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The Role of IT on Firm Performance
ScienceDirect ScienceDirect
Procedia Computer Science 00 (2019) 000–000 Procedia Computer Science 00 (2019) 000–000
Available online at www.sciencedirect.com
www.elsevier.com/locate/procedia www.elsevier.com/locate/procedia
ScienceDirect Procedia Computer Science 161 (2019) 258–265
The Fifth Information Systems International Conference 2019 The Fifth Information Systems International Conference 2019
The Role of IT on Firm Performance The Role of IT on Firm Performance Asih Nur Fadhilah, Apol Pribadi Subriadi* Asih Nur Fadhilah, Apol Pribadi Subriadi*
Department of Information Systems, Institut Teknologi Sepuluh Nopember, 60111, Indonesia Department of Information Systems, Institut Teknologi Sepuluh Nopember, 60111, Indonesia
Abstract Abstract The impact of Information Technology (IT) on firms has been widely discussed in many studies. Regarding the role of IT on Firm The impact of researchers Information have Technology (IT) on firmsresult. has been widely discussed in many Regarding the role on Firm Performance, reported a mixed Therefore, it encourages thatstudies. the essential character ofofITITfrom the perspective of researchers firm performance needs to abemixed explored systematically. needed that to reveal, in what facet of firm Performance, have reported result. Therefore, itIt was encourages the essential character of performance IT from the perspective of firm performance be explored systematically. It was needed to reveal, in what facet of firmperspective performance and under what circumstances ITneeds couldtoplay a significant role. This research contributes by providing a balanced on and under what circumstances IT could play a significant role.a view This research by providing a balanced on the role of IT on firm performance. The researchers could have from the contributes right angle about the role of IT on firmperspective performance. A systematic literature review wasThe conducted to get a comprehensive perspective thethe role the role of IT on firm performance. researchers could have a view from the rightregarding angle about roleofofITITon onFirm firm Performance. performance. A systematic literatureand review was conducted to get a comprehensive perspective regarding of IT on Firm Performance. The aspects extracted analyzed were mainly related to: (i). Firm performance attributes, the (ii).role Domains supported by IT, (iii). The aspects extracted Circumstances. and analyzed were mainly related to: (i). Firmanalysis performance attributes, (ii). supported by IT, (iii). IT-Firm Performance Based on these aspects several and conclusions wereDomains drawn. First, IT contributes to achievingPerformance strategic alignment, organizational and provide support for and business. Since were they drawn. were correlated strongly with IT-Firm Circumstances. Based onagility these aspects several analysis conclusions First, IT contributes to achieving strategicSecond, alignment, agility providebased support for perspectives: business. Since they were strongly with firm performance. firmorganizational performance could beand measured on two Financial and correlated non-financial. Third, IT firm Second, firm performance could beormeasured based onother two perspectives: Financial and non-financial. Third,and IT couldperformance. contribute more effectively in collaboration combining with resources. The elaboration of these findings suggestions for further were in thisorpaper. could contribute more research effectively indiscussed collaboration combining with other resources. The elaboration of these findings and suggestions for further research were discussed in this paper. © 2019 The Authors. Published by Elsevier B.V. © 2019 The Authors. Published by Elsevier B.V. This is an open accessPublished article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) © 2019 The Authors. by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) This is an open access article under CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee The Fifth Information Systems International Conference 2019 Peer-review under responsibility of the scientific committee ofofThe Fifth Information Systems International Conference 2019. Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019 Keywords: Information Technology;IT Performance; Firm Performance; IT Paradox; IT Productivity Paradox; Role of IT Keywords: Information Technology;IT Performance; Firm Performance; IT Paradox; IT Productivity Paradox; Role of IT
* Corresponding author. Tel.: +62-811-312-445; fax: +62-31-569-4965. address:author. [email protected] * E-mail Corresponding Tel.: +62-811-312-445; fax: +62-31-569-4965. E-mail address: [email protected] 1877-0509 © 2019 The Authors. Published by Elsevier B.V. This is an open access under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) 1877-0509 © 2019 Thearticle Authors. Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019 This is an open access article under CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019
1877-0509 © 2019 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019. 10.1016/j.procs.2019.11.122
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1. Introduction The rapid technological advancements have made competition in business increasingly stringent. Therefore, companies must create new strategies to survive in business competition. Some companies utilize IT to support their strategy because IT was considered offering a competitive advantage. The relation of Information System (IS) or IT to business strategy and the competitive advantage has been the main topics of many discussions during the past decade, and the importance of alignment between strategy of the business and IS has been recognized [1]. Prior studies examining the relationship between IT and Firm Performance (FM) have reported the diverse result. In practice and literature, the context of IT and FM has always been a debatable [2]. Management has long evaluated the value of IT and hoped that there were value benefits that can be taken from IT investments; this perspective is known as the business value of IT (BVIT) [3]. By implementing IT, the companies could have a competitive advantage, and organizations could increase the extent of their market and achieve their objectives by increasing the technology used [4]. Organizations could get the benefit from increasing production, improving business performance, and providing other competitive advantages by using IT [5]. IT made the companies were able to present new ideas and innovations of the businesses on their market [6]. IT was a mediator to achieve optimal firm performance, and Information system capabilities were not directly related to firm performance, nor was decision making performance capability directly influencing firm performance but must be supported by other factors [7]. The role of IT on FM requires additional factors such as organizational capabilities because there was no proof that IT has a direct contribution to firm performance [8]. The research indicates that there was a productivity paradox in IT investment. The relationship between information technology and productivity had been widely discussed but little understood [9]. Productivity paradox was initially identified by [10]. The existence of productivity paradox due to the high of IT expenditure did not provide maximum results for the productivity of the company. From research [11,12] also ensure that there was a productivity paradox in IT investment. However, the present of productivity paradox because the benefits of IT were only measured in terms of financial benefits. The benefits of IT could not only be measured by tangible but any other intangible benefits that could be obtained by IT, for example increasing customer satisfaction, increasing employee motivation, etc [13]. There was a lot of literature that discussed the contribution of IT on FM. This study aimed to identify the extent of the influence of IT in improving firm performance. Does information technology always provide a positive impact on improving company performance? A systematic literature review was conducted to know about the positive and negative impact of IT and also find a gap that might still need to be investigated further about the performance of companies that associated with information technology. The structure of this paper was as follows. II). The research methodology used to review was described; III). The concept of firm performance; IV). Result and discussion; and V). Conclusion. 2. Research method The method used was based on a systematic literature review to conduct a comprehensive and unbiased search. The step by step of the method consists of : (i) define the research question, (ii) literature search strategy, (iii) criteria selection and (iv) data extraction and synthesis 2.1. Research question This study aimed to expand knowledge about the impact or influence of IT on FM. Consequently, the research question of this paper was: What is the effect of IT implementation on firm performance?. Several relevant keywords were addressed by this question i.e. IT benefits, Impact of IT, IT capability, the role of IT, market value, profitability, market growth, customer satisfaction, employee satisfaction. These were keywords that take into account in the extracting/ analyzing process from the relevant (selected) literature.
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2.2. Search strategy Keywords were determined to facilitate the search to identify relevant papers. Based on the research question, keywords that could represent/reflect the theme of this study were “Information Technology” and “Firm Performance”. The literature search was conducted in mainly reputable, especially four very well-known journal/publisher databases i.e. ScienceDirect, EmeraldInsight, IEEE Digital Library, and Springer. The title and abstract of the paper that matches the keyword were selected. 2.3. Inclusion criteria The selected journals, screening was carried out by some criteria which were: years of journal publications, journal publication types, types of journals, journal ranking, the title correlation with the research question, and has a topic which discusses the impact of IT phenomenon. Journals which included to be reviewed must be: (i) published in the last ten years; (ii) the journal was not a conference or review journal; (iii) the journal should be an international journal; (iv) writen in English; (v) the journal name must be included in the ranking of the journal worldwide (vi); the title of the journal must be correlated with the research question; and (vii) abstract of the journal describe the answer to the research question. From the screening processes, 53 journals obtained. 2.4. Data extraction and synthesis Studies that meet the criteria were further assessed for their quality. Qualitative analysis was carried out by classifying the journal. The literature classified by year of published, the name of the journal, and the themes of the journal. Analysis of literature extraction was conducted to get more specific information about the topic. In the literature extraction, the necessary information from selected journals was collected. Relevant information from journals that must be recorded were the topics of journals, journal publications, bibliography, research objectives, research method, and research results. The literature assessment was carried out to get the synthesis. The literature assessment was the process of reviewing and evaluating the results of data extraction. The review and evaluation process was carried out by mapping the types of research, analyzing research trends and analyzing gaps that might be obtained. 3. Firm performance The concept of corporate performance always associated with organizational effectiveness; that should be distinguished. [14] provide a clear view of the scope of organizational effectiveness and company performance by describing it in three overlapping concentric circles. The first circle covers the area of organizational effectiveness where there was business performance or firm performance and financial performance, the second circle covers the real meaning of business performance where there was financial and operational performance, and the third was the domain of financial performance itself. In this case, the business performance was the subset of operational and financial performance where both are part of the effectiveness of the organization. [15] represent the operational performance which referred to [14] was more close to measuring of financial performance for the influence of resources. Where the domain of operational performance itself was still vast and multi-dimensional. Definition of performance defined by the satisfaction of stakeholders [16,17,18] could provide more meaningful help to distinguish between antecedent and performance outcomes. Firm performance clearly illustrated through (customer-stakeholder-perspective) relations. [19] and [20] agreed to represent that firm performance was a subset of the dimension consisting of the unidimensional or multi-dimensional indicator. Where the domain includes of the overall financial indicator (profitability, market value, and growth) to the social indicator (employee and customer satisfaction, environmental and environmental audit performance, corporate governance performance, and social performance). It could be concluded that firm performance could not only be measured based on financial indicators. However, there are social indicators that must be considered in measuring firm performance.
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The firm performance that was multi-dimensional make the evaluation of performance could not be measured only by the financial method. The methods that used to measure should cover all dimensions. One of them was the balanced scorecard method. Balance scorecard (BSC) was a method that evaluates based on four dimensions, consist of the user dimension, business value, efficiency, and innovation/learning perspectives [13]. One of the efforts of an organization to improve firm performance was to invest in IT (hardware and software). However, the relation of IT investment and improving firm performance should be evaluated. Many organizations were not realized that IT did not only consist of hardware and software that should be measured. In its components, IT consists of human resources or the management of IT, software, and hardware [13]. Due to the lack of a comprehensive IT evaluation, there was an assumption that IT has no direct relationship with the firm performance [21] and it contradicted from previous research result. Therefore, there was a productivity paradox in IT investment. The productivity paradox was the absence of positive financial impacts of IT investments. [22] and [12] on their research concluded that several parts of IT could have a direct impact on company performance (e.g., personal computer investment), but there are also IT investments that have an indirect impact (only emerged after two years or three years after implementation). In conclusion [7] states that the implementation of IT could not have an influence on firm performance but should be drived by other factors (for example management decisions). The assessment of the BVIT in an organization, need a comprehensive measurement because IT in its implementation has not only provide financial impact but also operational impact. Several methods could be used to evaluate the implementation of IT, for example, the economics of information (IE), Analytical Hierarchy Process (AHP), and IT balance Scorecard that measure the benefit of IT not only from a financial perspective but also non-financial perspective based on BSC perspective. 4. Result and discussion There were 4 electronic journal databases which were referenced to, with the keyword used was “Information Technology” and “Firm Performance” 27.583 journals were found on the initial search result. However, from these initial search results, it could not prove that research was related to the impact of IT on FM was widely researched because from the initial search result that appears many kinds of literature were not correlated with the topic. Therefore, the screening was carried out according to the keywords and inclusion criteria (i-v section 2.3.), and there were 23,793 journals obtained. Then filtering was conducted manually by matching the journal title with the research question and reading the abstract. A total of 53 journals were obtained with the details of the results could be seen in Table 1. From the number of papers included in the inclusion criteria, the analysis of content was carried out. The content analysis was carried out by a deep understanding of the paper. Based on the content analysis, 34 journals selected and use as a primary journal. Table 1. Literature selection results based on keywords. E-journal Database
Result
ScienceDirect
25
EmeraldInsight
19
SpringerLink
5
IEEE
4
Based on the literature that has been obtained, The discussion related to the influence of information technology in improving firm performance was a discussion that has not attracted much interest for researchers from 2009 to 2017 but it was sharply increased in 2018 as in fig. 1.(a). Issues related to the internet of things in industry and industry 4.0 challenges could be one of the conditions that enhance research in this field in 2018. In 2019, the number of studies related to the role of IT in FM declined dramatically. The decline in research could be due to the fact that in 2019 it had not been fully passed and the search was also conducted in the first quarter of 2019. The use of IT which was increasingly intense in business competition, internet of things and issues related to the industrial revolution 4.0 was still the basis for researchers to explore IT's role in 2019. The classification of the paper was conducted by themes
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classification to get more deeply understand about the trends. It was also found that the discussion regarding the role of IT in improving firm performance was few in number as seen in Fig. 1. (b). The focus of the study mostly discusses the benefits that the company have from the implementation of IT and analyses related to IT capabilities to support firm performance. The benefits of IT discussed also tend toward to IT components in the domain software; the use of IT in other fields (hardware and telecommunication networking or human resources of IT) has not been widely discussed. The discussion related to the role of IT in the company also has not been described clearly, at which level of IT orientation (i.e. technical, business and marketing influence) and what kind of IT benefit (i.e. enhance productivity, risk minimization, business expansion) would be improving FM.
Fig. 1. (a) Literature trends of paper; (b) Themes classification of paper.
The classification of the impact of IT was conducted to get a clear view of IT’s role. The effect of IT on the firm could be in the form of: i). IT enables strategic alignment; ii). IT as business support; iii). Improving organizational agility and iv). IT Which could not give any impact to the firm performance (productivity paradox) as seen in Fig. 2.
Fig. 2. (a) The impact of IT on the company; (b) The classification of the positive impact of IT on FM.
First that IT makes a strategic alignment as a positive impact was referred to the ability of performance to achieve business goals in the form of i). increasing market value [3,4,23,24,25,26], ii). improved profitability [27,28,29,30], iii). improved customer satisfaction [31,32], iv). cost saving [33,34], v). Environmental performance [35]. The second impact was that IT investment could provide: i). business support in making decisions [36,37,38], ii). disseminating information/ integrating organizational resources [39,40], and iii). Support corporate governance and administration [2]. The third impact was an enabler in organizational agility. The Agility refers to the capability of companies to identify or quick response on the opportunities and threats [31,41,42,43] or to create innovations, opportunities and ideas [6,44,45,46] to market changes and uncertainty.
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Superior IT investment was believed to provide superior performance to the firm. But [11] had said that the negative impact on firm performance may emerge. [47] and [12] argues that it takes a long time for a firm to absorb the impact of IT completely. While [7,48,49] found that IT could not have a direct effect on FM but it must be supported by other factors (e.g. top management support). These factors were assumed as the things that hinder the perceived benefits of IT on firm performance The findings related to the impact of IT on the FM in its review were still limited. The discussion was only specific in terms of whether IT provides a positive or negative impact on the firm. It was needs to be explored further regarding which IT domain could support the company, whether it was enough to implement the IT software component so it could provide performance support to the company? And how to apply IT that could support performance or why IT could have a positive effect on FM. Based on the existence of IT productivity paradox [7,11,47,48,49] and [12], it implicitly states that IT has a negative impact on the company. However, this should be clarified, why IT could have a negative impact on the FM. Based on the firm performance concept that FM has multidimensional indicators (i.e. financial and operational). The aspect of financial dimension were: profitability, market value, and growth. Whereas in the operational dimension, the indicators were: employee and customer satisfaction, environmental and environmental audit performance, corporate governance performance, and social performance. This notion of firm performance has consequences which must be considered. Regarding IT-firm performance measurement must be clear first, which dimensions and indicators were measured. As an example, in the absence of financial benefits, it cannot be immediately concluded that IT has no impact. In the previous research, [50] provide an attempt to clarify the existing IT productivity paradox. The assessment of the impact was carried out using direct and indirect measurement. Based on the result, the IT productivity paradox could not exist when the benefit of IT was assessed by the right measurement. It could be concluded that the absence of a positive impact by IT was because the measurement used in the study was not comprehensive. This study attempts to classify the positive impact of IT into the dimensions of FM to give an illustration of that IT has met all aspects of FM. As shown in fig. 2. (b). Despite the positive impact of IT mostly supports the financial dimension, it also supports the operational dimension. It could be concluded that IT support FM. Based on fig. 2. (b). It could be seen that IT was more inclined to the financial dimension, it is contrary to the opinion that IT has less impact on the financial aspect and has more impact on the operations aspect. Therefore, a qualitative study should be carried out for further research. Based on the [47] and [12], the impact of IT could not be taken for a short-term, in this case, a longitudinal case study should be carried out. From the results of [7,48,49] which states that new IT would have an impact if supported by other factors, multi-case studies could also be carried out for further research. To know clearly what factors that support the influence of IT and on what conditions IT could improve FM. 5. Conclusion This study is an attempt to describe the role of IT on FM. From the study above it was found that IT do contributes positively on firm performance indirectly. By playing a role in achieving strategic alignment, business support, and organizational agility with collaboration between other resources. Based on the results of the study above it also found that studies related to the role of IT on FM only explore at one aspect of IT (software/application). Comprehensive research related to the role of IT (software/application, hardware, and telecommunication network, and human resources of IT) could be one of the new research opportunities. Portfolio management could be one method that could be used to research the role of IT comprehensively. Portfolio management could provide an overview of the role of IT at the level of IT orientation and the benefits of IT. Organizational management could make the right decision with the overall picture. Research related to the role of IT also tends to be carried out through surveys and questionnaires so that research results could be easily broken. Research using a case study / longitudinal case study / multi-case study method could be carried out to prove further the role of IT. As a final remark, it is hoped that this study can trigger the emergence of other studies in the field of IT and Firm Performance.
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The Fifth Information Systems International Conference 2019 The Fifth Information Systems International Conference 2019
The Role of IT on Firm Performance The Role of IT on Firm Performance Asih Nur Fadhilah, Apol Pribadi Subriadi* Asih Nur Fadhilah, Apol Pribadi Subriadi*
Department of Information Systems, Institut Teknologi Sepuluh Nopember, 60111, Indonesia Department of Information Systems, Institut Teknologi Sepuluh Nopember, 60111, Indonesia
Abstract Abstract The impact of Information Technology (IT) on firms has been widely discussed in many studies. Regarding the role of IT on Firm The impact of researchers Information have Technology (IT) on firmsresult. has been widely discussed in many Regarding the role on Firm Performance, reported a mixed Therefore, it encourages thatstudies. the essential character ofofITITfrom the perspective of researchers firm performance needs to abemixed explored systematically. needed that to reveal, in what facet of firm Performance, have reported result. Therefore, itIt was encourages the essential character of performance IT from the perspective of firm performance be explored systematically. It was needed to reveal, in what facet of firmperspective performance and under what circumstances ITneeds couldtoplay a significant role. This research contributes by providing a balanced on and under what circumstances IT could play a significant role.a view This research by providing a balanced on the role of IT on firm performance. The researchers could have from the contributes right angle about the role of IT on firmperspective performance. A systematic literature review wasThe conducted to get a comprehensive perspective thethe role the role of IT on firm performance. researchers could have a view from the rightregarding angle about roleofofITITon onFirm firm Performance. performance. A systematic literatureand review was conducted to get a comprehensive perspective regarding of IT on Firm Performance. The aspects extracted analyzed were mainly related to: (i). Firm performance attributes, the (ii).role Domains supported by IT, (iii). The aspects extracted Circumstances. and analyzed were mainly related to: (i). Firmanalysis performance attributes, (ii). supported by IT, (iii). IT-Firm Performance Based on these aspects several and conclusions wereDomains drawn. First, IT contributes to achievingPerformance strategic alignment, organizational and provide support for and business. Since were they drawn. were correlated strongly with IT-Firm Circumstances. Based onagility these aspects several analysis conclusions First, IT contributes to achieving strategicSecond, alignment, agility providebased support for perspectives: business. Since they were strongly with firm performance. firmorganizational performance could beand measured on two Financial and correlated non-financial. Third, IT firm Second, firm performance could beormeasured based onother two perspectives: Financial and non-financial. Third,and IT couldperformance. contribute more effectively in collaboration combining with resources. The elaboration of these findings suggestions for further were in thisorpaper. could contribute more research effectively indiscussed collaboration combining with other resources. The elaboration of these findings and suggestions for further research were discussed in this paper. © 2019 The Authors. Published by Elsevier B.V. © 2019 The Authors. Published by Elsevier B.V. This is an open accessPublished article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) © 2019 The Authors. by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) This is an open access article under CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee The Fifth Information Systems International Conference 2019 Peer-review under responsibility of the scientific committee ofofThe Fifth Information Systems International Conference 2019. Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019 Keywords: Information Technology;IT Performance; Firm Performance; IT Paradox; IT Productivity Paradox; Role of IT Keywords: Information Technology;IT Performance; Firm Performance; IT Paradox; IT Productivity Paradox; Role of IT
* Corresponding author. Tel.: +62-811-312-445; fax: +62-31-569-4965. address:author. [email protected] * E-mail Corresponding Tel.: +62-811-312-445; fax: +62-31-569-4965. E-mail address: [email protected] 1877-0509 © 2019 The Authors. Published by Elsevier B.V. This is an open access under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) 1877-0509 © 2019 Thearticle Authors. Published by Elsevier B.V. Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019 This is an open access article under CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019
1877-0509 © 2019 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/) Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019. 10.1016/j.procs.2019.11.122
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1. Introduction The rapid technological advancements have made competition in business increasingly stringent. Therefore, companies must create new strategies to survive in business competition. Some companies utilize IT to support their strategy because IT was considered offering a competitive advantage. The relation of Information System (IS) or IT to business strategy and the competitive advantage has been the main topics of many discussions during the past decade, and the importance of alignment between strategy of the business and IS has been recognized [1]. Prior studies examining the relationship between IT and Firm Performance (FM) have reported the diverse result. In practice and literature, the context of IT and FM has always been a debatable [2]. Management has long evaluated the value of IT and hoped that there were value benefits that can be taken from IT investments; this perspective is known as the business value of IT (BVIT) [3]. By implementing IT, the companies could have a competitive advantage, and organizations could increase the extent of their market and achieve their objectives by increasing the technology used [4]. Organizations could get the benefit from increasing production, improving business performance, and providing other competitive advantages by using IT [5]. IT made the companies were able to present new ideas and innovations of the businesses on their market [6]. IT was a mediator to achieve optimal firm performance, and Information system capabilities were not directly related to firm performance, nor was decision making performance capability directly influencing firm performance but must be supported by other factors [7]. The role of IT on FM requires additional factors such as organizational capabilities because there was no proof that IT has a direct contribution to firm performance [8]. The research indicates that there was a productivity paradox in IT investment. The relationship between information technology and productivity had been widely discussed but little understood [9]. Productivity paradox was initially identified by [10]. The existence of productivity paradox due to the high of IT expenditure did not provide maximum results for the productivity of the company. From research [11,12] also ensure that there was a productivity paradox in IT investment. However, the present of productivity paradox because the benefits of IT were only measured in terms of financial benefits. The benefits of IT could not only be measured by tangible but any other intangible benefits that could be obtained by IT, for example increasing customer satisfaction, increasing employee motivation, etc [13]. There was a lot of literature that discussed the contribution of IT on FM. This study aimed to identify the extent of the influence of IT in improving firm performance. Does information technology always provide a positive impact on improving company performance? A systematic literature review was conducted to know about the positive and negative impact of IT and also find a gap that might still need to be investigated further about the performance of companies that associated with information technology. The structure of this paper was as follows. II). The research methodology used to review was described; III). The concept of firm performance; IV). Result and discussion; and V). Conclusion. 2. Research method The method used was based on a systematic literature review to conduct a comprehensive and unbiased search. The step by step of the method consists of : (i) define the research question, (ii) literature search strategy, (iii) criteria selection and (iv) data extraction and synthesis 2.1. Research question This study aimed to expand knowledge about the impact or influence of IT on FM. Consequently, the research question of this paper was: What is the effect of IT implementation on firm performance?. Several relevant keywords were addressed by this question i.e. IT benefits, Impact of IT, IT capability, the role of IT, market value, profitability, market growth, customer satisfaction, employee satisfaction. These were keywords that take into account in the extracting/ analyzing process from the relevant (selected) literature.
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2.2. Search strategy Keywords were determined to facilitate the search to identify relevant papers. Based on the research question, keywords that could represent/reflect the theme of this study were “Information Technology” and “Firm Performance”. The literature search was conducted in mainly reputable, especially four very well-known journal/publisher databases i.e. ScienceDirect, EmeraldInsight, IEEE Digital Library, and Springer. The title and abstract of the paper that matches the keyword were selected. 2.3. Inclusion criteria The selected journals, screening was carried out by some criteria which were: years of journal publications, journal publication types, types of journals, journal ranking, the title correlation with the research question, and has a topic which discusses the impact of IT phenomenon. Journals which included to be reviewed must be: (i) published in the last ten years; (ii) the journal was not a conference or review journal; (iii) the journal should be an international journal; (iv) writen in English; (v) the journal name must be included in the ranking of the journal worldwide (vi); the title of the journal must be correlated with the research question; and (vii) abstract of the journal describe the answer to the research question. From the screening processes, 53 journals obtained. 2.4. Data extraction and synthesis Studies that meet the criteria were further assessed for their quality. Qualitative analysis was carried out by classifying the journal. The literature classified by year of published, the name of the journal, and the themes of the journal. Analysis of literature extraction was conducted to get more specific information about the topic. In the literature extraction, the necessary information from selected journals was collected. Relevant information from journals that must be recorded were the topics of journals, journal publications, bibliography, research objectives, research method, and research results. The literature assessment was carried out to get the synthesis. The literature assessment was the process of reviewing and evaluating the results of data extraction. The review and evaluation process was carried out by mapping the types of research, analyzing research trends and analyzing gaps that might be obtained. 3. Firm performance The concept of corporate performance always associated with organizational effectiveness; that should be distinguished. [14] provide a clear view of the scope of organizational effectiveness and company performance by describing it in three overlapping concentric circles. The first circle covers the area of organizational effectiveness where there was business performance or firm performance and financial performance, the second circle covers the real meaning of business performance where there was financial and operational performance, and the third was the domain of financial performance itself. In this case, the business performance was the subset of operational and financial performance where both are part of the effectiveness of the organization. [15] represent the operational performance which referred to [14] was more close to measuring of financial performance for the influence of resources. Where the domain of operational performance itself was still vast and multi-dimensional. Definition of performance defined by the satisfaction of stakeholders [16,17,18] could provide more meaningful help to distinguish between antecedent and performance outcomes. Firm performance clearly illustrated through (customer-stakeholder-perspective) relations. [19] and [20] agreed to represent that firm performance was a subset of the dimension consisting of the unidimensional or multi-dimensional indicator. Where the domain includes of the overall financial indicator (profitability, market value, and growth) to the social indicator (employee and customer satisfaction, environmental and environmental audit performance, corporate governance performance, and social performance). It could be concluded that firm performance could not only be measured based on financial indicators. However, there are social indicators that must be considered in measuring firm performance.
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The firm performance that was multi-dimensional make the evaluation of performance could not be measured only by the financial method. The methods that used to measure should cover all dimensions. One of them was the balanced scorecard method. Balance scorecard (BSC) was a method that evaluates based on four dimensions, consist of the user dimension, business value, efficiency, and innovation/learning perspectives [13]. One of the efforts of an organization to improve firm performance was to invest in IT (hardware and software). However, the relation of IT investment and improving firm performance should be evaluated. Many organizations were not realized that IT did not only consist of hardware and software that should be measured. In its components, IT consists of human resources or the management of IT, software, and hardware [13]. Due to the lack of a comprehensive IT evaluation, there was an assumption that IT has no direct relationship with the firm performance [21] and it contradicted from previous research result. Therefore, there was a productivity paradox in IT investment. The productivity paradox was the absence of positive financial impacts of IT investments. [22] and [12] on their research concluded that several parts of IT could have a direct impact on company performance (e.g., personal computer investment), but there are also IT investments that have an indirect impact (only emerged after two years or three years after implementation). In conclusion [7] states that the implementation of IT could not have an influence on firm performance but should be drived by other factors (for example management decisions). The assessment of the BVIT in an organization, need a comprehensive measurement because IT in its implementation has not only provide financial impact but also operational impact. Several methods could be used to evaluate the implementation of IT, for example, the economics of information (IE), Analytical Hierarchy Process (AHP), and IT balance Scorecard that measure the benefit of IT not only from a financial perspective but also non-financial perspective based on BSC perspective. 4. Result and discussion There were 4 electronic journal databases which were referenced to, with the keyword used was “Information Technology” and “Firm Performance” 27.583 journals were found on the initial search result. However, from these initial search results, it could not prove that research was related to the impact of IT on FM was widely researched because from the initial search result that appears many kinds of literature were not correlated with the topic. Therefore, the screening was carried out according to the keywords and inclusion criteria (i-v section 2.3.), and there were 23,793 journals obtained. Then filtering was conducted manually by matching the journal title with the research question and reading the abstract. A total of 53 journals were obtained with the details of the results could be seen in Table 1. From the number of papers included in the inclusion criteria, the analysis of content was carried out. The content analysis was carried out by a deep understanding of the paper. Based on the content analysis, 34 journals selected and use as a primary journal. Table 1. Literature selection results based on keywords. E-journal Database
Result
ScienceDirect
25
EmeraldInsight
19
SpringerLink
5
IEEE
4
Based on the literature that has been obtained, The discussion related to the influence of information technology in improving firm performance was a discussion that has not attracted much interest for researchers from 2009 to 2017 but it was sharply increased in 2018 as in fig. 1.(a). Issues related to the internet of things in industry and industry 4.0 challenges could be one of the conditions that enhance research in this field in 2018. In 2019, the number of studies related to the role of IT in FM declined dramatically. The decline in research could be due to the fact that in 2019 it had not been fully passed and the search was also conducted in the first quarter of 2019. The use of IT which was increasingly intense in business competition, internet of things and issues related to the industrial revolution 4.0 was still the basis for researchers to explore IT's role in 2019. The classification of the paper was conducted by themes
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classification to get more deeply understand about the trends. It was also found that the discussion regarding the role of IT in improving firm performance was few in number as seen in Fig. 1. (b). The focus of the study mostly discusses the benefits that the company have from the implementation of IT and analyses related to IT capabilities to support firm performance. The benefits of IT discussed also tend toward to IT components in the domain software; the use of IT in other fields (hardware and telecommunication networking or human resources of IT) has not been widely discussed. The discussion related to the role of IT in the company also has not been described clearly, at which level of IT orientation (i.e. technical, business and marketing influence) and what kind of IT benefit (i.e. enhance productivity, risk minimization, business expansion) would be improving FM.
Fig. 1. (a) Literature trends of paper; (b) Themes classification of paper.
The classification of the impact of IT was conducted to get a clear view of IT’s role. The effect of IT on the firm could be in the form of: i). IT enables strategic alignment; ii). IT as business support; iii). Improving organizational agility and iv). IT Which could not give any impact to the firm performance (productivity paradox) as seen in Fig. 2.
Fig. 2. (a) The impact of IT on the company; (b) The classification of the positive impact of IT on FM.
First that IT makes a strategic alignment as a positive impact was referred to the ability of performance to achieve business goals in the form of i). increasing market value [3,4,23,24,25,26], ii). improved profitability [27,28,29,30], iii). improved customer satisfaction [31,32], iv). cost saving [33,34], v). Environmental performance [35]. The second impact was that IT investment could provide: i). business support in making decisions [36,37,38], ii). disseminating information/ integrating organizational resources [39,40], and iii). Support corporate governance and administration [2]. The third impact was an enabler in organizational agility. The Agility refers to the capability of companies to identify or quick response on the opportunities and threats [31,41,42,43] or to create innovations, opportunities and ideas [6,44,45,46] to market changes and uncertainty.
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Superior IT investment was believed to provide superior performance to the firm. But [11] had said that the negative impact on firm performance may emerge. [47] and [12] argues that it takes a long time for a firm to absorb the impact of IT completely. While [7,48,49] found that IT could not have a direct effect on FM but it must be supported by other factors (e.g. top management support). These factors were assumed as the things that hinder the perceived benefits of IT on firm performance The findings related to the impact of IT on the FM in its review were still limited. The discussion was only specific in terms of whether IT provides a positive or negative impact on the firm. It was needs to be explored further regarding which IT domain could support the company, whether it was enough to implement the IT software component so it could provide performance support to the company? And how to apply IT that could support performance or why IT could have a positive effect on FM. Based on the existence of IT productivity paradox [7,11,47,48,49] and [12], it implicitly states that IT has a negative impact on the company. However, this should be clarified, why IT could have a negative impact on the FM. Based on the firm performance concept that FM has multidimensional indicators (i.e. financial and operational). The aspect of financial dimension were: profitability, market value, and growth. Whereas in the operational dimension, the indicators were: employee and customer satisfaction, environmental and environmental audit performance, corporate governance performance, and social performance. This notion of firm performance has consequences which must be considered. Regarding IT-firm performance measurement must be clear first, which dimensions and indicators were measured. As an example, in the absence of financial benefits, it cannot be immediately concluded that IT has no impact. In the previous research, [50] provide an attempt to clarify the existing IT productivity paradox. The assessment of the impact was carried out using direct and indirect measurement. Based on the result, the IT productivity paradox could not exist when the benefit of IT was assessed by the right measurement. It could be concluded that the absence of a positive impact by IT was because the measurement used in the study was not comprehensive. This study attempts to classify the positive impact of IT into the dimensions of FM to give an illustration of that IT has met all aspects of FM. As shown in fig. 2. (b). Despite the positive impact of IT mostly supports the financial dimension, it also supports the operational dimension. It could be concluded that IT support FM. Based on fig. 2. (b). It could be seen that IT was more inclined to the financial dimension, it is contrary to the opinion that IT has less impact on the financial aspect and has more impact on the operations aspect. Therefore, a qualitative study should be carried out for further research. Based on the [47] and [12], the impact of IT could not be taken for a short-term, in this case, a longitudinal case study should be carried out. From the results of [7,48,49] which states that new IT would have an impact if supported by other factors, multi-case studies could also be carried out for further research. To know clearly what factors that support the influence of IT and on what conditions IT could improve FM. 5. Conclusion This study is an attempt to describe the role of IT on FM. From the study above it was found that IT do contributes positively on firm performance indirectly. By playing a role in achieving strategic alignment, business support, and organizational agility with collaboration between other resources. Based on the results of the study above it also found that studies related to the role of IT on FM only explore at one aspect of IT (software/application). Comprehensive research related to the role of IT (software/application, hardware, and telecommunication network, and human resources of IT) could be one of the new research opportunities. Portfolio management could be one method that could be used to research the role of IT comprehensively. Portfolio management could provide an overview of the role of IT at the level of IT orientation and the benefits of IT. Organizational management could make the right decision with the overall picture. Research related to the role of IT also tends to be carried out through surveys and questionnaires so that research results could be easily broken. Research using a case study / longitudinal case study / multi-case study method could be carried out to prove further the role of IT. As a final remark, it is hoped that this study can trigger the emergence of other studies in the field of IT and Firm Performance.
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