Assessing the business values of information technology and e-commerce independently and jointly

Abstract

The purpose of this paper is to assess the business values of information technology (IT) and electronic commerce (EC) independently and simultaneously as measured by productive efficiency, in order to provide new insights into IT and EC investments and, consequently, lead to better decisions on IT and EC investments. The paper analyzes a panel data set at the country level based on the theory of production and its companions called the time-varying stochastic production frontier (SPF) approaches with the one-equation and two-equation models estimated by a two-step nonlinear maximum-likelihood method. The performance metric called productive efficiency is built in the research approaches. The empirical evidence strongly suggests that the presence of EC may strengthen or weaken IT value, and vice versa, which provide a good explanation for the disappearance or existence of the so-called productivity paradox, and that the paradox may exist in a country regardless of whether it is a developed or a developing country, inconsistent with conventional wisdom claiming that the paradox exists only in developing countries. The findings imply that it is imperative to carefully assess the values of IT and EC and, as such, prudent rather than blind IT and EC investing decisions are made, and that the values of IT and EC must be evaluated jointly rather than separately. The findings add significant contributions to the literature and serve as a catalytic agent in stimulating further comparative research in these important areas linking IT investments and EC developments when their business values are the major concern.