An empirical investigation of the moderating effects of BPR and TQM on ICT business value

Abstract

PurposeThe purpose of this paper is to empirically investigate and compare the moderating effects of the two basic business process change paradigms – business process reengineering (BPR) and total quality management (TQM) – on the business value generated for firms by their information and communication technologies (ICT) investment.Design/methodology/approachUsing data collected through a survey of 271 Greek firms, moderated regression models founded on the Cobb‐Douglas production function are estimated, which have as the dependent variable the firm value added (objective measure of business performance), and as independent variables the yearly labour expenses, the value of the non‐computer capital, the value of the computer capital and BPR (TQM) measures.FindingsFrom the above models it is concluded that both BPR and TQM have considerable positive moderating effects of a similar magnitude on the relationship between ICT investment and firm value added. Also, different BPR and TQM activities have different moderating effects on ICT business value; process simplification, process improvement and the creation of a horizontal interdepartmental process are the BPR activities with the largest moderating effects, while measurement of employee satisfaction and simplification of work methods for quality improvement are the TQM activities with the largest moderating effects.Research limitations/applicationsThe basic limitation of this study is that it is based on data from Greek firms. Another limitation is that only one business performance measure, although quite important and theoretically fundamental (i.e. firm value added), is used.Practical implicationsBoth BPR and TQM are important ICT “complementary factors”, which, if combined with ICT, can increase the business value it generates. Therefore ICT should not be used simply as a tool for automating existing business processes, but for creating and supporting new business processes and practices, such BPR and TQM.Originality/valueThis study investigates and compares the moderating effects of the two main business process paradigms – BPR and TQM – based on reliable measurement of both through validated multi‐item scales, and also on theoretically sound models, founded on the Cobb‐Douglas production function.