The Effect of Investment in Information Technology on the Performance of Firms in the Rubber Industry

The paper examines the effectiveness of IT investment leading towards favorable business results. The data shows that ease of use, frequency and length of use, and company culture and attitudes of employees towards IT affects the company's performance. The results of this study, besides testing the instrument for assessing IS variables in the context of a developing economy, land support to prior research findings. User satisfaction with IS had a significant impact on performance. The direct impact of IT investment on performance was not detected. This study found an indirect effect of investment in IT on performance. Many other IS variables did affect performance. 1. Introduction E-Business is expected to experience fast growth over the next several years. Forrester Research, Inc. of Cambridge, Mass. , forecasts that revenues generated by e-Business will be as much as $6.9 trillion by 2003. By 2002, e-tailing, a category of e-Business that involves the purchasing of consumer goods and services online, will be a $41 billion business, compared to a forecasted $12 billion in revenues at the end of 2000, according to Jupiter Communications, Inc., a New York market research firm [1]. A study done by the University of Texas revealed sales revenue over the Internet in 1998 was more than $300 billion and employed more than 1.2 million workers [2]. These figures are increasing rapidly. Figures from Forrester, Gartner, IDC, Jupiter and others all predict that worldwide business-to-business (B2B) e-Business will exceed $13 trillion by the year 2003 [3]. The expanding literature on electronic commerce is primarily focused on business-to-consumer (B2C) e-Business, although business-to-business (B2B) e-Business has a larger potential impact on the economy [4,5]. Predictions for worldwide e-Business exceed $3 trillion in 2003 with growth rates exceeding 100% per year. GartherGoup estimates that worldwide B2B e-Business will surpass $7.29 trillion in 2004, close to 7% of the forecasted total global sales transactions [6]. Vennat (2000) says, " The beauty of ecommerce is that a business does not have to be big to win big. Information technology allows companies of all sizes to improve productivity and extend their reach to a broad customer base; innovation is the name of the game". It is crucial to study the efficiency and effectiveness of investing in Information Technology (IT), specially focusing on e-Business in selected industries. To examine the contribution of IT to output, it isfielpful to work within the well-defined framework of the theory of economic production. This theory postulates that the output of a firm is related to its inputs (one of which will be IT) via a production function and predicts that each input should make a positive contribution to output. Also, the marginal cost of each input should, on balance, be offset with production of at least equal benefit. Numerous definitions have emerged since the introduction of e-Business. Experts define e-Business as the integration of business processes; enterprise applications, relationships and organizational structure to create a high-performance business model, capable of delivering differentiated business value [7,8,9,10]. The implementation of e-Business applications includes the reengineering of business processes and the use of the Internet technology to disseminate information electronically [8]. Wigand [11] views e-Business as the seamless application of Internet technology alone the entire value chain of business processes, enabling the accomplishment of business goals. The U.S. Small Business Administration (SBA) guidelines use annual sales volume and/or number of employee, depending on the industry, for classifying businesses as to size. Under the SBA guidelines, a small business could have fewer than 100 to as many as 1500 employees, or annual sales from $2.5 to $17 million, depending on the industry [12]. The standard most often cited by the SBA's Office of Advocacy for the public at large is fewer than 100 employee [12]. …