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
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 1 1.1 INTRODUCTION 1 1.2 DEFINITION OF SMEs 5 1.3 SMEs IN GERMANY 5 1.3.1 Historical Significance of SMEs in Germany.*. 5 13.2 SMEs and ICT in Germany 6 1.4 SMEs IN JORDAN 9 1.4.1 Significance of SMEs in Jordan 9 1.4.2 ICT Initiatives in Jordan 9 1.5 RESEARCH QUESTIONS 10 1.6 METHODOLOGY 10 1.7 EXPECTED CONTRIBUTION TO RESEARCH AND PRACTICE 11 CHAPTER 2: LITERATURE REVIEW AND THEORETICAL FRAMEWORK 12 2.1 INTRODUCTION 12 2.2 LITERATURE CLASSIFICATION 12 2.3 LITERATURE REVIEW 17 2.4 THE RESOURCE-BASED VIEW OF ICT USE 19 2.5 THE VALUE-CHAIN VIEW OF ICT USE 21 2.5.1 Inbound and Outbound Logistics 28 2.5.2 Operations 31 2.5.3 Marketing and Sales 32 2.5.4 After-Sales Service.' 33 2.5.5 Administration & Management 33 2.5.6- Human Resources Management 34 2.5.7 Technology Development 35 2.5.8 Procurement 36 2.6 THE ICT IMPACT ON BUSINESS PERFORMANCE 36 2.7 RESEARCH HYPOTHESES 39 2.8 THEORETICAL FRAMEWORK 40 2.8.1 Research Model 40 2.8.2 The Link between Research Questions and Hypotheses 41 2.8.3 Definitions of Model Constructs 42 2.9 CONCLUSION 43 CHAPTER 3: RESEARCH METHODOLOGY 45 3.1 INTRODUCTION 45 3.2 RESEARCH DESIGN 46
3.3 QUESTIONNAIRE DEVELOPMENT 48 3.4 STRUCTURAL EQUATION MODELING: SK-STAGE APPROACH 50 3.5 DEFINE THE INDIVIDUAL CONSTRUCTS (STAGE ONE) 52 3.5.1 Operationalization of Constructs 52 3.5.2 Items Analysis and Deletion 55 3.5.3 Assessment of the Suitability of Data for Factor analysis 56 3.6 DEVELOP AND SPECIFY THE MEASUREMENT MODEL (STAGE Two) 57 3.6.1 Exploratory Factor Analysis and Unidimensionality Assessment 57 3.6.2 Confirmatory Factor Analysis and Measurement Model 5* 3.6.3 Items per Construct and Model Specification 58 3.6.4 Model Identification 59 3.6.5 Reflective Vs Formative Constructs 61 3.7 DESIGN A STUDY TO PRODUCE EMPIRICAL RESULTS (STAGE THREE) 62 3.7.1 Covariance Vs Correlation Matrices 62 3.7.2 Missing Data Procedures?. 62 3.7.3 The Adequacy of Sample Size :' 65 3.7.4 Model Estimation Technique 66 3.7.5 Computer Program Selectedfor the Analysis 67 3.8 ASSESS MEASUREMENT MODEL VALIDITY (STAGE FOUR) 67 3.8.1 Assessment ofgoodness-of-fit (GOF) 67 3.8.2 Construct Validity (Content, Discriminant, and Convergent Validity) 71 3.8.3 Model Diagnostics and Modification Measures 75 3.9 SPECIFY STRUCTURAL MODEL (STAGE FIVE) 77 3.9.1 One-Step Vs Two-Step Approach 77 3.9.2 Structural Model Specification 78 3.9.3 Transform the Measurement Model to a Structural Model 78 3.10 ASSESS STRUCTURAL MODEL VALIDITY (STAGE SK) 79 3.10.1 Assess Overall Structural Model Fit 79 3.11 METHODOLOGICAL CONTRIBUTIONS OF THIS RESEARCH 79 3.12 CONCLUSION 80 CHAPTER 4: DATA ANALYSIS OF ICT USE ACROSS THE VALUE CHAIN IN SME 81 4.1 INTRODUCTION 81 4.2 RESPONDENTS PROFILE (FIRST STUDY IN GERMANY) 81 4.2.1 Respondents of German SMEs Classified by Industrial Sector 81 4.2.2 Respondents of German SMEs Classified by Job Function 82 4.2.3 Respondents of German SMEs Classified by Number of Employees 84 4.2.4 Respondents of German SMEs Classified by Annual Sales 84 4.2.5 Respondents of German SMEs Classified by Date of Establishment 86 4.3 RESPONDENTS PROFILE (SECOND STUDY IN JORDAN) 87 4.3.1 Respondents of Jordanian SMEs Classified by Industrial Sector 87 4.3.2 Respondents of Jordanian SMEs Classified by Job Function 87 4.3.3 Respondents of Jordanian SMEs Classified by Number of Employees 89 4.3.4 Respondents of Jordanian SMEs Classified by Annual-Sales 89 4.3.5 Respondents of Jordanian SMEs Classified by Date of Establishment 91 4.4 INBOUND LOGISTICS TECHNOLOGIES 91 4.4.1 Supply Chain Management Software (SCMS) 92 4.4.2 Online Payments and Electronic Access to Suppliers 93 4.4.3 Automated Storage & Retrieval System (AS/RS) 94 4.5 OPERATIONS TECHNOLOGIES 94 4.5.1 Computer Aided Manufacturing (CAM) 95 4.5.2 Computer Numerical Control Machines (CNC) 95 4.5.3 Flexible Manufacturing System (FMS) 96 4.5.4 Automated Material Handling System (AMHS) 97 4.5.5 Electronic Time and Expense Reporting 98 4.6 OUTBOUND LOGISTICS TECHNOLOGIES 99 4.6.1 Order Processing Software 99. 4.6.2 Online Order Trackings. Production Scheduling 100 4.6.3 Online Access to Delivery Schedule 101 4.6.4 Computer System for Vehicle Operations Scheduling 102
4.7 MARKETING AND SALES TECHNOLOGIES 103 4.7.1 Customer Relationship Management (CRM) 103 4.7.2 Sales Force Automation (SFA) 104 4.7.3 Computer Analysis of Sales 105 4.7.4 Online Sales Channels 106 4.8 SERVICES TECHNOLOGIES 107 4.8.1 Online Customer Service 107 4.9 ADMINISTRATION AND MANAGEMENT TECHNOLOGIES 108 4.9.1 Enterprise Resource Planning (ERP) 108 4.9.2 Accounting and Finance Software 109 4.9.3 Electronic Invoicing System 110 4.9.4 Office Automation Ill 4.10 HUMAN RESOURCES MANAGEMENT TECHNOLOGIES 112 4.10.1 HRM Software 113 4.10.2 Online Personnel and Benefits Administration 113 4.10.3 Online Training 114 4.10.4 Online Sharing of Enterprise Information by Employees 115 4.11 TECHNOLOGY DEVELOPMENT 115 4.11.1 Computer Aided Design (CAD) 116 4.11.2 Online Access to R&D 117 4.12 PROCUREMENT TECHNOLOGIES 117 4.12.1 Computerized Procurement System 118 4.12.2 Online Procurement of Parts (e-procurement) 118 4.13 THE SIGNIFICANT DIFFERENCE OF ICT USE AMONG SMES IN GERMANY AND JORDAN 119 4.14 ICT AND VALUE-CHAM COST ADVANTAGE 123 4.14.1 Inbound Logistics Cost 123 4.14.2 Operations Cost 124 4.14.3 Outbound Logistics Cost 124 4.14.4 Marketing and Sales Cost 125 4.14.5 ' Services Cost 126 4.14.6 Administration Cost 127 4.14.7 Human Resources Management Cost 128 4.14.8 Technology Development Cost 130 4.14.9 Procurement Cost 130 4.15 ICT AND DIFFERENTIATION 132 4.15.1 Product Differentiation.' 132 4.15.2 Process Differentiation 133 4.15.3 Sales Growth 134 4.15.4 Productivity 135 4.15.5 Market Share 136 4.16 ICT RESOURCES -.-. 137 4.16.1 The Quality of ICT Infrastructure 137 4.16.2 The ICT Skills of Employees 138 4.16.3 The Governmental Policies toward ICT Adoption 139 4.16.4 The Role of Competition to Encourage ICT Adoption 140 4.17 CONCLUSION 141 CHAPTER 5: STRUCTURAL EQUATION MODELING ANALYSIS AND RESULTS 142 5.1 INTRODUCTION 142 5.2 FIRST STUDY RESULTS-GERMANY 142 5.2.1 Item Analysis and Data Unidimensiona/ity Assessment 142 5.2.2 Exploratory Factor Analysis-SEM Stage 1 143 5.2.3 Measurement Model-SEMStages 2-4 144 5.2.4 Structural Model-SEM Stages 5-6 147 5.2.5 Hypotheses Testing 148 5.3 SECOND STUDY RESULTS-JORDAN 150 5.3.1 Item Analysis and Data Unidimensionality Assessment 150 5.3.2 Exploratory Factor Analysis-SEMStage 1.'. 151 5.3.3 Measurement Model-SEM Stages 2-4 153 5.3.4 Structural Model-SEM Stages 5-6 755
5.3.5 Hypotheses Testing 156 5.4 COMPARATIVE ANALYSIS OF Two MODELS 158 5.5 CONCLUSION 159 CHAPTER 6: DISCUSSION OF RESULTS 160 6.1 INTRODUCTION 160 6.2 FINDING l: THE ICT RESOURCES AND ICT USE 160 6.2.1 Sample in Germany 160 6.2.2 Sample in Jordan 160 6.3 FINDING 2: THE ICT RESOURCES AND THE VALUE-CHAIN COST ADVANTAGE 161 6.4 FINDING 3: ICT USE AND THE VALUE-CHAIN COST ADVANTAGE 162 6.4.1 Sample in Germany 162 6.4.2 Sample in Jordan 162 6.5 FINDING 4: THE VALUE-CHAIN COST ADVANTAGE AND THE OVERALL PERFORMANCE 164 6.6 CONCLUSION (SUPPORT OF HYPOTHESES) 164 CHAPTER 7: IMPLICATIONS, LIMITATIONS AND CONCLUSION 166 7.1 RESEARCH IMPLICATIONS 166 7.2 IMPLICATIONS FOR PRACTICE AND POLICY MAKERS 167 7.3 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