department of Business Administration and Social science, Lulea University of
Technology, Master thesis.
Qobadi, A. (2006) A Comparison between the Impact of Information and
Communication Technology (ICT) on Productivity in the Asian and European
Countries Department of Economics, Tarbiat Modares University, Master thesis.
Reichheld, F. and Sasser, W.E (1990) Zero defection : quality comes to services .
Harvard business review.
Rezaee Nejad, A. (1999) Reengineering Rasa Inc.
Romanelli, E. and Tushman, M.L. (1994) Organizational transformation as
punctuated equilibrium: an empirical test Academy of Management journal.
Ross, J. (1998) IT infrastructure management, paper presented at the 98 Annual
Conference of Information Systems Management at the London Business School
Centre for Research in Information Management, London.
124
Rusli, A. and Noor Azman, A. (2003) The use of cognitive mapping technique in
management research: Theory and practice management Research News journal.
Rutha, Sara. and Saven, Aguilar. (2004) Business process reengineering modeling:
modeling and framework International journal of production economics.
Sabherwal, R. and King, W. (1991) Towards a theory of the strategic use of
information resources: an inductive approach, Information and Management journal.
Satti, Samia. and Nour, O. M. (2002) ICT Opportunities and Challenges for
Development in the Arab World UNU/WIDER Conference on the New Economy in
Development, May
Saunders, C. and Jones, W. (1992) Measuring Performance of the Information
Systems Function, Journal of Management Information Systems.
Saunders, M. and Thournhil, A. (2003) Research methods for business statements
Financial Times/ Prentice Hall, Harlow.
Siegel, D. (1997) The Impact of Computers on Manufacturing Productivity Growth:
A Multiple- Indicators, Multiple-Causes Approach, Review of Economic Statistics.
Shao, B. and Lin, W. (2000) "Examining the Determinants of Productive Efficiency
with IT as a Production Factor." Journal of Computer Information Systems.
Shao, B. and Lin, W. (2001) "Measuring the Value of Information Technology in
Technical Efficiency with Stochastic Production Frontiers." Information and Software
Technology journal.
Soliman, F. and Youssef, M. A., (1998) The role of SAP software in business process
reengineering. International journal of operations & production management.
Solow, R. M. (1987) Wed Better Watch Out New York Times Book Review.
Solow, R.M. (1956) Technical change and the aggregate production function Review
of economics and statistics journal.
Steinberg, D., Colla, P.L. and Martin, K. (1999) MARS User Guide Salford
Systems, San Diego, CA
Stiroh, K. J. (2001) Information technology and the U.S. productivity revival: What
does the industry data say? Federal Reserve Bank of New York.
Sumanth, D. (1984) Productivity engineering and management McGraw-Hill
publication Ltd , chapter one page 20.
Sumanth ,D.J. (1991) How to measure productivity in manufacturing and service
organizations fall industrial engineering conf .
125
126
Appendix A
Weighted Least Squares Analysis
[DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\Ahmad1.3_1.sav
Power Summary
Log-Likelihood Values(b)
Power
-2.000
-1.500
-1.000
-.500
.000
.500
1.000
1.500
2.000
1.758
1.796
1.833
1.870
1.907
1.943
1.978
2.013
2.047(a)
a The corresponding power is selected for further analysis because it maximizes the log-likelihood
function.
b Dependent variable: Revenue, source variable: Non IT capital
Weight
4
Source
Power Value
Revenue
IT Labor
Non IT Labor
NonIT Capital
IT Capital
non IT capital
2.000
Model: MOD_2
Model Summary
Multiple R
R Square
Adjusted R Square
Std. Error of the Estimate
Log-likelihood Function Value
.949
.901
.891
.008
2.047
127
ANOVA
Regression
Residual
Total
Sum of
Squares
.027
.003
.029
df
4
39
43
Mean Square
.007
.000
F
95.367
Sig.
.000
Coefficients
Unstandardized
Coefficients
Standardized
Coefficients
Sig.
Std. Error
.473
.880
Std. Error
Beta
Std. Error
(constant)
ITLabor
NonITLabor
.023
.140
.022
.134
B
.725
.164
.199
.0.87
.119
.047
2.287
.0188
NonITCapital
ITCapital
.726
.067
.164
.060
.778
.075
.175
.067
4.426
1.114
.000
.0386
CORRELATIONS
/VARIABLES=TFP IT Capital
/PRINT=TWOTAIL NOSIG
/MISSING=PAIRWISE.
Correlations
[DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\Ahmad1.3_1.sav
Correlations
TFP
TFP
1
Pearson Correlation
IT Capital
.869(**)
Sig. (2-tailed)
ITCapital
.002
44
44
Pearson Correlation
.869(**)
Sig. (2-tailed)
.002
44
44
CORRELATIONS
/VARIABLES=IT Capital Labor Productivity
/PRINT=TWOTAIL NOSIG
/MISSING=PAIRWISE .
Correlations
[DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\Ahmad1.3_1.sav
128
Correlations
IT Capital
IT Capital
1
Pearson Correlation
Labor productivity
.430
Sig. (2-tailed)
LaborProductivity
.032
44
44
Pearson Correlation
.430
Sig. (2-tailed)
.032
44
44
2- paired T-test
GET
FILE='C:\Ahmad Sobhani\FINAL ANALYZE\1233455.sav'.
DATASET NAME DataSet1 WINDOW=FRONT.
GET
FILE='C:\Ahmad Sobhani\FINAL ANALYZE\12.12.sav'.
DATASET NAME DataSet2 WINDOW=FRONT.
T-TEST
PAIRS = lastCSQuality lastCIT WITH lastDSQuality lastDIT (PAIRED)
/CRITERIA = CI(.95)
/MISSING = ANALYSIS.
T-Test
[DataSet2] C:\Ahmad Sobhani\FINAL ANALYZE\12.12.sav
Paired Samples Statistics
Pair 1
Pair 2
lastCSQuality
lastDSQuality
lastCIT
lastDIT
Mean
16.69
33.29
11.94
24.63
N
201
201
201
201
Std. Deviation
1.314
1.325
1.660
2.359
Std. Error
Mean
.093
.093
.117
.166
lastCSQuality
&
lastDSQuality
lastCIT & lastDIT
Correlation
Sig.
201
.032
.338
201
.043
.465
129
Paired Differences
Mean
Pair 1 lastCSQuality
lastDSQuality
Pair 2 lastCIT
lastDIT
Standar
d
Deviatio
n
Std.
Error
Mean
df
Sig
(2tailed)
95%confidence
interval of
difference
Lower
Upper
-16.602
1.836
0.129
-16.857
-16.347
-128.21
200
0.00
-12.692
2.826
0.199
-13.085
-12.299
-63.678
200
0.00
130
Appendix B
Dear Respondent:
The question which is accessible for you is in direction of a student research. The
purpose of this research is to evaluate the impact of employing Business process
reengineering on some parameters which are effective on the function of
Telecommunication Company of Tehran.
The intension of Reengineering" in short is transformation of organizational structure
from the form hierarchy to process structure ,that its final purpose is just attracting the
customers satisfaction and providing their needs and desires with the assistance of
establishing active working teams and increasing the rate of organizational
productivity.
Please help us for performing this research by answering to the fallowing questions.
Incidentally, please write your proposal or opinion at the back of this questionnaire.
We are so thankful because of your attention and patience for completing this
questionnaire.
Best regards,
1- Gender:
Male
Female
2- Level of Education:
Diploma
Master
Junior college
PhD
Bachelor
Very
low
6- The rate of cession of decision-making power to skillful and with work experience
personnel; and their ability for freely decision-makings in necessity occasions.
Very
much
Very
low
131
Very
low
8- The rate of the existence of excess, unnecessary, parallel or repetitions activities in the
organization.
Very
much
Very
low
9- The rate of the presence of excess work forces and useless personnel in the
organization.
The present situation
Very much medium low
much
Very
low
10- The situation of official hierarchy and the number of organizational levels.
Very
much
Very
low
11- The rate of successive and interconnected activities under one job title (complex
duties).
Very
much
Very
low
12- The rate of general customers satisfaction from performing and fulfilling the process
of their affairs(quality) in the organization.
The desirable situation
The present situation
Very
much medium low Very
Very much medium low Very
much
low
much
low
13- The rate of accessibility to information networks such as internet.
Very
much
Very
low
14- Rate of simultaneous accessibility to necessary and common information for all of
the persons who are implicated( as a team) for doing a specific work in the
organization.
The present situation
Very much medium low
much
Very
low
15- The rate of forms, reports, paper work and excessive bureaucracy in the
organization.
Very
much
Very
low
16- The rate of accessibility to feed back information (opportune)for personnel of the
organization in order to awareness from the deficiency of their functions and correct
them.
Very
much
Very
low
17- The rate of fast, instant and immediate accessibility of personnel to the information.
Very
much
Very
low
18- Office automation and accomplishing the automatic activities in the organization.
Very
much
Very
low
133