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1 University of Regensburg Modeling the Impact of ICT on Business Performance: Empirical Evidence from SMEs in Germany and Jordan A dissertation presented By Mahmoud R M Almadhoun To The Chair of Innovation and Technology Management, Department of Business, Faculty of Business, Economics and Information Systems In partial fulfillment of the requirements for the degree of PhD in Business Administration University of Regensburg Germany Supervisors Prof. Dr. Michael Dowling, Chair of Innovation arid Technology Management Prof. Dr. Gunther Pernul, Chair of MIS I- Information Systems 2010

2 Table of Contents DEDICATION FORWARD ABSTRACT TABLE OF CONTENTS LIST OF TABLES LIST OF FIGURES ABBREVIATIONS ACKNOWLEDGMENTS Ill IV V VI X XI XIII XVI CHAPTER 1: BACKGROUND TO THE RESEARCH INTRODUCTION DEFINITION OF SMEs SMEs IN GERMANY Historical Significance of SMEs in Germany.* SMEs and ICT in Germany SMEs IN JORDAN Significance of SMEs in Jordan ICT Initiatives in Jordan RESEARCH QUESTIONS METHODOLOGY EXPECTED CONTRIBUTION TO RESEARCH AND PRACTICE 11 CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK INTRODUCTION LITERATURE CLASSIFICATION LITERATURE REVIEW THE RESOURCE-BASED VIEW OF ICT USE THE VALUE-CHAIN VIEW OF ICT USE Inbound and Outbound Logistics Operations Marketing and Sales After-Sales Service.' Administration & Management Human Resources Management Technology Development Procurement THE ICT IMPACT ON BUSINESS PERFORMANCE RESEARCH HYPOTHESES THEORETICAL FRAMEWORK Research Model The Link between Research Questions and Hypotheses Definitions of Model Constructs CONCLUSION 43 CHAPTER 3: RESEARCH METHODOLOGY INTRODUCTION RESEARCH DESIGN 46

3 3.3 QUESTIONNAIRE DEVELOPMENT STRUCTURAL EQUATION MODELING: SK-STAGE APPROACH DEFINE THE INDIVIDUAL CONSTRUCTS (STAGE ONE) Operationalization of Constructs Items Analysis and Deletion Assessment of the Suitability of Data for Factor analysis DEVELOP AND SPECIFY THE MEASUREMENT MODEL (STAGE Two) Exploratory Factor Analysis and Unidimensionality Assessment Confirmatory Factor Analysis and Measurement Model 5* Items per Construct and Model Specification Model Identification Reflective Vs Formative Constructs DESIGN A STUDY TO PRODUCE EMPIRICAL RESULTS (STAGE THREE) Covariance Vs Correlation Matrices Missing Data Procedures? The Adequacy of Sample Size :' Model Estimation Technique Computer Program Selectedfor the Analysis ASSESS MEASUREMENT MODEL VALIDITY (STAGE FOUR) Assessment ofgoodness-of-fit (GOF) Construct Validity (Content, Discriminant, and Convergent Validity) Model Diagnostics and Modification Measures SPECIFY STRUCTURAL MODEL (STAGE FIVE) One-Step Vs Two-Step Approach Structural Model Specification Transform the Measurement Model to a Structural Model ASSESS STRUCTURAL MODEL VALIDITY (STAGE SK) Assess Overall Structural Model Fit METHODOLOGICAL CONTRIBUTIONS OF THIS RESEARCH CONCLUSION 80 CHAPTER 4: DATA ANALYSIS OF ICT USE ACROSS THE VALUE CHAIN IN SME INTRODUCTION RESPONDENTS PROFILE (FIRST STUDY IN GERMANY) Respondents of German SMEs Classified by Industrial Sector Respondents of German SMEs Classified by Job Function Respondents of German SMEs Classified by Number of Employees Respondents of German SMEs Classified by Annual Sales Respondents of German SMEs Classified by Date of Establishment RESPONDENTS PROFILE (SECOND STUDY IN JORDAN) Respondents of Jordanian SMEs Classified by Industrial Sector Respondents of Jordanian SMEs Classified by Job Function Respondents of Jordanian SMEs Classified by Number of Employees Respondents of Jordanian SMEs Classified by Annual-Sales Respondents of Jordanian SMEs Classified by Date of Establishment INBOUND LOGISTICS TECHNOLOGIES Supply Chain Management Software (SCMS) Online Payments and Electronic Access to Suppliers Automated Storage & Retrieval System (AS/RS) OPERATIONS TECHNOLOGIES Computer Aided Manufacturing (CAM) Computer Numerical Control Machines (CNC) Flexible Manufacturing System (FMS) Automated Material Handling System (AMHS) Electronic Time and Expense Reporting OUTBOUND LOGISTICS TECHNOLOGIES Order Processing Software Online Order Trackings. Production Scheduling Online Access to Delivery Schedule Computer System for Vehicle Operations Scheduling 102

4 4.7 MARKETING AND SALES TECHNOLOGIES Customer Relationship Management (CRM) Sales Force Automation (SFA) Computer Analysis of Sales Online Sales Channels SERVICES TECHNOLOGIES Online Customer Service ADMINISTRATION AND MANAGEMENT TECHNOLOGIES Enterprise Resource Planning (ERP) Accounting and Finance Software Electronic Invoicing System Office Automation Ill 4.10 HUMAN RESOURCES MANAGEMENT TECHNOLOGIES HRM Software Online Personnel and Benefits Administration Online Training Online Sharing of Enterprise Information by Employees TECHNOLOGY DEVELOPMENT Computer Aided Design (CAD) Online Access to R&D PROCUREMENT TECHNOLOGIES Computerized Procurement System Online Procurement of Parts (e-procurement) THE SIGNIFICANT DIFFERENCE OF ICT USE AMONG SMES IN GERMANY AND JORDAN ICT AND VALUE-CHAM COST ADVANTAGE Inbound Logistics Cost Operations Cost Outbound Logistics Cost Marketing and Sales Cost ' Services Cost Administration Cost Human Resources Management Cost Technology Development Cost Procurement Cost ICT AND DIFFERENTIATION Product Differentiation.' Process Differentiation Sales Growth Productivity Market Share ICT RESOURCES The Quality of ICT Infrastructure The ICT Skills of Employees The Governmental Policies toward ICT Adoption The Role of Competition to Encourage ICT Adoption CONCLUSION 141 CHAPTER 5: STRUCTURAL EQUATION MODELING ANALYSIS AND RESULTS INTRODUCTION FIRST STUDY RESULTS-GERMANY Item Analysis and Data Unidimensiona/ity Assessment Exploratory Factor Analysis-SEM Stage Measurement Model-SEMStages Structural Model-SEM Stages Hypotheses Testing SECOND STUDY RESULTS-JORDAN Item Analysis and Data Unidimensionality Assessment Exploratory Factor Analysis-SEMStage 1.' Measurement Model-SEM Stages Structural Model-SEM Stages

5 5.3.5 Hypotheses Testing COMPARATIVE ANALYSIS OF Two MODELS CONCLUSION 159 CHAPTER 6: DISCUSSION OF RESULTS INTRODUCTION FINDING l: THE ICT RESOURCES AND ICT USE Sample in Germany Sample in Jordan FINDING 2: THE ICT RESOURCES AND THE VALUE-CHAIN COST ADVANTAGE FINDING 3: ICT USE AND THE VALUE-CHAIN COST ADVANTAGE Sample in Germany Sample in Jordan FINDING 4: THE VALUE-CHAIN COST ADVANTAGE AND THE OVERALL PERFORMANCE CONCLUSION (SUPPORT OF HYPOTHESES) 164 CHAPTER 7: IMPLICATIONS, LIMITATIONS AND CONCLUSION RESEARCH IMPLICATIONS IMPLICATIONS FOR PRACTICE AND POLICY MAKERS LIMITATIONS AND FUTURE RESEARCH 169 APPENDIX 1: ITEM ANALYSIS AND DELETION 172 APPENDIX 2: RESULTS OF FACTOR ANALYSIS 185 APPENDIX 3: DATA COLLECTION QUESTIONNAIRE: ENGLISH VERSION 197 APPENDIX 4: DATA COLLECTION QUESTIONNAIRE: GERMAN VERSION 205 APPENDIX 5: DATA COLLECTION QUESTIONNAIRE: ARABIC VERSION 211 APPENDIX 6: THE RESEARCHER'S C.V 217 LIST OF REFERENCES 226

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