Predicting Enterprise Efficiency: The Impact of IT Capability

Abstract

Drawing from both the IS and economics perspectives, the present study shows that the quality management of IT matters to firm performance. It is the first attempt to evaluate firm efficiency by incorporating the effect of IT capability using a sample of small- and medium-sized enterprises in China and adopting the two-stage data envelopment analysis (DEA) approach. The efficiency of Chinese enterprises is estimated using DEA. The estimated efficiency score of the enterprises is then regressed on a set of variables in which measures of IT capability are the focus. The input-based DEA results indicated that about 35% of existing inputs were required to produce existing output had the enterprises been efficient. The Tobit results showed that the better IT competency of employees was, the more overall and pure technical efficient the enterprise was. Also, enterprises located in the coastal area were found to be less efficient while enterprises with smaller size operated with more scale efficient.