On IT and business value in developing countries : A complementarities-based approach

Developing economies accommodate more than three quarters of the world's population. This means understanding their growth and well-being is of critical importance. Information technology (IT) is one resource that has had a profound effect in shaping the global economy. IT is also an important resource for driving growth and development in developing economies. Investments in developing economies, however, have focused on the exploitation of labor and natural resources. Unlike in developed economies, focus on IT investment to improve efficiency and effectiveness of business process in developing economies has been sparse, and mechanisms for deriving better IT-related business value is not well understood. This study develops a complementarities-based business value model for developing economies, and tests the relationship between IT investments, IT-related complementarities, and business process performance. It also considers the relationship between business processes performance and firm-level performance. The results suggest that a coordinated investment in IT and IT-related complementarities related favorably to business process performance. Improvements in process-level performance lead to improvements in firm-level performance. The results also suggest that the IT-related complementarities are not only a source of business value on their own, but also enhance the IT resources' ability to contribute to business process performance. This study demonstrates that a coordinated investment approach is required in developing economies. With this approach, their IT resources and IT-related complementaries would help them significantly in improving their business processes, and eventually their firm-level performances.

Information technology and business value in a global economy : do information technology investments pay off in a developing economy?

Understanding the business value of IT has mostly been studied in developed countries, but because most investment in developing countries is derived from external sources, the influence of that investment on business value is likely to be different. We test this notion using a two-layer model. We examine the impact of IT investments on firm processes, and the relationship of these processes to firm performance in a developing country. Our findings suggest that investment in different areas of IT positively relates to improvements in intermediate business processes and these intermediate business processes positively relate to the overall financial performance of firms in a developing country.

Information technology and business value: how complementary IT usage platform and capable resources explain IT business value variation

Understanding information technology’s (ITs) contribution to business value is an imperative issue, and while we have attempted to untangle the relationship between IT and business value with some success, our knowledge of specific factors leading to ITs contribution to business value still remains limited. In this paper we propose that complementing IT resources, by establishing a sound IT platform with capable organisational resources may aid in ITs ability to contribute to business value. We suggest that performance measurement of this contribution be undertaken at the business process level first, and then mapped through to firm level performance measurement to obtain a better understanding of the path of IT business value contribution.

Leveraging value within IT-backed collaborative alliances

Organizations today make radical use of the IT resources to sustain or better their existing competitive position. One such initiative is forming alliances on a shared IT backbone with partners of their value chain. We term these alliances the collaborative organizational structures (COS). Regardless of the nature of engagement with IT resources, organizations will require unique competencies to obtain performance-differentiating value from these IT resources. In a collaborative environment, these competencies would be a result of the synergy between the alliances’ unique competences. We call these the inter-firm IT-related capabilities. The resource centric theoretical frameworks suggest a trajectory of competence development and the structure of inter-firm competencies, but does not inform on the nature of these competencies. We employ an interpretive design to suggest three inter-firm IT-related capabilities for IT-backed collaborative alliances. We discuss these capabilities in this research and suggest that their effectiveness be measured directly against the collaborative rent, and indirectly against the firm-level performance of the alliance partners. This forms a model of leveraging and evaluating value within IT-backed collaborative alliances.

Creating and evaluating IT-related business value in developing markets : part 1

There is no doubt that information technology (IT) resources are important for organisations in any jurisdiction to manage their processes. Organisations consume considerable financial resources to acquire and manage their IT resources with various IT governance structures. Investment in IT, thus, is a strategic necessity. IT resources, however, do not contribute fully to business value on their own. Business value considers performance impacts of resources at various organisational levels (e.g., processes and firm levels). ITs are biased resources in that they require some form of manipulation to attain their maximum value. While we know that IT resources are important, a deeper understanding on two aspects of use of IT resources in organisations is important. First, is how to leverage the IT resources to attain its maximum value, and second, is where to evaluate IT-related business value in the organisation’s value chain. This understanding is important for organisation to sustain their operations in an ever-changing business environment. We address these issues in two parts. This paper discusses the first aspect of ways in which organisations can create and sustain their IT-related business value.

Changes in profit as market conditions change : an historical study of a building firm

This paper analyses the profits from 221 construction projects undertaken by an Australian building firm in the period 1910–1938 and examines the factors that influence the firm's profit levels. This involves a series of multiple regression analyses with three dependent variables representing profit and 26 independent variables representing economic conditions and project characteristics. From these, 11 models are derived of which two are chosen as having the best explanatory power in explaining approximately 72% of the variability in profit levels movements. The results show that unemployment, interest rates, level of construction activity in the state, change of wage level, inflation rate of building material and project value significantly influenced the firm's profit level during the period.

From concept to capability : developing design thinking within a professional services firm

Corporate business and management are embracing design thinking for its potential to deliver competitive advantage through helping them be more innovative, differentiate their brands, and bring more customer centric products and services to market (Brown, 2008). As consumers continue to expect more personalisation and customisation from their service providers, the use of design thinking for innovation within organisations is a logical progression. To date however, there is little empirical literature discussing how organisations are setting about integrating design thinking into their culture and innovation practices. This paper is a first step in initiating a scholarly discussion on the integration of design thinking within organisational culture. Deloitte Australia is a large professional services firm employing over 5700 staff in 12 offices across Australia. The company provides a range of services to clients in the areas of audit, tax, financial advisory and consulting. In early 2011 the company made a strategic commitment to introducing design thinking into the organisation’s practices. While it already maintains a strong innovation culture, to date it had largely been operating within an analytical business environment. For Deloitte, design thinking is an opportunity to create better outcomes for the people they serve – both internal and external stakeholders (Brown and Wyatt, 2010). Research was conducted using case study methodology and ethnographic methods from June to September 2011 at the Melbourne Deloitte office. It involved three methods of data collection: semi structured interviews, participant observation and artifact analysis. This paper presents preliminary case study findings of Deloitte’s approach to building awareness and a consistent understanding of design thinking, as well as large scale capability, across the firm. Deloitte’s commitment to transforming its culture to one of design thinking poses significant potential for understanding how design thinking is comprehended, enabled and integrated within a complex organisational environment.

The valuation accuracy of multiples in mergers and acquisitions, and their association with firm misvaluation

This study explores the accuracy and valuation implications of the application of a comprehensive list of equity multiples in the takeover context. Motivating the study is the prevalent use of equity multiples in practice, the observed long-run underperformance of acquirers following takeovers, and the scarcity of multiplesbased research in the merger and acquisition setting. In exploring the application of equity multiples in this context three research questions are addressed: (1) how accurate are equity multiples (RQ1); which equity multiples are more accurate in valuing the firm (RQ2); and which equity multiples are associated with greater misvaluation of the firm (RQ3). Following a comprehensive review of the extant multiples-based literature it is hypothesised that the accuracy of multiples in estimating stock market prices in the takeover context will rank as follows (from best to worst): (1) forecasted earnings multiples, (2) multiples closer to bottom line earnings, (3) multiples based on Net Cash Flow from Operations (NCFO) and trading revenue. The relative inaccuracies in multiples are expected to flow through to equity misvaluation (as measured by the ratio of estimated market capitalisation to residual income value, or P/V). Accordingly, it is hypothesised that greater overvaluation will be exhibited for multiples based on Trading Revenue, NCFO, Book Value (BV) and earnings before interest, tax, depreciation and amortisation (EBITDA) versus multiples based on bottom line earnings; and that multiples based on Intrinsic Value will display the least overvaluation. The hypotheses are tested using a sample of 147 acquirers and 129 targets involved in Australian takeover transactions announced between 1990 and 2005. The results show that first, the majority of computed multiples examined exhibit valuation errors within 30 percent of stock market values. Second, and consistent with expectations, the results provide support for the superiority of multiples based on forecasted earnings in valuing targets and acquirers engaged in takeover transactions. Although a gradual improvement in estimating stock market values is not entirely evident when moving down the Income Statement, historical earnings multiples perform better than multiples based on Trading Revenue or NCFO. Third, while multiples based on forecasted earnings have the highest valuation accuracy they, along with Trading Revenue multiples for targets, produce the most overvalued valuations for acquirers and targets. Consistent with predictions, greater overvaluation is exhibited for multiples based on Trading Revenue for targets, and NCFO and EBITDA for both acquirers and targets. Finally, as expected, multiples based Intrinsic Value (along with BV) are associated with the least overvaluation. Given the widespread usage of valuation multiples in takeover contexts these findings offer a unique insight into their relative effectiveness. Importantly, the findings add to the growing body of valuation accuracy literature, especially within Australia, and should assist market participants to better understand the relative accuracy and misvaluation consequences of various equity multiples used in takeover documentation and assist them in subsequent investment decision making.

The value of political connections : evidence from Korean chaebols

This thesis examines the value of political connections for business groups by constructing a unique dataset that allows us to identify the form and extent of the connections. Results show firms' membership to family-controlled business groups (South Korean chaebol) play a key role in determining the value of political connections. Politically connected chaebol firms experience substantial price increases following the establishment of the connection than other firms, but the reverse is found for other (non-family-controlled) connected business groups.

Exploring innovation driven value creation in B2B service firms : The roles of the manager, employees, and customers in value creation

This study adopts the premise that innovation capability underpins a service firm's value creation ability and that management style, employee behaviors and marketing underpin its innovation capability. This study examines the role of managers and employees in the creation and delivery of superior value to customers via the firm's innovation capability. To test this premise the current study examines the role of transformational leadership (TFL) as an aspect of the service firm's management style in creating and delivering value to customers through its services. This study adopts a multi-level study, collecting data from managers, employees and customers of service firms in a Southeast-Asian country, Cambodia. The results show that a service firm's innovation capability has a positive effect on the firm's value offering (VO), the VO has a positive relationship with customer perceived value-in use (PVI), and PVI has a positive relationship with firm performance. This study also finds moderating effects of TFL on the relationship between service innovation capability and VO, and of service marketing capability on the relationship between VO and PVI respectively.

Understanding service firms brand value creation : a multilevel perspective including the overarching role of service brand marketing capability

Purpose This study seeks to extend the existing literature on value creation by specifically focusing on service brand value creation (SBVC) and the role of brand marketing. Design/methodology/approach The authors first develop a model of SBVC and simultaneously investigate SBVC from the firm perspective (service brand value offering – SBVO) and from the customer perspective (service brand perceive value-in use – SBPVI). Subsequently, they investigate the effects of SBVO on SBPVI and integrate the moderation role of service brand marketing capability (SBMC) on the relationship between SBVO-SBPVI outcomes. SBVO is viewed as the firms' interpretation of and responsiveness to customer requirements via the delivery of superior performance the value offering through the service brand and SBPVI customers' perceived value from the firms' service brand. The contributions of SBVC to customer-based performance outcomes are then investigated. Hypotheses were tested using a sample of the senior managers of service firms in Cambodia and their customers. A survey was used to gather data via a drop-and-collect approach. Findings Results indicated that SBVO is positively related to SBPVI and SBPVI is positively related to customer-based performance. Noticeably, the results revealed that SBMC enhances the positive relationship between the firm SBVO and the customers SBPVI. Originality/value The paper extends the previous literature on value creation to capture SBVC. More significantly, the premise of the theoretical framework provides a breakthrough in the current SBVC literature which has so far neglected to take into account the dyadic approach (firm-customer) in understanding value creation and more specifically SBVC. The model is expanded by looking at the contingency role of SBMC in communicating value to customers.

A simulation modeling approach to understanding information technology value cocreation

The business value of information technology (IT) is increasingly being cocreated by multiple parties, opening opportunities for new research initiatives. Previous studies on IT value cocreation mainly focus on analyzing sources of cocreated IT value, yet inadequately accommodating the influence of competition relationships in IT value cocreation activities. To fill the gap, this in-progress paper suggests an agent-based modeling (also simulation) approach to investigating potential influences of the dynamic interplay between cooperation and competition relationships in IT value cocreation settings. In particular, the research proposes a high-level conceptual framework to position general IT value cocreation processes. A relational network view is offered, aiming at decomposing and systemizing several typical cooperation and competition scenarios in practical IT value cocreation settings. The application of a simulation approach to analytical insights and to theory building is illustrated.

From valuing design to designing value

This paper presents findings of an embedded action research project within a small to medium sized enterprise (SME). Through the implementation of design-led innovation processes, this research aims to identify the changes experienced in the participating company during a shift in the perspective of design from a product focus towards a strategic focus. Staff interviews and a reflective journal were used as methods to collect data from a range of design interventions that were facilitated throughout the engagement. A shift in perspective of design was evident through three cultural changes within the firm. First, the perceived outcome focus of design became increasingly long-term. Second, the value of design outcomes became less directed towards current projects, and more directed towards future possibilities. Finally, the perceived tangibility of design outcomes shifted from tangible to intangible. For example, design activities which produced customer insights, rather than product features, became seen as beneficial to the firm. These three components are proposed as cultural stepping stones which describe how a company transitions from an exclusively product-focused perspective and utilisation of design towards design as a company based process. Implications of this research provide considerations for designers who are attempting to facilitate a similar transformation within a business in the future.

Environmental information provision, market valuation, and firm incentives: An empirical study of the Japanese PRTR system

The environmental performance of a listed firm could affect its level of investment in pollution prevention and its access to financial markets. Previous studies using Tobin's q that explore market response to environmental performance do not distinguish between the impact of performance on investment and market response, which may mislead conclusions. To overcome this problem, we simultaneously estimate the functions of the intangible asset, the replacement cost, and the toxic chemical risk. We find that the Japanese financial market does not value risk associated with toxic chemical releases. Nevertheless, even without market valuation, firms increase investment to reduce pollution. © 2010 by the Board of Regents of the University of Wisconsin System.

Understanding financial information used to assess small firm performance : an Australian qualitative study

Purpose The purpose of this paper is to investigate the reality of financial and management accounting in a small group of small firms. Specifically, from the owner's perspective, an exploration is undertaken to see what financial information is collected, how it is used (or not) to make business decisions and evaluate the firm's performance, and the role played by the accountant in that process. Design/methodology/approach A phenomenological paradigm underpins this exploratory study. Semi‐structured interviews were undertaken with the owners of ten small firms, where the focus was on understanding what happens in an organisational setting, as opposed to theory and textbook practice. Findings The qualitative data supported prior research in other countries. The in‐depth analysis revealed a very basic understanding of accounting information and problems with the financial literacy amongst these small firm owners. Accounting reports were not widely produced or used, so an informal assessment, such as how much cash was in the bank, was the primary means of assessing business performance. Accountants were used for taxation services, although some owners sought more general business advice. Originality/value An understanding is developed of why there might be a gap between textbook rhetoric and reality of accounting practice in small firms. The conclusion is that accounting textbooks need to include more information about the reality of financial management in small firms.