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AIS Newsletter |
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IS SECTION / AMERICAN ACCOUNTING ASSOCIATION. |
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In the Literature : Research on Determining IT Value |
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FUTURE PROFITABILITY, OPERATING CASH FLOWS, AND MARKET VALUATIONS ASSOCIATED WITH OFFSHORING ARRANGEMENTS OF TECHNOLOGY JOBS Kimberly Dunn, Mark Kohlbeck, Matthew, Magilke. Journal of Information Systems; Fall2009, Vol. 23 Issue 2, p25-47, 23p
Abstract. We investigate profitability, operating cash flows, and value relevance associated with offshoring arrangements of technology-oriented jobs. Offshoring is the business practice of moving substantial portions of a firm's business operations (and jobs) to another country usually to take advantage of lower labor costs or other production factors in developing countries. Offshoring carries social costs as local jobs are lost which may limit realization of benefits. We find that firms that offshore technology-oriented jobs report greater earnings and operating cash flows following an offshoring event as the relative size of the offshoring arrangement increases. Consistent with these results, the market only values offshoring beyond the impact recognized in the financial statements for larger offshoring arrangements. A valuation discount actually exists for smaller offshoring arrangements suggesting either (1) costs exceed potential benefits or (2) the perception that benefits are only realized through economies of scale. We document both benefits and costs that are important for those firms considering offshoring arrangements and their stakeholders.
INVESTMENTS IN INFORMATION TECHNOLOGY: INDIRECT EFFECTS AND INFORMATION TECHNOLOGY INTENSITY Neerah Mittal, Barrie R. Nault. Information Systems Research. Linthicum. Mar 2009. Vol 20, Iss. 1, pg 140, 16 pgs. Abstract: Many studies measure the value of information technology (IT) by focusing on how much value is added rather than on the mechanisms that drive value addition. We argue that value from IT arises not only directly through changes in the factor input mix but also indirectly through IT-enabled augmentation of non-IT inputs and changes in the underlying production technology. We develop an augmented form of the Cobb-Douglas production function to separate and measure different productivity-enhancing effects of IT. Using industry-level data from the manufacturing sector, we find evidence that both direct and indirect effects of IT are significant. Partitioning industries into IT-intensive and non-IT-intensive, we find that the indirect effects of IT predominate in the IT-intensive sector. In contrast, the direct effects of IT predominate in the non-IT intensive sector. These results indicate structural differences in the role of IT in production between industries that are IT-intensive and those that are not. The implication for decision-makers is that for IT-intensive industries the gains from IT come primarily through indirect effects such as the augmentation of non-IT capital and labor.
THE VALUE TO THE CUSTOMER OF RFID IN SERVICE APPLICATIONS Heim, Gregory R., Wentworth Jr., William R., Peng, Xiaosong (David), Decision Sciences; Aug2009, Vol. 40 Issue 3, p477-512, 36p
Abstract: This article examines how customer value may be affected by deploying radio frequency identification (RFID) technologies within service environments. Business articles promote operational cost savings and improved inventory management as key benefits of deploying RFID. In response, service firms are using RFID to reengineer service transactions and customer touchpoints. Customers may view these RFID applications to offer both benefits and drawbacks. This article demonstrates that individuals will recognize far more value from RFID service applications than just cost savings and inventory availability. The article analyzes qualitative survey responses on the value gained from RFID to identify a broad list of value objectives—benefits and drawbacks—associated with RFID service applications. The article contributes to academic literature by providing salient value dimensions for return on investment models of service RFID applications and for future empirical analyses of means-ends and value-profit chain models. Managers can use the list of dimensions to develop rich business cases for evaluating the benefits and costs from enhancing service operations with RFID. The identified drawbacks also provide managers with a resource for understanding potential risks of RFID applications. |
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Fall 2009 |