Investigating the performance of US manufacturing and service operations: Essays on the relationships of information technology with inventory turnover, firm characteristics, and industry characteristics

Research in operations management focuses on explaining differences in operating performance across organizations (Gino and Pisano 2008). In the same manner, this dissertation is motivated by the need to investigate the firm's performance as measured by technical (productive) efficiency and inventory productivity. The dissertation consists of three essays, addressing: (i) the performance of U.S. manufacturing and service operations in the presence of information technology (IT); (ii) the impacts of firm and industry characteristics upon the business value of IT as measured by technical efficiency; and (iii) the relationships among inventory turnover performance, IT, and firm and industry characteristics.;In the first essay, based on the Bayesian stochastic production frontier approach, we evaluate and compare the performance of U.S. manufacturing and service operations in the presence of IT at the firm, industry, and sector levels, using a set of firm level data from 133 firms from 1999 to 2009. We also examine whether or not the "IT productivity paradox" exists in terms of technical efficiency, categorizing the whole sample into three subgroups according to the relative size of IT investment (high IT, medium IT, and low IT investment firms). Moreover, by suggesting a sensitivity analysis, we observe the variation of technical efficiency responding to the variation in the quality of IT capital. The main findings include the following: (i) a fair number of firms considered in this research benefit from adopting IT capital as one of their production factors. (ii) a lot of IT investments do not necessarily improve technical efficiency. (iii) wholesale industry performs best in terms of technical efficiency irrespective of the introduction of IT. (iv) the IT productivity paradox is observed in eight industries (five manufacturing and three service industries). (v) low IT investment firms, wholesale industry, and service sector turn out to be less sensitive to the variation in the quality of IT capital. In addition, this essay reviews in detail the useful estimation method called Gibbs sampling, considered one of the novel ways to analyze managerial problems.;In the second essay, we investigate the roles of firm and industry characteristics in conjunction with IT in terms of technical efficiency. Specifically, employing growth options and vertical integration to reflect firm characteristics, and adopting industry dynamism and concentration to reflect industry characteristics, we analyze the impacts of these variables upon the business value of IT as measured by technical efficiency. For analysis, this essay relies on the generalized two-equation model equipped with the Bayesian stochastic production frontier, using a set of firm level IT data from 131 firms from 1999 to 2009. Importantly, the IT productivity paradox is reexamined on the consideration of the selected characteristics. The principal findings include: (i) IT has the positive impact on output and technical efficiency at the collective level, regardless of the introduction of firm and industry characteristics. (ii) vertical integration has a negative impact on output and technical efficiency, and the relationship between IT and vertical integration is substitutable. (iii) high IT investment firms do not benefit from IT in the absence and presence of firm and industry characteristics. (iv) the IT productivity paradox is observed in most industries with higher IT investment. (v) substitutability phenomena created by IT and firm and industry characteristics appear in six industries (three manufacturing industries and three service industries), no matter which characteristics are considered.;In the third essay, we examine the relationship between IT investment and inventory turnover performance, using 98 firms spanning 11 years (from 1999 to 2009). In addition, we analyze the correlation of inventory turnover performance with firm and industry characteristics. Specifically, as in the second essay, vertical integration and growth options are chosen to reflect the important features of the firm's internal characteristics, and industry dynamism and concentration are chosen to represent the industry's competitive environment. The major findings include the following: (i) inventory turnover ratio is positively correlated with IT investment and growth options. (ii) inventory turnover ratio is negatively correlated with vertical integration and industry dynamism. We also examine time trends in inventory turnover performance and find that it has been improved over the period from 1999 to 2009.