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ABSTRACT

Management authors such Hodgetts, et al (2006) and Bartlett, et al (2008) describe the increasing complexity of operating a business with international activities. Of the many factors that are involved in successful operational and strategic decisions, these authors draw conclusions that understanding the bearing that information technology (IT) investments can have upon an international business is critical. Thus, the intent of this research was to understand the impact of IT investment upon the operations of international business through analysing the influence, upon the firm’s financial performance, of the type of IT Investment, the mode of international operations , the location of those international operations and the firm’s industry sector. The sources for this dissertation included interviews with senior management personnel from  Melbourne-based companies that had international operations, and prior research literature in the form of doctoral and masters-level theses, published collections of articles, as well as journals and other volumes.

Rather than posit an hypothesis regarding the impact of IT investment upon the operations of international business and subjecting that hypothesis to rigorous testing (ie, the deductive approach) I chose an inductive approach. This approach is supported by Saunders (2007) who states that “research using an inductive approach is likely to be concerned with the context in which such events were taking place”.

Therefore, in order to draw conclusions based on the interviews and the literature, I classified the relevant prior research into several conceptual structures. The categories of organizational impact studies, the productivity paradox, measurement models and frameworks, IT Economics, International Business and IT, Strategic Global IT , cross-culture models, worldwide organisational structures and market entry strategies were used. This led the author to adduce relevant conclusions based on the collected primary data and applicable theoretical models such as “Porters 5-forces model of competitive advantage” (Porter, 1979), Kaufman and Weill’s (1989) “evaluative framework: a synthesis of economics and behavioural science” and Hofstede’s (Hodgett et al, 2006) “five dimensions of culture”.

Although there are eight distinct conclusions, the major outcome of the work is the model that I postulate to describe the impact of this IT investment. This “IT Investment Impact Implication” model describes the influence that the combination of business maturity, IT alignment with business strategy and the homogeneity of IT systems has upon the firm.

The Primary Conclusion – the “IT Investment Impact Implication Model”

This graphically triangular model consists of three components. One describes the maturity of the business, the second concerns the alignment of IT systems to business strategy, the third the homogeneity of the IT systems. The impact is derived from the “pressure”[1] inside this triangle. That is, the smaller the sides, the smaller the volume, the greater the pressure.

With reference to the first conclusion made, “that the optimal impact of IT investment occurs at the confluence of three factors. The alignment of IT systems with the business’s strategy, the homogeneity of systems across the organization, and the maturity of the business”, are the three related components. The ‘alignment of IT systems with the business’s strategy’ has to do with the degree of separation between the IT strategy and the host business’s strategy. One example of this is where the IT department is constantly second guessing the needs of the business. It is where there is no real communication between the executive and the IT department, or where there is no understanding within the executive of what benefits IT can bring to the business. Thus, the smaller this spread, the greater the positive impact upon business’s long-term expected value. The second component, ‘the homogeneity of systems across the organization’, concerns the spread of system types to achieve the same functions. For example, does one section of the business use a different brand of computer operating systems to another? Therefore, the greater the level of homogeneity, the greater the positive impact upon the business’s long-term expected value. The third component, ‘the maturity of the business’, is a reflection on both the pervasiveness, and consistency of application, of internal administrative processes. The model posits that the greater the maturity of the firm implies a reduction in organizational risk, thus a positive impact upon business’s long-term expected value.


[1] The pressure inside this triangle is analogous to Boyles Law. Boyles Law (k=Pv) holds that for a constant temperature the pressure that is exerted by a unit of gas is inversely proportional to the volume that it occupies.

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Posted February 22, 2011 by terop

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