Title: Engineering information technology value in IT-based industries using partial adjustment valuation and resource-based view approach

Authors: Lukman Abdurrahman; Suhardi; Armein Z.R. Langi

Addresses: School of Electrical Engineering and Informatics, Bandung Institute of Technology, Bandung, Indonesia ' School of Electrical Engineering and Informatics, Bandung Institute of Technology, Bandung, Indonesia ' School of Electrical Engineering and Informatics, Bandung Institute of Technology, Bandung, Indonesia

Abstract: This paper provides a study concerning IT value substance in IT-based industries. The applied method is a partial adjustment valuation approach, expressing that the real output is part of the preferred output. Thus, there should be a coefficient between both, which shakes the relationship in between, called a speed of adjustment. To examine the method, this theory experimented six Indonesian IT-based firms through two cases: three-factor (K, L, and I) and two-factor (K and L) models. Here K = regular capital, L = labour expense, and I = IT spending. The results disclose dissimilarities between the two cases, the three-factor model retains performance ratios superior to the two-factor model. This deviation leads to a comprehension that the value of IT is tangible in improving business performances. Consequently, the performance variables will be material to evaluate the role of IT in the firm. Thus, open for the IT value engineering study to develop further.

Keywords: information technology; IT-based industries; partial adjustment valuation; business performance; speed of adjustment; SoA; performance ratio; resource-based view; RBV; IT value engineering; production function; Indonesia; regular capital; labour expense; IT investment.

DOI: 10.1504/IJICT.2016.076824

International Journal of Information and Communication Technology, 2016 Vol.8 No.4, pp.420 - 435

Received: 09 Jan 2015
Accepted: 16 Jun 2015
Published online: 01 Jun 2016 *

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