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Assessing the impact of information technology on firm
performance considering the role of intervening
variables: organizational infrastructures and business
processes reengineering
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performance considering the role of intervening variables: organizational
infrastructures and business processes reengineering', International Journal of
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Vol. 45, No. 12, 15 June 2007, 2697–2734
Assessing the impact of information technology on firm performance

considering the role of intervening variables: organizational
infrastructures and business processes reengineering
A. ALBADVIy, A. KERAMATI*z and J. RAZMIz
yIndustrial Engineering Department, Faculty of Engineering,

Tarbiat-Modares University, Tehran, Iran
zIndustrial Engineering Department, Faculty of Engineering,
University of Tehran, Tehran, Iran
(Revision received April 2006)
The relationship between the use of information technology (IT) and firm
performance has been widely researched over recent years. However, there has
been no well-founded empirical research on the role of intervening variables on
such a relationship. The current paper aims to present an instrument to be used
in such research and to study the role of two intervening variables including
organizational infrastructures and business processes reengineering in such a
relationship. Data from 200 car part manufacturers were gathered in a field
survey. The empirical work indicated that constructed measures demonstrate the
key psychometric properties including reliability and validity. The findings also
demonstrate moderating effects of organizational infrastructures and mediating
role of business processes reengineering on the relationship between the use of
information technology and firm performance.
Keywords: Information technology; Firm performance; Organizational

infrastructures; Business process reengineering; Empirical study; Questionnaire
1. Introduction
There have now been many studies on the relevancy between the application of
information technology (IT) and organizational efficiency or firm performance.
The results have shown a significant and positive correlation between IT and firm
performance (Alpar and Kim 1990, Harris and Katz 1991, Rai et al. 1997, Newman
and Kozar 1994, Mukhopadhyay et al. 1995). Meanwhile the other researches have
not been able to find such a relationship (Brynjolfsson and Hitt 1998, Davern and
Kaffman 2000). This is called productivity paradox in the literature of IT and
productivity. One suggested way to explain the paradox is to consider intervening
variables such as total quality management, reengineering of processes and
organizational infrastructures, on the relationship between IT and performance
(Brynjolfsson 2003, Davern and Kauffman 2000). Here, we considered the
intervening variables to understand the indirect relationship between IT and
*Corresponding author. Email: kerama_a@modares.ac.ir
International Journal of Production Research

ISSN 0020–7543 print/ISSN 1366–588X online 2007 Taylor & Francis
http://www.tandf.co.uk/journals
DOI: 10.1080/00207540600767780
2698 A. Albadvi et al.
organizational performance. Not much previous research has been done on this
aspect before; also little empirical research has been done on the impact of
intervening variables on the relationship between IT and performance.
There are important challenges for firms in the IT era. Do business process
reengineering (BPR) and organizational factors mediate the effect of IT adoption on
a company’s performance? In this research we will investigate these important
challenges. We will show the organizational infrastructures in which firms should
invest in order to realize the IT capabilities. Also the effects of process changes on
IT productivity will be examined in this research.
We have found organizational infrastructures and business process changes more
significant than the other intervening variables that have been suggested in the
related literature. This is attributed to the following.
1. According to Boyer et al. (1997), researchers have often diagnosed the
productivity paradox as a failure to balance investments in IT with
investments in the infrastructure to support it (Brynjolfsson 2000, Meredith
1987, Ettlie 1988, Zuboff 1988). Although IT provides powerful new
capabilities for firms, these capabilities can only be fully realized when
companies also invest in organizational infrastructures, such as providing
quality leadership, empowering workers, decentralization, team working
and process management provide one of the keys for unlocking the vast
potential of IT.
2. BPR involves rethinking and redesigning the organizations to create more
values. As Attaran (2003) mentioned, the rapid evolution of information
technologies and its declining costs are creating opportunities for organiza-
tions to change dramatically and improve the way they conduct business.
IT provides strategic value to an organization by giving support to the
business processes. It is used for cost reduction, product differentiation,
quality improvement, integration with customers and suppliers, organiza-
tional learning, and creating new business opportunities. IT is the most
effective enabling technology for BPR (Attaran 2003).
3. We believe that a combination of organizational infrastructures and business
process changes will provide an integrated organization perspective, involving
everyone, everything and everybody associated with the company, including
its customers and suppliers.
In section 2 a brief review of literature and theoretical framework of the
relationship between IT and performance considering the role of intervening variables
(organizational infrastructures and reengineering of processes) will be demonstrated.
In section 3 the research methodology is explained. Moderating effects of
organizational infrastructures and mediating effect of business process reengineering
in relation with IT and performance will be empirically analysed in section 4.
Limitations, conclusions and discussions will be mentioned in sections 5 and 6.
2. Literature review
With a careful scan of the published work at corporate level IT productivity, we find
that researchers have developed two different approaches in assessing the correlation
Assessing the impact of information technology on firm performance 2699
between IT implementation and productivity. Broadly speaking, the first approach

focuses on the effects of IT investment on direct and intermediary and financial and
non-financial measures of productivity. This approach could positively prove either
a direct correlation or lack of such a relation. The second approach considers the IT
implementation but emphasizes the role of intervening investments that enhance and
complement the IT implementation. Our research on IT and firm performance is in
accordance with the second approach of IT productivity studies, which considered
the role of intervening variables.
A summary of our review is shown in table 1. In the remainder of this section we
will discuss some of the important works that support the idea of the role of
intervening variables.
Organizations can achieve more production from their IT investment if IT
investments are coordinated with organizational redesign and other managerial
decisions (Hunter and Lafkas 2003), business strategy and the nature of managerial
work (Pinsonneault and Rivard 1998, Pinsonneault and Kreamer 1997, Belleflamme
2001). Also investment on management skills, user training, application of standards
and the way people work and how their performance is measured and controlled
are critical to realizing more productivity from IT investment (Brynjolfsson 2003,
Davern and Kauffman 2000).
Recent research focuses on the impact of IT on organizational structure, culture,
productivity, efficiency and quality. For example, Lau et al. (2001) have investigated
the effect of complexity, formalization, decentralization, span of control,
outsourcing and lateral communication as the factors of structure, and team
working and learning as organization culture. They find that IT investment has
significant impacts on organizational structure and culture.
Decentralization and investment on human capital are considered by Brenham
et al. (2001) as IT complementary investments. They conclude that greater levels of
IT are associated with increased delegation authority, greater levels of skill and
education in the work force.
Lucas et al. (1993) found that introduction of financial imaging system resulted
in improvements to customer service, control of certificates, higher-quality images,
improved search speed, and cost, time and staff reduction.
In summary, the first approach of IT productivity studies is based on the belief
that IT investment leads to cost reduction and improves quality, variety, innovation,
etc. But paradoxical results and a huge variation across organizations (some have
spent vast sums on IT with little benefit, while others have spent similar amounts
with tremendous success) change the critical question facing IT managers
and researchers from ‘Does IT increase productivity?’ to ‘How can we invest in IT
to increase productivity?’ The results of this approach show that investment in
IT does not automatically increase productivity, but is part of a broader system of
organizational investment for changes that do increase productivity (Brynjolfsson
and Hitt 1998).
Most importantly, the highest productivity of IT will be realized when IT
investment is integrated with complementary investments (Brynjolfsson and Hitt
1998); new strategies, new business processes, new working practices and new
organizations all appear to be important in realizing the maximum benefit of IT
(Brynjolfsson and Hitt 1998). These changes will require a time-consuming period of
Table 1. Selected works on IT productivity.

2700
Researcher(s) Measures Findings
Studies that found IT does not improve productivity

Alpar and Kim (1990) Multifactor (loans and demand deposits) IT results in decrease in costs and increase in time
deposits.
Harris and Katz (1991) Operating expense as a percentage of Firms that are profitable have higher growth on IT
premium income expense ratios and lower growth on operating expense
ratios.
Newman and Kozar (1994) Positive identification of jewellery System resulted in: Better asset management and
financial control
Availability of decision support for gemol- Increased productivity
ogist throughout evaluation process Reduced costs and increased revenue
Better quality
Merchandise
Mukhopadhyay et al. (1995) Inventory turnover EDI resulted in cost reductions ($100 savings per
Obsolete inventory vehicle, annual savings of $220 million)
Premium freight
Annual production volume
Parts variety
A. Albadvi et al.
New parts introduction

Rai et al. (1997) Labour and related expenses All measures of 1T investment are positively associated
Total property, plant, and equipment with firm output. IT capital and client/server expendi-
Total number of employees company sector tures are positively associated with return on assets.
sales Most expenditure except software and telecom are
Return on assets return on equity Labour associated with increased labor productivity.
productivity
Administrative productivity IS staff, hardware, software, and telecom expenditures
are negatively related with administrative
productivity.
Studies that found IT improves productivity
Mahmood and Mann (1993) Return on investment, return on sales, Individual IT investment variables were found to be
growth in revenue, sales by total assets, weakly related to organizational strategies and
sales by employee, market value to book economic performance.
value.
Loveman (1994) Performance ratios (ROI) Contribution of investment on IT was about 0 during a
period of 5 years study
Hitt and Brynjolfsson (1996) Production function IT increased productivity and consumer value, but did
Business profitability not result in supernormal business profitability.
Consumer surplus There is no inherent contradiction between increased
productivity, increased consumer value and
unchanged business profitability.
Tam (1998) Total shareholder return IT investment is not correlated with shareholder return.
Return on equity, assets, sales Level of computerization is not valued by the stock
Book value of assets market in developed and newly developed countries.
Market value There is no consistent measurement of IT investment.
Anderson et al. (2003) 1. Market value 1. IT productivity paradox remains in their data and it
2. Intangible assets value (innovation) presents a new IT productivity paradox.
3. Effects of investment in complementary 2. Two parallel explanations for the paradox:
assets such as greater use of teams, Complementary investment in organizational assets
broader decision-making authority, and accompanying implementation of ERP and related
worker training systems increased intangible asset value. And the
interweaving of IT links throughout the supply chain
created value by enabling each member of the supply
chain to identify and respond to dynamic customer
needs.
Studies shows the effects of intervening variables on relationship between IT and productivity
Lucas et al. (1996) Changes in organizational structure, work- Introduction of financial imaging system resulted in
flows and functions, interface operations, improvements to customer service, control of certifi-
technology cates, higher-quality images, improved search speed,
cost reduction, research time reduction, staff
reduction.
Henderson and Lentz (1995–96) Organizational learning The benefits anticipated from IT investments
New products and services (e.g. innovation) are marginal unless integrated,
dynamic processes exist to actively manage and adapt
these investments.
(continued )
2701
Table 1. Continued.
2702
Researcher(s) Measures Findings
Brynjolfsson and Hitt (1998) Productivity Investment in computers does not automatically
Decentralization increase productivity, but is part of a broader system
IT spending of organizational changes that does increase
productivity.
Bresnahan et al. (2000) Decentralization and investment on human 1. Greater levels of IT are associated with increased
capital delegation of authority, greater levels of skill and
education in the workforce, and the greater empha-
sizes on pre-employee screening for education and
training.
2. These work practices are correlated with each other
Devaraj and Kohli (2002) Organizational change IT investment combined with business process reengi-
neering positively and significantly influences
performance.
Brynjolfsson (2003) Human and organizational capital The greatest IT benefits are realized when an IT
Work practices investment is coupled with a specific set of
Decision making process complementary business investments.
Sherer et al. (2003) Investment in change management Planned communications and change management
A. Albadvi et al.
strategies led to the smooth implementation of the

upgrade process and contributed to the payoff from
the IT investment.
The influence of IT on business

processes
• Order flow
• Strategic processes
• Product
• Marketing and sales
IT application • Services
H1
• IT in communications • Accounting H1
• IT in planning • Personnel Performance upgrading
• IT in operations • Technology • Customer results
• IT in quality control H1 • People results
• IT as a support for • Operational results
• Growth
decision making
H2
• IT in administrative or H2
office work
• IT in financialaffairs Interactions between
technology and organisational
infrastructures
Organisation infrastructures
H2
• Delegation of power
(reducing hierarchy)
• Decentralization
• Training
• Group work
• Process management
• Relationship with
customers and suppliers
Figure 1. Theoretical framework of the impact of IT on firm performance considering the

role of intervening variables.
reengineering and redesign of organization in order to best utilize their IT

investment.
In this research we have considered the role of two important variables including
organizational infrastructures and business process redesign in the relationship
between IT and performance. These two variables cover many factors examined in
previous research.
In the next section a theoretical framework has been developed to study the
effects of IT on firm performance by considering the role of two intervening variables
including organizational infrastructures and business process change.
2.1 Theoretical framework of assessing the impact of IT on performance

In figure 1, a theoretical framework of the role of organizational infrastructures and
business process reengineering in relation with IT and organizational performance is
presented. This framework is an interpretation and synthesis of two previous models.
The first one, developed by Grover et al. (1998), studied the relationship between
IT and performance through the mediation of BPR. The second model, presented
by Boyer et al. (1997), studies the relationship between IT and performance in
organizations considering the role of organizational infrastructures.
Studies of Boyer et al. (1997), Hitt and Brynjolfsson (2000) and Lau et al. (2001)
show that in order to benefit from IT potentials and to improve organizational
performance, proper organizational infrastructures are essential. Boyer et al. (1997)
consider quality strategy, soft integration and worker empowerment as necessary
infrastructures to unlock IT potentials. The results of several case studies by Hitt and
Brynjolfsson (2000) indicate that creation of necessary IT infrastructures is an

indispensable element for gaining higher IT performance. They have organized these
infrastructures into three general categories including inter-organizational transfor-
mation, interactions with customers and interactions with suppliers. Lau et al. (2001)
have investigated the effects of IT on working conditions including organizational
structure and culture. They conclude that IT needs its own specific structure and
culture. They succeeded in showing the effects of factors such as education, group
work, control domain and decentralization in the workplace.
In this research we have selected and investigated the most noticeable structural
elements. Based on the results of studies by Boyer et al. (1997), Hitt and Brynjolfsson
(2000) and Lau et al. (2001) we consider the effects of organizational infrastructures
as a moderator role. First research hypothesis, in relation to this association, is:
Hypothesis 1: The relationship between IT and firm performance will be moderated
by the extent of practical diligence to organizational infrastructures.
Figure 1 also shows the role of business processes redesign in the relationship
between IT and performance. The result of the studies on mediating and moderating
effects of BPR on the relation between IT and performance by Grover et al. (1998)
indicates that organizational reengineering has a mediating role in the relation
between IT and performance. Gunasekaran and Nath (1997) and Attaran (2003)
have also shown the mediating role of BPR. These studies show that in
organizational process reengineering, IT is one of the fundamental factors that
must be considered as the enabler.
Noticing IT potentials and its proper application is a critical factor for success
in BPR programs (Hammer 1990). Executing successful BPR programs and proper
IT application makes the organizations expect that substantial improvements be
properly made, and these improvements in turn improve performance measures of
the organization. BPR mediating effects in the relation between IT and performance
are shown in figure 1.
This figure shows that IT investments can improve business processes and
through which improve organizational performance. This relationship, stated in the
form of the second research hypothesis, is:
Hypothesis 2: The relationship between IT and firm performance will be mediated by
the extent of BPR associated with the IT.
Gunasekaran and Nath (1997, pp. 96–97) have shown the effect of IT on the
reengineering of processes of order flow, strategic planning, product, marketing
and sales, services, accounting, human resources and have indicated the key role of
IT in their reengineering program. The same processes are considered in the
framework of this research.
3. Methodology
3.1 Data collection and sampling

In a study of IT performance, Froza (1995) studied sample automotive industries
and electronic industries in Italy. He asserts that the main reason behind choosing
the automotive industry is that it is one of the most competitive industries in which
innovation and change play a crucial role. With Iranian automotive industry
entering the international competitive arena (this is a strategy favoured by
automakers, government and policy makers), competition, creativity and innovation
in the Iranian automotive industry will achieve higher status. As Froza (1995) states,
creativity and innovation require the application of modern technologies and
reengineering program. We have investigated a sample of companies relating to the
automotive industry in Iran including part manufacturers.
In Iran 560 companies are involved in car part and component manufacturing.
Noticing that our sampling was purposive sampling, we have selected the top 200
suppliers companies respecting their yearly turnover. Because yearly turnover of
these companies is significant as those firm’s can invest in IT and reengineering
programs. 112 of these companies participated in the survey. Therefore, the response
rate came to be 56%, a feasible rate for such research (Ang et al. 2001). The
questionnaires were completed by people in organizational positions such as chief
director, factory manager, quality control manager, computer and systems manager,
production manager and management advisor or expert.
Noting a variety of respondents, it was essential to look into the probable
influence that their views might have on research findings. In order to do that, using
one-way ANOVA (analysis of variance), we analysed the differences in answers in
relation to the respondent’s organizational position (table 2). Table 2 shows
significant difference in responses by people in different positions (p50.05) in only
6 out of 89 measures. In other measures there is no significant difference between
responses in different positions. As shown in table 6, t-test results indicate that
advisors, compared with other positions, had more pessimistic views. Table 2 also
shows that quality experts held more pessimistic views about improvement in
technology and service processes.
3.2 Measurement instrument

Figure 1 depicts one independent variable ‘the extent to use IT’, two latent variables
‘organizational infrastructure and BPR’ and one independent variable ‘company’s
performance’.
In this section we will operationally define every one of the research variables and
then introduce their measuring instruments. It is important to note that reuse of
instrument from previous studies ensures content validity of the current study. When
necessary, we have defined some first time instruments that are validated at the end.
3.2.1 The extent of IT usage (ITU). A list of information technology use in

companies based on literature by Boyer et al. (1997), Swamidass and Kotha (1998),
Martinez-Lorente et al. (2004) is drawn out. Since variables are directly imme
asurable, their measurement requires scale definition. Therefore, 35 measures have
been defined to evaluate IT in organizations (Appendix 1). Then, they have been
classified into four criteria in terms of their application objectives consisting of IT
in communications, IT in decision-making support, IT in production and operation,
and IT in administration (see table 3). Respondents were asked to indicate the
application rate of each technology on a Likert scale from 1 (not used) to 7
2706
Table 2. ANOVA analysis of the difference between respondent views in different positions.
Organizational position of the respondent Variance analysis
Question code A B C D E F G H F-value Sig. T-test
ITPO 1.3 5.30 4.33 4.76 5.50 2.33 8.00 6.50 5.53 2.229 0.040 A4E, H4F
ITPO 2.7 4.05 2.33 3.00 4.86 5.33 1.00 4.50 2.47 2.720 0.014 A4H, E4C, D4H, E4H
ITAD 1.1 4.59 6.33 4.12 6.29 4.33 1.00 5.50 4.95 2.325 0.032 D4A, A4F, D4C, D4F, D4H, H4F
ITAD 1.6 5.03 5.00 5.35 3.71 5.33 1.00 5.00 5.15 2.156 0.046 D4A, A4F, C4D, C4F, H4D, E4F, H4F
BPSE1 5.03 4.00 4.79 5.67 5.00 2.00 5.42 2.354 0.039 A4G, C4G, D4G, E4G, H4G
A. Albadvi et al.
BPTE2 4.93 2.33 4.71 4.14 6.33 3.00 3.00 4.60 2.230 0.039 A4G, C4B, D4B, E4B, H4B, C4G, E4G, H4G
(A) Chief director, (B) factory manager, (C) quality control manager, (D) computer and systems manager, (E) production manager, (F) advisor, (G) quality unit expert,
(H) other.
*P50.05.
Table 3. ITU variable.
Measurement criteria Source Definition
IT in communications Grover et al. (1998), Pinnesealt IT in communications refers to those directly involved in
(1997), Martinez-Lorenze transaction of information. This criterion includes the
(2003) following applications: email, fax, cell phone, Internet
access, local access networks (LAN) for technical
data within the company, LAN for companies,
internal networks of the company, company’s website
for advertisement, intranet, data interaction with
suppliers and customers.
IT in decision making Swamidass and Kotha (1998), This decision-making support criterion indicates the
Boyer et al. (1997) application of IT in supporting management of
processes. So, it includes IT applications such as
decision support systems (DSS), data analysis
techniques and prognostic software.
IT in manufacturing and operation Turban et al. (2002), Boyer This criterion works as an umbrella to delineate a range
et al. (1997), Froza (1995) of computer-assisted technologies for direct or
indirect support, control, detecting and monitoring
of manufacturing activities.
IT in administrative or office work Turban et al. (2002), Martinez- This criterion refers to the use of IT to help adminis-
Lorenze (2003) trative or office work like organizing documents
organizing and storing data etc.
2707
(very frequently used). In IT and performance literature, measuring IT in

organizations using subjective criteria is mainly carried out by researchers such as
Grover et al. (1998), Pinsonneault (1998) and Martinez-Lorenze (2003). In these
researches reliability and validity of such criteria are shown.
3.2.2 Performance measurement (PER). Researchers who have conducted the same
studies as ours have reported that the number of people inclined to answer objective
questions about performance is usually 100% smaller than those who are motivated
to respond to subjective questions (Porter 1979, Vickery et al. 1993, Ward et al.
1994). Thus we have used Likert scale questions from subjective measures to evaluate
performance.
To assess organizational performance we have defined measures in relation with
customer results, people results, operational results and growth using different
sources. We have used four different criteria for measuring performance (see table 4).
The first two questions concerning customer satisfaction and relationship are taken
from Froza (1995) and organizational elevation model from the European
Foundation for Quality Management (EFQM) (1999). The mean value for these
two questions is termed ‘customer results’. The second criterion for measuring
performance consists of two questions that have been used to evaluate worker
satisfaction and performance. The mean value for these two is named ‘people
results’. These two questions are also taken from EFQM (1999). In the third
criterion, six questions for measuring improvement in flexibility, delivery, quality,
cost, defective rates and cycle time have been taken from Froza (1995) and
Swamidass and Kotha (1998). The mean value for these questions is named
‘operational results’. The last criterion consists of two questions, which evaluate the
growth of the company in sales and return of investment (ROI). The respondents are
required to specify the condition of their company in comparison with four years
ago. The response is indicated through a seven-point Likert scale of 1 (significantly
lower) to 7 (significantly higher).
Table 4. PER variable.
Customer results Froza (1995), EFQM Customer satisfaction of product

(1999) quality and better customer rela-
tionship are measured with this
criterion.
People results EFQM (1999), This criterion is used to measure
Martinez-Lorenze worker satisfaction and
(2003) performance.
Operational results Swamidass (1998), Froza It is used to measure improvement
91995), Martinez- rate of flexibility, delivery, quality,
Lorenze (2003), Boyer cost, defectives, and time cycle.
et al. (1997)
Growth Martinez-Lorenze With this criterion, the growth rate in
(2003), Boyer et al. sales and return of investment
(1997) (ROI) is evaluated.
3.2.3 Organizational infrastructure measures (OIS). This part of the questionnaire

is also designed to measure the degree to which the company is involved in creating
IT organizational infrastructures. The measures of this part are taken from works of
Boyer (1997), Froza (1995), Lau et al. (2001), Ward et al. (1994), Pinsonnseault and
Kramer (1997), Flynn et al. (1994), Brynjolfsson and Hitt (2000), EFQM (1999). The
extent of involvement in creating seven organizational infrastructures including work
empowerment, decentralization, training, team work, process management and
customer relationship, changes in supplier relationship and leadership have been
measured using 7-point Likert-type scale from ‘no involvement’ to ‘complete
involvement. In table 5 a summary of measurement criteria for research variable,
‘organizational infrastructure’, is presented.
3.2.4 Business process reengineering measures (BPRM). The ranges of transforma-

tions in eight business processes have been measured using 7-point Likert-type scale
from ‘no change’ to ‘basic changes’. These business processes have been taken from
Gunasekaran and Nath (1997, pp. 96–97). They have classified the most important
processes in service and manufacturing companies. These include the following
processes: order flow, strategic planning, product, marketing and sales, services,
accounting, personnel and technology. In Appendix 1, assessment method of
transformations of every one of the processes is given. In table 6 a brief account
of measuring criteria of the mediator variable of this research (BPR) is presented.
In Appendix 1, the questionnaire used as data collection instrument in this study
is presented. Measurement instrument in this questionnaire are developed based
on the above definitions.
3.3 Pre-testing
To improve the validity and reliability of research data; pre-testing was conducted
before sending questionnaires to respondents. In order to control elements such as
understanding, number, order, sensitiveness, and required time of questions, initial
personal interviews with eight experts (including academic and industrial experts)
were held. First, we asked two experts for any modifications. After applying their
views, the test was administered for the second time. When the last two experts did
not have any significant points to add, we stopped the modification process.
3.4 Pilot-testing
After pre-testing, the questionnaire was sent to a group of 12 respondents in
positions similar to those of final respondents. They were asked to answer the
questions and suggest any modifying views concerning our questions. We then
applied slight modifications and prepared the final draft.
3.5 Reliability and validity analysis

The reliability analysis of a questionnaire determines its ability to yield the same
results on different occasions and validity refers to the measurement of what the
questionnaire is supposed to measure (Cooper and Schindler 2003).
Table 5. ‘OIS’ variable.

2710
Delegation of power Ward et al. (1994) In human resource management discussions, delegation of power
is defined as granting widespread responsibilities for execution
and control of activities relating to workers’ life.
Decentralization Pinsonneault et al. (1997) Decentralization relates to retention or delegation of decision
making or order-issuing in the organization. It creates more
flexibility through which organizational departments and units
can better interact with internal and external periphery.
Training Lau et al. (2001) In order to ensure that workers possess enough theoretical
knowledge and necessary instruments to efficiently take their
responsibilities, they should be given essential training Leu
et al. (2001), Lau et al. (2001) have stressed that working
culture in cooperation with technology, in which open
relationship with co-workers, improved cooperation and
constant training are of great importance.
Team work Pinonnseault et al. (1997) Work sharing in work teams and the existence of matrix structure
form a significant approach in the organization can lead to
improved performance.
A. Albadvi et al.
Process management and Flynn et al. (1994), Process management focuses on directing business processes
customer relationship Brynjolfsson and Hitt based on current and future needs of customers.
(2000), EFQM (1999)
Changes in transaction with suppliers Brynjolfsson and Hitt (2000) Technologies such as electronic data interaction (EDI), and other
intraorganizational information systems have significantly
reduced cost, time and other problems of interaction with
suppliers, Ordering, invoice issuing, and stock control are
among factors that change with information technologies
Leadership Pinsonneault et al. (1997), In order to successfully execute improvement plans, top
Flynn et al. (1994) management is supposed to take leadership responsibilities like
relationship with workers, encouragement and promotion.
There is great amount of synergy between IT and improvement
plans such as TQM and BPR.
Table 6. ‘BPRM’ variable.
Order flow Gunase Karan, Order flow includes activities such as

Nath (1997, pp. 96–97) supply, product assembly, manufac-
turing production, ordering, place
and installation of the product.
Notice that the role of IT in this
process is defined in terms of basic
activities, objectives or customer
needs.
Strategic planning Strategic planning process is a blend of
formulating strategy and planning of
organizational structure. In this pro-
cess we need not only external analy-
sis but also analyses of the data with
in the organization.
Product Product process includes planning
activities, engineering and design.
Marketing and sales This process includes customer satisfac-
tion, market survey anticipation and
decision-making about product
makeup.
Services This includes maintenance and repair of
products, after sales services and
quality control.
Accounting Accounting process includes product
pricing, budgeting, and making deci-
sions for purchase or manufacturing.
Personnel This process involves various units such
as employment, selection, promotion
systems, and performance upgrading.
Technology Technology process includes selection,
installation, establishment and dispo-
sal of the factory or its equipment.
There are many uses for decision-
making support systems and multi-
media systems.
3.5.1 Reliability. In order to assess the reliability of instrument, we have calculated

Cronbach’s alpha for criteria of research variables [IT application (ITU) including
four criteria; the influence of IT in process reengineering (BPRM) including eight
criteria; practical diligence in applying organizational infrastructures (OIS) including
seven criteria; and finally improvement of performance (PER) including four
criteria]. The strategic planning criterion (INSE) from OIS variable is the only
criterion with an alpha of 60% that does not in fact possess acceptable reliability.
Eliminating a measure, reliability index will increase to an acceptable level over 70%
[see table 7(a)]. It is now time to assess the validity of instrument.
3.5.2 Validity analysis. Construct validity, content validity and predictive

validity were analysed to ensure the validity of the instruments (Nunnally and
Bernstein 1994).
2712
Table 7(a). Validity index and factor analysis of variable BPRM.
# of # of eliminated Std. % from total

Variable Measurement measures measures N Mean deviation Alpha Eigenvalue variance
The impact of Business process of order flow: BPOF 5 0 97 5.22 1.05 0.7194 2.549 50.978
IT application on Business process of strategy: BPST 2 0 96 4.86 1.57 0.8246 1.703 85.152
business process Business process of product: BPPR 3 0 97 5.57 1.08 0.7082 1.954 65.135
reengineering Business process of marketing 4 0 97 4.92 1.37 0.8773 2.935 73.384
(BPRM) and sales: BPMS
Business process of services: BPSE 3 0 97 5.30 1.19 0.7191 2.001 66.706
Business process of accounting: BPAC 3 0 97 5.25 1.29 0.8126 2.187 72.901
A. Albadvi et al.
Business process of personnel: BPPE 4 0 97 4.78 1.25 0.8488 2.784 89.603

Business process of technology: BPTE 2 0 97 4.83 1.57 0.8631 1.760 87.979
Total BPRM 93 5.09 1.30
An alpha of below 0.7 and over 0.6 for new instruments is acceptable (Nunnly 1987).
An alpha of below 0.6 is not acceptable.
Construct validity shows the extent to which measures of a criterion are

indicative of the direction and size of that criterion (Flynn et al. 1994). It also shows
that the measures do not interfere with measures of the other criteria (Flynn et al.
1994). Construct validity of measurement instrument is analysed through factor
analysis. In this study each measurement criterion is considered as a distinct
construct. The most common decision-making technique to obtain factors is to
consider factors with eigenvalue of over one as significant (Olson et al. 2005, Hair
et al. 1998).
Factor analysis shows that ITPO, ITDS and ITAD possess more than one factor
with eigenvalue of over one. Eliminating ITDS3 solved the problem with ITDS.
Concerning ITPO and ITAD factor analysis indicates three and two factors for each
of these measures respectively [see tables 7(b) and 7(c)].
The type and definition of questions show that ITPO has three latent variables
including IT in planning, IT in operation and IT in quality control [see table 7(b)
below]. ITAD also has two latent variables including IT in administrative affairs and
IT in financial affairs [see table 7(c)].
To ensure instrument reliability we have calculated reliability indexes for all
final criteria again.
Table 7(d) shows that all criteria of variable ITU except criteria of IT in
administrative and financial affairs have an alpha of over 0.7. An alpha of 0.6 was
Table 7(b). Factor loadings for ITAD.
ITAD criterion Factor 1 Factor 2
Measures of ITAD New code IT in financial pecuniary affairs IT in administrative affair
ITAD10 ITAD2.10 0.841349 0.098666

ITAD8 ITAD2.8 0.782807 0.22032
ITAD9 ITAD2.9 0.728648 0.087321
ITAD7 ITAD1.7 0.066869 0.752603
ITAD6 ITAD1.6 0.040672 0.740113
ITAD2 ITAD1.2 0.114139 0.632419
ITAD1 ITAD1.1 0.389275 0.496301
ITAD5 ITAD1.5 0.188359 0.463711
Table 7(c). Factor loadings for ITPO.
ITPO criterion Factor 1 Factor 2 Factor 3
Measures of ITPO New code IT in planning IT in operations IT ion quality control
ITPO4 ITPO1.4 0.864394 0.100607 0.000795

ITPO5 ITPO1.5 0.768977 0.297352 0.00291
ITPO11 ITPO1.11 0.744054 0.17913 0.171894
ITPO3 ITPO1.3 0.543544 0.178223 0.113729
ITPO8 ITPO2.8 0.319612 0.803941 0.083888
ITPO7 ITPO2.7 0.261655 0.799537 0.019016
ITPO9 ITPO2.9 0.090871 0.723657 0.10322
ITPO13 ITPO3.13 0.057749 0.027447 0.935693
ITPO12 ITPO3.12 0.144478 0.06436 0.923877
2714
Table 7(d). Validity index and factor analysis for ITU variable.
# of eliminated Std. % from total

Variable Measurement criterion # of measures measures N Mean deviation Alpha Eigenvalue variance
Information IT in communications ITCO 8 2 96 4.37 1.32 0.7673 2.945 49.086

technology IT in production and IT in planning 13 4 97 4.43 1.40 0.7521 2.314 57.853
use (ITU) operation: ITPO IT in operation 96 3.92 1.63 0.7106 1.929 64.306
IT in quality control 97 5.89 1.48 0.8621 1.760 88.001
IT in decision making and support: ITDS 4 1 97 3.05 1.51 0.7749 2.102 70.067
IT in administration: IT in administration 10 2 97 4.52 1.02 0.6364* 2.089 41.775
A. Albadvi et al.
ITAD IT in pecuniary affairs 97 5.98 1.04 0.6936* 1.961 65.354

Total ITU 97 4.59 0.85
obtained in criteria of IT in administrative and financial affairs. This is acceptable

with regard to the fact that the criterion is new. This table also shows that some
measures have been eliminated because they do not focus on one specific factor.
The column for the percentage from total variance shows what percentage of total
variance is covered by the relating factor. Except for IT in administrative affairs,
all other criteria indicate a considerable percentage of the total variance. This
produces a rather good construct validity for this variable.
A summary of calculations relating to reliability and validity indices of variable
OIS is shown in table 7(e). Except for criterion INEM, other criteria have an alpha of
over 0.7 and INEM also has an alpha of over 0.6. Therefore, all criteria possess an
acceptable reliability index. Factor analysis also shows that all criteria lie on a factor
with eigenvalue of over one. The only factor for each one of the criteria indicates a
high percentage from the total variance (except for INEM). This table also shows
that a measure from strategy criteria is eliminated owing to results from factor
analysis.
In table 7(a) validity factor analysis results for BPRM variable are shown. These
results indicate that all criteria of BPRM have an alpha of over 0.7, and all criteria
only have a factor with an eigenvalue of over one. The column for the percentage
from total variance also shows rather good construct validity for this variable.
The results of examining validity and reliability of variable PER are shown in
table 7(f). As it is seen in this table, all criteria have an alpha of over 0.7 except for
company’s growth rate (PEGR) that also has an alpha of near 0.7. One of the
measures relating to PEOP is eliminated to place all instruments on one factor.
Content validity indicates meeting the specific range of contents that have been
selected (Nunnally and Bernstein 1994). It also shows that measurement instruments
have elements that cover all aspects of variables under measurement. Content
validity cannot be numerically measured, but we can measure it subjectively and
judgmentally. Basically, content validity depends on the appropriateness of
the content and the method of rendering (Nunnally and Bernstein 1994). Since the
selection of research variables is based on an intensive survey of literature and all the
elements are supported by authentic research, the instrument has content validity.
Furthermore, academic and industrial experts have examined the content of the
questionnaire during the pre-testing.
Predictive validity is in fact the correlation between measurement instrument and
an independent variable taken from relating criteria (Nunnally 1978). This validity is
only possible through correlation between the predictor (independent variable) and
criterion (dependent) variable (Nunnally and Bernstein 1994). In this study, the
results of two-variable and multi-variable correlation between ITU as independent
variables and PER as dependent variable have shown that there is significant
correlation between intended criteria under measurement in this study.
3.6 Non-response bias test

Two time-dated groups were used to test for non-response bias test (Cooper 2003).
First-group returns were received within one month after the survey was sent out (we
had asked respondents to answer no later than one month, after they received the
questionnaire). Subsequent responses, coded as second-group returns, were received
after the reminder letters had been sent out to the managers to follow.
2716
Table 7(e). Validity index and factor analysis of variable OIS.
No. of No. of eliminated Std. % from total

Variable Measurement measures measures N Mean deviation Alpha Eigenvalue variance
Practical diligence Empowerment: INEM 4 0 97 4.98 0.98 0.6345 1.911 47.773

for organizational Decentralization: INDE 5 0 96 4.91 1.02 0.8492 3.167 63.349
infrastructures (OIS) Training: INTR 3 0 97 5.55 1.01 0.8473 2.300 76.680
Group work: INGO 2 0 97 5.51 1.20 0.7518 1.610 80.480
Process management: INPC 7 0 97 6.14 0.79 0.8890 4.256 60.802
Change in interactions with 3 0 97 5.93 0.93 0.7945 2.162 72.067
A. Albadvi et al.
suppliers: INSU
Leadership: INLE 4 1 97 6.15 0.82 0.7186 1.944 64.801
Total OIS 93 5.60 0.97
Table 7(f). Validity index and factor analysis of variable PER.
No. of No. of eliminated Std. Percentage from

Variable Measurement criteria measures measures N Mean deviation Alpha Eigenvalue total variance
Performance: Customer results: PECO 2 0 97 6.14 0.92 0.7417 1.596 79.784

(PER) Employee results: PEEM 2 0 97 5.46 0.93 0.7756 1.638 81.877
Organizational performance 6 1 97 5.97 0.81 0.8587 3.203 64.063
results: PEOP
Company’s growth rate: PEGR 2 0 97 5.40 1.08 0.6810* 1.558 77.876
Total PER 97 5.81 0.76
Total PER* (PEGR eliminated) 97 5.90 0.78
*An alpha of below 0.7 and over 0.6 for new instruments is acceptable (Nunnly 1987).
2717
To test the non-response bias, time-dated groups were compared with variables.
No t-tests were statistically significant at the 0.05 level. These results show that
findings can be generalized to the sample.
3.7 Method of analysis

The method of analysis is applied at three levels of study. First, data are examined
and some descriptive statistics obtained in order to obtain an overview of the
characteristics of the sample and to assess issues such as mean and standard
deviation. This analysis examines the scales as independent entities to determine the
extent of use of IT in sample companies, company’s performance, the extent of use of
IT in BPR and the degree to which the company cares for creating IT organizational
infrastructures. Second, bivariate correlations between variables are analysed with
respect to the correlation between scales of IT use and company performance
measures, and also two intervening variables. This aspect of the analysis forms a
basis to examine the existence of association between the dependent, independent
and intervening variables. The final stage of the analysis adopts a regression analysis.
The variables are drawn together in the application of regression analysis to
investigate the relationship between the extent of use of IT and company
performance with considering the role of intervening variables. In particular, it
examines the research hypothesises.
4. Empirical results
4.1 Univariate analysis
4.1.1 IT usage (ITU). This section highlights the extent of the use of IT in sample
companies. Table 7(d) shows the total use of IT exceeded from moderate level (4.59).
This table shows that the highest amount of IT usage is in the ‘IT in pecuniary
affairs’ (5.98) closely followed by ‘IT in quality control’ (5.89). IT applications in
pecuniary affairs are one of the eldest applications of IT (Turban 2002) and
numerous software applications are developed and used in companies, inexpensively.
Also, implementing a quality management system (such as ISO 9000, QS 9000) is one
of the requirements of car part suppliers in Iran. These companies use IT
applications for gathering and analysing quality data. Table 7(d) indicated that
only ‘IT in decision support systems’ is used less than moderate level (3.05).
Decision-support systems are more advanced and more expensive than the other type
of IT applications in table 7(d).
4.1.2 Emphasize on organizational infrastructure (OIS). Table 7(e) indicates that

companies under study pay considerable attention to organizational infrastructures.
The total average of variable OIS is exceeded from the moderate level (5.60).
Table 7(a) shows that all of the criteria of OIS variables are above 4.9 on a seven-
point Likret scale. The ‘leadership’ has been emphasized at the highest level (6.14)
followed closely by the ‘process management’ (6.14) and ‘Change in interactions with
suppliers’(5.93). Although the decentralization has the lowest mean of emphasis, the
mean of this criterion is exceeded significantly from the moderate level (4.09).
4.1.3 The impact of IT application on business process reengineering

(BPRM). Table 7(a) indicates respondents’ perspectives of the influence of IT on
their business process transformation. Table 7(e) shows that IT applications affect all
of the business processes more than the moderate level (3.5). IT has the highest
effect on ‘business process of product’ (5.57). The ‘business process of personnel’ has
the lowest mean of IT effects (4.78). Table 7(e) summarize total effects of IT on all
eight-business processes.
4.1.4 Company performance (PER). In this study we asked respondents to rate

their plant’s position with respect to competitors on a seven-point Likert scale.
Table 7(f) shows that most of the respondents recognized themselves as
highly competitive. They recognized the most competitive improvement in
‘Customer results’ (6.14), in descending order, followed by ‘organizational
performance results’(5.97), ‘employee results’(5.46) and ‘Company’s growth rate’
(5.40) (table 7(f)).
Consequently, the results of the univariate analysis indicate that four variables
considerably exceeded moderate level in the sample companies of this study.
4.2 Bivariate correlation analysis

This section shows the results of testing the correlation between four research
variables including amounts of use of IT (ITU), company performance (PER),
practical diligence to organizational infrastructures (OIS) and the effects of IT on
business processes reengineering (BPRM) (table 8(a)). Altogether, all of the bivariate
correlations in tables 8(a), 8(b) and 8(c) are positive and statistically significant
except the correlation between ‘growth rate (PEGR)’ and ‘IT in communication
(ITCO)’ as well as ‘IT in production and operation (ITPO)’. Consequently, ‘growth
rate (PEGR)’ scale has been deleted from the later analysis, because bivariate
statistically significant correlation is essential for the special type of regression
analysis in this paper. Tables 8(a)–8(c) show the values of the bivariate Pearson’s
correlation coefficients (r) and respective statistical significant levels (p). Following
these results, it appears logical to pursue regression analysis.
4.3 Findings about moderating effects of OIS

The procedure that is used to test the moderating effect of organizational
infrastructures on relationship between IT usage and company performance is
hierarchical regression analysis. Boyer et al. (1997), Cohen and Cohen (1975), Miller
and Droge (1986), Stone and Hollenbeck (1989), Dean and Snell (1991), Baron and
Kenny (1986) have suggested this procedure for this kind of research. This procedure
facilitates an analysis of the effects of groups of variables in an incremental,
controlled manner (Boyer et al. 1997). In order to test the moderating effect of
each of the seven organizational infrastructure scales, seven regression equations
are applied and analysed. This procedure is used to conduct seven separate
Table 8(a). Bivariate correlations between IT Usage and company performance.

2720
Customer results Employee Performance Growth rate Total PER*

Criterion (PECU) results (PEEM) (PEOP) (PEGR) (PEGR eliminated)
IT in communications: r 0.302y 0.269y 0.318y 0.144 0.335y

ITCO p 0.003 0.008 0.002 0.162 0.001
N 96 96 96 96 96
IT in production IT in planning: ITPOI r 0.424y 0.428y 0.449y 0.103 0.482y
and operation: ITPO p 0.000 0.000 0.000 0.314 0.000
N 97 97 97 97 97
IT in operation: ITPOII r 0.202* 0.377y 0.345y 0.164 0.354y
p 0.049 0.000 0.001 0.111 0.000
N 96 96 96 96 96
IT in quality control: ITPOIII r 0.263y 0.299y 0.272y 0.096 0.293y
p 0.009 0.003 0.007 0.352 0.004
N 97 97 97 97 97
IT in decision support: ITDS r 0.246* 0.336y 0.290y 0.104 0.321y
p 0.015 0.001 0.004 0.312 0.001
N 97 97 97 97 97
A. Albadvi et al.
IT in administration: IT in administrative affair: ITADI r 0.428y 0.375y 0.460y 0.223* 0.476y

ITAD p 0.000 0.000 0.000 0.028 0.000
N 97 97 97 97 97
IT in pecuniary affair: ITADII r 0.351y 0.281y 0.427y 0.214* 0.416y
p 0.000 0.005 0.000 0.035 0.000
N 97 97 97 97 97
Total IT usage: ITU r 0.481y 0.535y 0.562y 0.228* 0.590y
p 0.000 0.000 0.000 0.024 0.000
N 97 97 97 97 97
*Correlation is significant at the 0.05 level (2-tailed).
y
Correlation is significant at the 0.01 level (2-tailed).
Table 8(b). Bivariate correlations between PER, ITU and OIS.
INEM INDE INTR INGO INPC INSU INLE
Total PER* (PEGR eliminated) r 0.491y 0.410y 0.314y 0.221y 0.518y 0.395y 0.592y
p 0.000 0.000 0.002 0.030 0.000 0.000 0.000
N 97 96 97 97 97 97 97
IT Usage: ITU r 0.513y 0.512y 0.381y 0.262y 0.467y 0.437y 0.502y
p 0.000 0.000 0.000 0.009 0.000 0.000 0.000
N 97 96 97 97 97 97 97
y
Table 8(c). Bivariate correlations between PER, ITU and BPRM.
BPOF BPST BPPR BPMS BPSE BPAC BPPE BPTE
Total PER* r 0.436y 0.351y 0.407y 0.411y 0.349y 0.433y 0.387y 0.481y
(PEGR eliminated) p 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
N 97 96 97 97 97 97 97 97
IT Usage: ITU r 0.354y 0.269y 0.406y 0.325y 0.333y 0.326y 0.327y 0.324y
p 0.000 0.008 0.000 0.001 0.001 0.001 0.001 0.001
N 97 96 97 97 97 97 97 97
y
hierarchical regressions: one for each of of the seven organizational infrastructure

measurement scales (INEM, INDE, INTR, INGO, INPC, INSU, INLE). For each
of the seven organizational infrastructure scales, this analysis is conducted in
three steps:
1. In each equation, one of the organizational infrastructure scales is entered
into the equation [for example INEM is entered in equation (1)].
2. Total mean of the ITU is entered into the equation.
3. Finally, the interaction between respective organizational infrastructure and
ITU are entered into the regression equation.
When these interaction terms account for a significant amount of incremental
variance in the dependent variable, as measured by the t-tests for each interaction or
by significance tests for the incremental F-statistic, then there is evidence to support
research Hypothesis 1, that there is a moderating effect of infrastructure on the use
of IT. Total mean of company performance scales (PER*) is considered as the
dependent variable in each of the regression equation. Results of hierarchical
regression are demonstrated in the following section.
Table 9 shows the results of a hierarchical regression with PER* as the dependent
variable, the organizational infrastructure scales (for example INEM in first part of
the table 9), ITU, and their interactions entered in the sequential manner described
above. Results of hierarchical regression with, for example, INEM as the moderating
variable will be discussed in the following paragraph. The discussion of the other
moderating variables is the same as INEM.
Table 9. Results of hierarchical regression analysis: testing moderating effects of OIS.
t-test F-test
Step Measurement scale B Statistics Sig. R2 R2 Statistics Sig.
Empowerment: INEM
1 INEM 0.393 5.498 0.000 0.241 0.241 30.229 0.000
2 ITU 0.419 4.903 0.000 0.396 0.154 24.038 0.000
3 ITU*INEM 0.155 3.026 0.003 0.450 0.054 9.155 0.003
Decentralization: INDE
1 INDE 0.315 4.354 0.000 0.168 0.168 18.953 0.000
2 ITU 0.463 5.239 0.000 0.357 0.190 27.452 0.000
3 ITU*INDE 0.147 2.687 0.009 0.404 0.047 7.220 0.009
Overall 20.806 0.000
Training: INTR
1 INTR 0.242 3.218 0.002 0.098 0.098 10.358 0.002
2 ITU 0.504 6.147 0.000 0.357 0.259 37.782 0.000
3 ITU*INTR 0.157 2.978 0.004 0.413 0.056 8.870 0.004
Overall 21.796 0.000
Group work: INGO
1 INGO 0.144 2.208 0.030 0.049 0.049 4.876 0.030
2 ITU 0.523 6.636 0.000 0.352 0.303 44.042 0.000
3 ITU*INGO 0.135 2.747 0.007 0.401 0.049 7.545 0.007
Overall 20.744 0.000
Process management: INPC
1 INPC 0.510 5.897 0.000 0.268 0.268 34.778 0.000
2 ITU 0.407 5.021 0.000 0.423 0.155 25.209 0.000
3 ITU*INPC 0.164 2.856 0.005 0.469 0.047 8.156 0.005
Overall 27.416 0.000
Change in interactions with suppliers: INSU
1 INSU 0.331 4.193 0.000 0.156 0.156 17.582 0.000
2 ITU 0.472 5.664 0.000 0.371 0.215 32.078 0.000
3 ITU*INSU 0.191 3.629 0.000 0.449 0.078 13.168 0.000
Overall 25.251 0.000
Leadership: INLE
1 INLE 0.565 7.158 0.000 0.350 0.350 51.231 0.000
2 ITU 0.358 4.481 0.000 0.465 0.114 20.077 0.000
3 ITU*INLE 0.103 1.821 0.072 0.483 0.018 3.317 0.072
Overall 28.975 0.000
The organizational infrastructure scale, which is entered into the model in the
first step, accounts for a significant amount of variance (an R2 of 0.241, P50.000).
The inclusion of ITU in the second step provides a significant improvement
(an incremental R2 of 0.154, P50.000), and also the interaction terms of step 3 result
in an incremental R2 of 0.054, which is significant (P50.01). The overall effect of the
model is the explanation of 39.6% of the variance in PER*, which the associated F
test indicates is significant at P50.000. Note that the interaction between ITU and
INEM has a negative coefficient (0.155). While at first glance this appears to
provide evidence contradicting Hypothesis 1, an examination of table 8(b) shows
that the negative coefficient is likely a result of multi-collinearity. Table 8(b) shows
that the interaction between ITU and INEM has a significant, positive correlation
with PER* when taken by itself. However, in the hierarchical regression of

table 9 the inclusion of multiple variables in the model causes some of the variables
to take on negative correlations, a common occurrence in regression analysis
(Cooper 2003).
In short, as implied in table 9, moderating effects are observed for all of the
organizational infrastructure scales (as indicated by the significance level of the
interaction effect with p50.05, except for INLEA which is significant at p51).
The regression model shown in table 9 has two major implications. First,
the overall result indicates that organizational infrastructure and the interactions
between information technology usage and organizational infrastructure have
positive associations with company performance. This outcome is important because
it provides support for the proposition that practical diligence to the organizational
infrastructure and the IT usage in a plant is positively associated with performance.
Second, the significant incremental improvement in the model upon the addition of
the interactions between ITU and OIS supports the premise that organizational
infrastructures have a positive moderating effect on the relationship between ITU
and performance. The results therefore support Hypothesis 1.
4.4 Findings about mediating effects of BPRM

Judd and Kenny (1981) noted that a series of regression models provides the best test
of a mediating effect. To establish mediation, the following conditions must hold:
1. The independent variable must affect the mediator [equation (1)].
2. The independent variable must affect the dependent variable [equation (2)].
3. The mediator must affect the dependent variable equation (3).
4. If these conditions hold, then the effect of the independent variable on the
dependent variable must be less in equation (3) than in equation (2).
Table 10 contains the results of the regression equations estimated for a mediating
effects model. As shown in the first row of table 10, the regression equations
PER ¼ f(ITU) suggests that higher IT usage is associated with higher levels of
company performance improvement. Regression equations No. 1 in table 9 suggests
that for total average of ITU company performance improvement are strongly
associated with business process change. Table 10 shows that in descending order,
the strongest associations are observed for business process of order flow (BPOF)
(b ¼ 0.324, p50.000), business process of product (BPPR) (b ¼ 0.296, p50.000),
business process of personnel (BPPE) (b ¼ 0.242, p50.000), business process of
technology (BPTE) (b ¼ 0.239, p50.000), business process of marketing and sales
(BPMS) and business process of accounting (BPAC) (b ¼ 0.236, p50.000), business
process of services (BPSE) (b ¼ 0.230, p50.000) and business process of strategy
(BPST) (b ¼ 0.175, p50.000). The regression results seem to suggest that, to varying
degrees, ITU is a positive contributor to performance. The results also suggest that
process redesign with respect to ITU is directly associated with company
performance improvement, a first indication of mediating effects between ITU and
company performance improvement.
Where IT usage significantly affects process change [rows No. 2 in table 10:
BPxx ¼ f(ITU)), assessment of mediation can be made through comparison of the
Table 10. Results of regression analysis: testing mediating effects of BPRM.
t-test F-test
Measurement scale B Statistics Sig. R2 Adj. R2 SE Statistics Sig.
No. PER1 ¼ f(ITU) 0.540 7.114 0.000 0.348 0.341 0.6358 50.607 0.000
Business process of order flow: BPOF

1 PER1 ¼ f(BPOF) 0.324 4.726 0.000 0.190 0.182 0.70829 22.335 0.000
2 BPOF ¼ f(ITU) 0.437 3.691 0.000 0.125 0.116 0.99122 13.623 0.000
3 PER1 ¼ f(ITU, BPOF) 0.456 5.856 0.000 0.407 0.394 0.60951 32.224 0.000
0.193 3.062 0.003
Business process of strategy: BPST
1 PER1 ¼ f(BPST) 0.175 3.632 0.000 0.123 0.114 0.73810 13.190 0.000
2 BPST ¼ f(ITU) 0.495 2.713 0.008 0.073 0.063 1.5173 7.359 0.008
3 PER1 ¼ f(ITU, BPST) 0.486 6.256 0.000 0.383 0.370 0.62252 28.842 0.000
0.104 2.461 0.016
Business process of product: BPPR
1 PER1 ¼ f(BPPR) 0.296 4.345 0.000 0.166 0.157 0.71895 18.879 0.000
2 BPPR ¼ f(ITU) 0.511 4.333 0.000 0.165 0.156 0.98885 18.775 0.000
3 PER1 ¼ f(ITU, BPPR) 0.465 5.721 0.000 0.381 0.368 0.62248 28.957 0.000
0.146 2.262 0.026
Business process of marketing and sales: BPMS
1 PER1 ¼ f(BPMS) 0.236 4.395 0.000 0.169 0.160 0.71758 19.314 0.000
2 BPMS ¼ f(ITU) 0.520 3.353 0.001 0.106 0.096 1.2985 11.241 0.001
3 PER1 ¼ f(ITU, BPMS) 0.467 6.040 0.000 0.401 0.389 0.61228 31.507 0.000
0.141 2.906 0.005
Business process of services: BPSE
1 PER1 ¼ f(BPSE) 0.230 3.625 0.000 0.121 0.112 0.73779 13.138 0.000
2 BPSE ¼ f(ITU) 0.462 3.444 0.001 0.111 0.102 1.1243 11.864 0.001
3 PER1 ¼ f(ITU, BPSE) 0.488 6.151 0.000 0.374 0.360 0.62631 28.031 0.000
0.113 1.976 0.051
Business process of accounting: BPAC
1 PER1 ¼ f(BPAC) 0.263 4.687 0.000 0.188 0.179 0.70940 21.966 0.000
2 BPAC ¼ f(ITU) 0.492 3.361 0.001 0.106 0.097 1.2252 11.294 0.001
3 PER1 ¼ f(ITU, BPAC) 0.459 5.999 0.000 0.413 0.400 0.60647 33.020 0.000
0.164 0.228 0.002
Business process of personnel: BPPE
1 PER1 ¼ f(BPPE) 0.242 4.096 0.000 0.150 0.141 0.72569 16.775 0.000
2 BPPE ¼ f(ITU) 0.480 3.369 0.001 0.107 0.097 1.1932 11.353 0.001
3 PER1 ¼ f(ITU, BPPE) 0.475 6.081 0.000 0.390 0.377 0.61803 30.053 0.000
0.136 2.558 0.012
Business process of technology: BPTE
1 PER1 ¼ f(BPTE) 0.239 5.352 0.000 0.232 0.224 0.68998 28.645 0.000
2 BPTE ¼ f(ITU) 0.596 3.337 0.001 0.105 0.096 1.4972 11.137 0.001
3 PER1 ¼ f(ITU, BPTE) 0.444 5.948 0.000 0.442 0.430 0.59125 37.191 0.000
0.161 3.982 0.000
regression coefficients of PER* ¼ f(ITU), rows No. 1 (PER1 ¼ f(BPxx)), and rows
No. 3 (Per ¼ f(ITU, BPxx).
In the case of BPOF, the beta-coefficient of equation PER* ¼ f(ITU) suggests
that Performance is a function IT Usage (b ¼ 0.0.540, p50.000). The coefficient of
row 2 suggests that changes in BPOF is a function of IT Usage (b ¼ 0.437, p50.000)

and the coefficients of row 3 suggest that performance improvement is a function
of IT Usage (b ¼ 0.456, p50.000) and changes in BPOF (b ¼ 0.193, p50.003).
Since the coefficient associated with IT Usage is less in row 3 than in
equation PER* ¼ f(ITU), and rows 1 and 2 are both significant, a mediating effect
is implied.
This phenomenon is also observed for BPOF, BPST, BPPR, BPMS, BPSE,
BPAC, BPPE, BPTE. In summary, the results suggest that business process change is
a necessary and sufficient condition for improvements in Performance. The results
therefore support Hypothesis 2.
5. Limitations
The most important limitation of this study lies in the study’s sample size. The
study’s sample size is 112 plants (out of 200 plants). This size is considered small for
our statistical analysis. On the other hand, this size is generally used at individual
respondent level of analysis, where measures’ instability is fairly high (Froza 1995,
Hofstede et al. 1990). In the present study, each measure used, has high internal
consistency, in other words, the answers are highly correlated, and this consistency
increases the stability of measure (see table 7). Hofstede et al. (1990) state that a
lower sample size is acceptable when this kind of stable data with high internal
consistency is used.
The second potential limitation lies in the process of making the research variable
of PER operational. We used four separate subjective measures to assess the company
performance. Researchers, conducting similar studies, have reported that the number
of people willing to answer objective questions on the company performance is more
than those who want to answer the subjective questions (Boyer et al. 1997, Forza 1995,
Dewhurst 2003 and Ang et al. 2001). This is most likely that the result of being
reluctant to divulge the companies’ confidential performance information somehow
undermine the findings, so we used objective, Likert scale questions to assess
performance.
The third limitation of this research is about the stability of performance
measures. We have described four criteria to measure performance: ‘customer
satisfaction and relationship’ were grouped together under a new variable
‘customer results’ based on the mean value; a similar process was done to other
indicators in the questionnaire and related to ‘worker satisfaction and
performance’, labelled ‘people results’ and other six other questions labelled
‘operational results’. Although factor analysis shows that the above measures
cannot be grouped together, according to the previous studies (Froza (1995),
EFQM (1990) and Swamidass and Kotha (1998)), we grouped questions
together based on the mean value and created four above-mentioned criteria
to measure performance. The validity and reliability of the measures are
presented in table 7(f). Only company’s growth rate (PEGR) cannot show
acceptable Alpha (reliability index), consequently, PEGR is eliminated from our
analysis.
6. Conclusions and discussions
6.1 Measurement instrument

In this study, measurement instruments of the impact of IT on the performance
of manufacturing companies regarding the role of intervening variables including
organizational infrastructures and business processes reengineering have been
developed and their reliability and validity, based on a survey in 200 companies of
car part manufacturers in Iran, have been assessed. In order to achieve this, four
variables have been examined: the application of IT as independent variable, firm
performance as dependent variable, the impact of IT on transformation as mediator
and finally organizational infrastructures as moderator variable. We have defined
and mentioned all measurement criteria and their applications in the literature. Their
validity and reliability have been tested and modified accordingly. Ultimately,
we have introduced valid and reliable criteria (seven for ITU variable, three for
firm performance, eight for the impact of IT on reengineering, and eight for
organizational infrastructures). Some criteria were initially defined to be used in
measuring the application of IT in companies. The defined criteria are: IT in
communications, IT in production and operation, IT in administration and office
work, and IT in decision-making.
Although the criteria used in other studies have been proven valid and reliable,
using confirmatory factor analysis (CFA) with regard to latent structure among
these criteria, we found new dimensions in the application of IT in companies under
study. The new criteria resulting from this study are: IT in communications, IT in
planning, IT in operation, IT in quality control, IT in decision-making, IT in
financial affairs and IT in administration and office work.
Another important point about measurement instrument in this study is that
measures for measuring the impact of IT on business processes reengineering have
been created. The impact of IT on business processes and reengineering of processes
has been investigated in many studies, but valid measures for quantitative
measurement of this impact have not been reported. Only one study (Grover et al.
(1998)) examined the impact of IT on transformation in business processes adopting
quantifiable methods. The difference between their criteria and the ones defined in
this study is that in their study the impact of ten ITs including email, electronic data
interchange, the internet, client/server, RDBMS, LAN (local area network). Imaging
technology has been matured, but in our study we have measured the impact of
IT on processes of order flow, strategy product, marketing and sales, services,
accounting, personnel and technology. The variables used in this study are the result
of qualitative research and case studies, but have never been quantitatively used in a
survey. The growth of qualitative research concerning the impact of IT and
reengineering of processes has led to the conception of these criteria and paved the
way for the employment of such criteria in quantitative research. Validity and
reliability of these criteria are proved in this study.
6.2 OIS moderating effect

Results of this study prove the moderating effect of organizational infrastructures in
the relationship between IT and firm performance. In fact, this study shows that
practical diligence for organizational infrastructures including work empowerment,

decentralization, training, teamwork, process management and customer relation-
ship, changes in supplier relationship and leadership, strengthen the relationship
between IT and firm performance. These results are consistent with the study of
Boyer et al. (1997): the only difference is that they did not consider the role of process
management and customer relationship, changes in supplier relationship in their
study.
First, we considered Empowerment as an organizational infrastructure.
Management information systems (MIS) and email simplify communication and
interchange of reports between different organizational levels. Utilization of IT
enables top management to have direct control over different executive organiza-
tional levels and have access on the summarized and graphical reports of their
subordinates. Therefore, organizations can decrease the middle management and
bureaucracy; in return, management should give more authority and power to the
employees in production and operations planning and control. These results
regarding empowerment are consistent with the study of Pinsonneault and Rivard
(1998), which evaluate the effects of IT on managerial nature.
Decentralization is the second organizational infrastructure in this study.
Decreasing the middle management levels require the increase in the authority of
reminder of the middle management levels; it means organizations should try to give
decision power in cases of human resource, financial and operations management to
the reminder levels of middle management. Results of decentralization criterion are
in consistent with the study of Boyer et al. (1997).
Continuous training of employees improves the utilization of IT and means that
an improvement is expected in their productivity. We considered teamwork as
the next organizational infrastructure in our study. Nowadays technologies such as
group-wares, the internet, intranet, email, and EDI facilitates and improves the
teamwork in organizations. On the other hand, advantages such as synergy and
knowledge sharing in teamwork encourage the teamwork in organizations. This
study shows that group projects and matrix organizational structure are necessary to
realize IT potential. Results of training and teamwork are in consistent with the
study of Lau et al. (2001).
Process management is another IT organizational infrastructure. Process
management can be implemented through quality management systems in
accordance with ISO 9000: 2000 or another TQM program. In this approach
business processes are defined according to customer needs. Evaluation criteria are
defined and measured according to processes. IT systems such as process flow
management facilitate process management approach. These systems could be used
to collect data for evaluating the performance and analysis and present the results
of evaluation.
Brynjolfsson and Hitt (2000) considered the change in interactions between firm
and customers and also suppliers as one of the requirements in improving the
organizational IT productivity. We considered above-mentioned changes as
organizational infrastructures and proved the moderating effects of those changes
in relationship between IT and firm performance. IT systems such as EFT (electronic
found interchange) and EDI (electronic data interchange) facilitate the processes
of ordering, billing, receipt, and money exchange. Also, the inter-organizational,
customer relationship management (CRM), and supply chain management (SCM)

systems are more applicable in this category.
Leadership is considered as the last organizational infrastructures to realize the
IT potentials in our study. The results of this research show that top management
commitment in continual improvement of processes, training and motivating all
employees in participating in enhancement the quality leads to more IT potential
utilization. These results are in consistent with work of Boyer et al. (1997).
6.3 BPRM mediating effect

One of the most important outcomes of this study is to show the mediating effect of
BPR in the relationship between IT and firm performance. The outcome shows that
transformation in the processes of order flow, strategic planning, product, marketing
and sales, services, accounting, personally and technology is the necessary
precondition for improving the firm performance made by IT usage. The result of
our study is consistent with the outcomes of the research study of Grover et al.
(1998), which showed that the mediating effect of BPR is stronger than the
moderating effect of this variable. And also results of Hammer and Champy’s study
(1993), which indicated that IT is an important BPR enabler, support our outcome.
As Gunasekaran and Nath (1997) mentioned, BPR and IT form an integral system in
improving the performance of manufacturing companies drastically. Basically, IT
can save time and improve accuracy in exchanging information about company goals
and strategies. It removes much of the human error inherent complex and repetitive
tasks. IT saves money because it reduces errors, and the time it takes to accomplish
tasks. IT provides a competitive advantage by helping a company’s position and
capitalizes on trends so that it should be the first to market a new product.
Therefore, it is highly recommended to: (a) use the IT potentials in transforming the
business processes, and (b) develop the business processes in alignment with IT
potential for reengineering processes.
7. Future research directions
The strong role of intervening variables such as BPR and OIS to realize IT potential
is outlined in this study. We have considered the role of only two of the above-
mentioned important intervening variables in relationship between IT usage and
company performance: it seems that researchers can study the role of other variables
such as management style and total quality management on such a relation.
In addition, the research instrument developed here is useful for further IT and
performance studies.
The second future research direction lies in method of analysis. We used
regressing analysis, which is not based on the examination of simultaneous
equations; rather it takes into account separate equations. However, recent
development in the IS field shows a trend in the use of a second-generation
simultaneous equation models (SEMs). We suggest using this approach to further
knowledge about our model.
Appendix 1. Questionnaire
Please indicate the extent to which IT has been used by your company by marking
the alternative that best describes your idea, ranging from 1 to 7: (1 ¼ not at all,
4 ¼ to some extent, 7 ¼ strongly)
Code Measures Later code changed to
ITU IT Use
ITCOM Communication IT
ITCOM1 e-mail
ITCOM2 Fax Later deleted
ITCOM3 Mobile Later deleted
ITCOM4 Internet
ITCOM5 LAN: Local Area Network
ITCOM6 Web site for advertisement
ITCOM7 Intranet
ITCOM8 EDI: Electronic Data
Interchange for interactions
with suppliers
ITPOM Production and operation IT
ITPO1 Barcode Later deleted
ITPO2 Automatic warehousing Later deleted
ITPO3 Software for project ITPO1.3 (Factor1: IT in planning)
management
ITPO4 CAPP: Computer Aided ITPO1.4 (Factor1: IT in planning)
Production Planning
ITPO5 MRP: Manufacturing ITPO1.5 (Factor1: IT in planning)
Requirement Planning
ITPO6 CAD: Computer Aided Design Later deleted
ITPO7 CAM: Computer Aided ITPO2.7 (Factor2: IT in operation)
Manufacturing
ITPO8 CAE: Computer Aided ITPO2.8 (Factor2: IT in operation)
Engineering
ITPO9 CNC: Computer Numerical ITPO2.9 (Factor2: IT in operation)
Control
ITPO10 Robotics Later deleted
ITPO11 Computer aided production ITPO1.11 (Factor1: IT in planning)
planning
ITPO12 Final product quality control ITPO3.12 (Factor3: IT in quality
control)
ITPO13 Process quality control ITPO3.13 (Factor3: IT in quality
control)
ITDS Decision support IT
ITDS1 Data analysis
ITDS2 Graphical data presentation Later deleted
tools
ITDS3 DSS: Decision Support
Systems
ITDS4 SIS: Strategic Information
Systems
(continued)
Continued.
Code Measures Later code changed to
ITAD Administrative IT
ITAD1 Databases ITAD1.1 (Factor1: IT in administration)
ITAD2 Spread sheets ITAD1.2 (Factor1: IT in administration)
ITAD3 Word possessors Later deleted
ITAD4 Workflow management system Later deleted
ITAD5 Internet recruitment ITAD1.5 (Factor1: IT in administration)
ITAD6 Training system ITAD1.6 (Factor1: IT in administration)
ITAD7 Performance analysis system ITAD1.7 (Factor1: IT in administration)
ITAD8 Payroll system ITAD2.8 (Factor2: IT in financial affair)
ITAD9 Invoice systems ITAD2.9 (Factor2: IT in financial affair)
ITAD10 Financial system ITAD2.10 (Factor2: IT in financial affair)
Please indicate the extent to which information technology (IT) has been changed the
following business processes in your company Likert scale ranging from 1 ¼ no
effect, to 4 ¼ moderate effects, to 7 ¼ extreme effects)
Code Measures
BPRM Business process changes

BPOF Order flow
BPOF1 Raw material
BPOF2 Product assembly
BPOF3 Obtaining orders
BPOF4 Delivery of the product
BPOF5 Installation of the product
BPST Strategic process
BPST1 Formulation of the strategy
BPST2 Organizational and behavioural issues
BPPR Product
BPPR1 Design of product
BPPR2 Engineering
BPPR3 Process planning
BPMS Marketing/sale
BPMS1 Customer satisfaction
BPMS2 Market research
BPMS3 Forecasting
BPMS4 Product-mix decisions
BPSE Services
BPSE1 Maintenance of the product
BPSE2 Quality assurance
BPSE3 After-sale service
BPAC Accounting
BPAC1 Product costing
BPAC2 Make-or-by decisions
BPAC3 Budgeting
BPAC4 Recruitment
BPAC5 Training
BPAC6 Motivation
BPAC7 Performance appraisal
BPTE Technology
BPTE1 Selection of plant and equipment
BPTE2 Installation of plant and equipment
Indicate the degree of emphasis that your manufacturing plant places on the
following activities. (Likert scale ranging from 1 ¼ no emphasis, to 4 ¼ moderate
emphasis, to 7 ¼ extreme emphasis).
Code Measures
OIS Organizational infrastructures

INEM Empowerment
INEM1 Giving authority of scheduling to the workers
INEM2 Giving authority of inspection and quality control to the workers
INEM3 Changes in managers responsibilities
INEM4 Giving workers a broader range of tasks
INDE Decentralization
INDE1 Giving authority of recruitment to middle managers
INDE2 Giving authority of workers assignment to middle managers
INDE3 Giving authority of workers control to middle managers
INDE4 Giving authority of financial resources assignment to middle managers
INDE5 Giving authority of physical assets assignment to middle managers
INTR Training
INTR1 Improving supervisors training
INTR2 Improving workers training
INTR3 Improving direct workers motivation
INTE Teamwork
INTE1 Permanent project teams (with people from different functional areas)
INTE2 Matrix organization (people working on a project report functionally
within their department but report to a project manager for project
work)
INPC Process management and customer relationship
INPC1 Process management
INPC2 Statistical process control
INPC3 Assessment of processes
INPC4 Continues improvement of processes
INPC5 Customer needs assessment
INPC6 Customer satisfaction measurement
INPC7 Customer relationship management
INSU Changes in transaction with suppliers
INSU1 Supplier relationship management
INSU2 Improvement of financial exchange with suppliers
INSU3 Involvement in supplier quality assurance
Please indicate your level of agreement or disagreement with the following

statements. (Likert scale ranging from 1 ¼ strongly disagree, to 4 ¼ neither agree
nor disagree, to 7 ¼ strongly agree).
INLE Leadership
INLE1 All major department heads within our plant accept

responsibility for quality
INLE2 Plant management provides personal leadership for Later deleted
quality improvement
INLE3 The top priority in evaluating plant management is
quality performance
INLE4 Our top management strongly encourages employee
involvement in the production process
For your major product line, indicate your position with respect to your competitors
on the following dimensions for the last 2 years. (Likert scale ranging from
1 ¼ significantly lower, to 4 ¼ equal, to 7 ¼ significantly higher).
Code Measures
PER Performance
PEC0 Customer results
PECO1 Customer satisfaction indicators
PECO2 Customer relation
PEEM Employee results
PEEM1 Staff satisfaction indicators
PEEM2 Staff performance indicators
PEOP Operational performance indicators
PEOP1 Quality of products
PEOP2 Flexibility to change volume
PEOP3 Defective rates
PEOP4 Fast delivery
PEOP5 Cost per unit Later deleted
PEOP6 Cycle time
PEGR Growth
PEGR1 Sales growth
PEGR2 Return on investment (ROI)
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© Taylor and Francis 2007

Vol. 45, No. 12, 15 June 2007, 2697–2734

Assessing the impact of information technology on firm performance

A. ALBADVIy, A. KERAMATI*z and J. RAZMIz

yIndustrial Engineering Department, Faculty of Engineering,

(Revision received April 2006)

Keywords: Information technology; Firm performance; Organizational

*Corresponding author. Email: kerama_a@modares.ac.ir

International Journal of Production Research

between IT implementation and productivity. Broadly speaking, the first approach

Table 1. Selected works on IT productivity.

Researcher(s) Measures Findings

Studies that found IT does not improve productivity

New parts introduction

Researcher(s) Measures Findings

strategies led to the smooth implementation of the

The influence of IT on business

Figure 1. Theoretical framework of the impact of IT on firm performance considering the

reengineering and redesign of organization in order to best utilize their IT

2.1 Theoretical framework of assessing the impact of IT on performance

Brynjolfsson (2000) indicate that creation of necessary IT infrastructures is an

3.1 Data collection and sampling

3.2 Measurement instrument

3.2.1 The extent of IT usage (ITU). A list of information technology use in

Organizational position of the respondent Variance analysis

Question code A B C D E F G H F-value Sig. T-test

Table 3. ITU variable.

Measurement criteria Source Definition

(very frequently used). In IT and performance literature, measuring IT in

Table 4. PER variable.

Measurement criteria Source Definition

Customer results Froza (1995), EFQM Customer satisfaction of product

3.2.3 Organizational infrastructure measures (OIS). This part of the questionnaire

3.2.4 Business process reengineering measures (BPRM). The ranges of transforma-

3.5 Reliability and validity analysis

Table 5. ‘OIS’ variable.

Measurement criteria Source Definition

Table 6. ‘BPRM’ variable.

Measurement criteria Source Definition

Order flow Gunase Karan, Order flow includes activities such as

3.5.1 Reliability. In order to assess the reliability of instrument, we have calculated

3.5.2 Validity analysis. Construct validity, content validity and predictive

Table 7(a). Validity index and factor analysis of variable BPRM.

# of # of eliminated Std. % from total

Business process of personnel: BPPE 4 0 97 4.78 1.25 0.8488 2.784 89.603

Construct validity shows the extent to which measures of a criterion are

Table 7(b). Factor loadings for ITAD.

ITAD criterion Factor 1 Factor 2

Measures of ITAD New code IT in financial pecuniary affairs IT in administrative affair

ITAD10 ITAD2.10 0.841349 0.098666

Table 7(c). Factor loadings for ITPO.

ITPO criterion Factor 1 Factor 2 Factor 3

Measures of ITPO New code IT in planning IT in operations IT ion quality control

ITPO4 ITPO1.4 0.864394 0.100607 0.000795

# of eliminated Std. % from total

Information IT in communications ITCO 8 2 96 4.37 1.32 0.7673 2.945 49.086

ITAD IT in pecuniary affairs 97 5.98 1.04 0.6936* 1.961 65.354