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Efficiency enhancing effects of IT investment on other factor inputs and accounting identity approach to value of IT

Mittal, Neeraj
http://rave.ohiolink.edu/etdc/view?acc_num=osu1085362216

Abstract Details

2004, Doctor of Philosophy, Ohio State University, Accounting and Management Information Systems.
The debate around the value of Information Technology (IT) has raged for a long time and the analysis suggests that IT does in fact create business value. IT interacts with the organizational processes, strategies and incentives within an organization. Because the benefits of IT are diffuse and arise through many mechanisms, the benefits have been measured at various levels using different measures. Not many studies have focused on the question of how much value is added. The fact that IT interacts with other parts of the organization has only recently started to receive attention. In the first part of the study, we argue that IT affects other factors inputs. In the process IT increases value by making other factor inputs more productive. We incorporate the efficiency enhancing effects of IT capital on non-IT capital and labor by extending the traditional production function approach. We show that in presence of such indirect effects, not accounting for these effects would lead to under-investment in IT and over estimation of the output elasticity of IT and empirically estimate these efficiency-enhancing effects of IT capital. The empirical results show that indirect effects are significant and positive.The second part of our study highlights the problems associated with the use of dollar data (data on factor inputs and outputs is measured in dollars at the macro level). We show that the parameters such as output elasticity of IT capital, recovered from the production function approach using dollar data for outputs and inputs are actually driven by an underlying accounting identity. Therefore, we cannot recover the underlying technology parameters using this approach. We extend the accounting identity formulation to incorporate the returns from IT capital and empirically estimate the returns to IT capital. The returns to IT capital are positive from this methodology. In summary, this study contributes to the understanding about value of IT in two distinct ways. Conceptually, it incorporates the indirect effects of IT capital thus providing insight into the mechanisms of accrual of value from IT. Methodologically, it uses a new approach using the accounting identity to triangulate the value of IT.
Richard Dietrich (Advisor)
120 p.
Business Administration, Management
Information Technology; IT; Value of IT; Production function; Efficiency Enhancing; Accounting Identity

Recommended Citations

Citations

  • Mittal, N. (2004). Efficiency enhancing effects of IT investment on other factor inputs and accounting identity approach to value of IT [Doctoral dissertation, Ohio State University]. OhioLINK Electronic Theses and Dissertations Center. http://rave.ohiolink.edu/etdc/view?acc_num=osu1085362216

    APA Style (7th edition)

  • Mittal, Neeraj. Efficiency enhancing effects of IT investment on other factor inputs and accounting identity approach to value of IT. 2004. Ohio State University, Doctoral dissertation. OhioLINK Electronic Theses and Dissertations Center, http://rave.ohiolink.edu/etdc/view?acc_num=osu1085362216.

    MLA Style (8th edition)

  • Mittal, Neeraj. "Efficiency enhancing effects of IT investment on other factor inputs and accounting identity approach to value of IT." Doctoral dissertation, Ohio State University, 2004. http://rave.ohiolink.edu/etdc/view?acc_num=osu1085362216

    Chicago Manual of Style (17th edition)

osu1085362216
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© 2004, all rights reserved.
This open access ETD is published by The Ohio State University and OhioLINK.