Advanced Topics in Global Information Management Series (Vol. 2) 1591400643, 9781591400646, 9781591401018

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Advanced Topics in Global Information Management Volume 2 Felix B. Tan University of Auckland, New Zealand

IDEA GROUP PUBLISHING Hershey • London • Melbourne • Singapore • Beijing

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Published in the United States of America by Idea Group Publishing (an imprint of Idea Group Inc.) 701 E. Chocolate Avenue, Suite 200 Hershey PA 17033 Tel: 717-533-8845 Fax: 717-533-8661 E-mail: [email protected] Web site: http://www.idea-group.com and in the United Kingdom by Idea Group Publishing (an imprint of Idea Group Inc.) 3 Henrietta Street Covent Garden London WC2E 8LU Tel: 44 20 7240 0856 Fax: 44 20 7379 3313 Web site: http://www.eurospan.co.uk Copyright © 2003 by Idea Group Inc. All rights reserved. No part of this book may be reproduced in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher.

Advanced Topics in Global Information Management, Volume 2 is part of the Idea Group Publishing series named Advanced Topics in Global Information Management Series (ISSN 1537-9302) ISBN 1-59140-064-3 eISBN 1-59140-101-1

British Cataloguing in Publication Data A Cataloguing in Publication record for this book is available from the British Library.

NEW from Idea Group Publishing • Digital Bridges: Developing Countries in the Knowledge Economy, John Senyo Afele/ ISBN:1-59140-039-2; eISBN 1-59140-067-8, © 2003 • Integrative Document & Content Management: Strategies for Exploiting Enterprise Knowledge, Len Asprey and Michael Middleton/ ISBN: 1-59140-055-4; eISBN 1-59140-068-6, © 2003 • Critical Reflections on Information Systems: A Systemic Approach, Jeimy Cano/ ISBN: 1-59140-040-6; eISBN 1-59140-069-4, © 2003 • Web-Enabled Systems Integration: Practices and Challenges, Ajantha Dahanayake and Waltraud Gerhardt ISBN: 1-59140-041-4; eISBN 1-59140-070-8, © 2003 • Public Information Technology: Policy and Management Issues, G. David Garson/ ISBN: 1-59140-060-0; eISBN 1-59140-071-6, © 2003 • Knowledge and Information Technology Management: Human and Social Perspectives, Angappa Gunasekaran, Omar Khalil and Syed Mahbubur Rahman/ ISBN: 1-59140-032-5; eISBN 1-59140-072-4, © 2003 • Building Knowledge Economies: Opportunities and Challenges, Liaquat Hossain and Virginia Gibson/ ISBN: 1-59140-059-7; eISBN 1-59140-073-2, © 2003 • Knowledge and Business Process Management, Vlatka Hlupic/ISBN: 1-59140-036-8; eISBN 1-59140-074-0, © 2003 • IT-Based Management: Challenges and Solutions, Luiz Antonio Joia/ISBN: 1-59140-033-3; eISBN 1-59140075-9, © 2003 • Geographic Information Systems and Health Applications, Omar Khan/ ISBN: 1-59140-042-2; eISBN 1-59140076-7, © 2003 • The Economic and Social Impacts of E-Commerce, Sam Lubbe/ ISBN: 1-59140-043-0; eISBN 1-59140-077-5, © 2003 • Computational Intelligence in Control, Masoud Mohammadian, Ruhul Amin Sarker and Xin Yao/ISBN: 1-59140037-6; eISBN 1-59140-079-1, © 2003 • Decision-Making Support Systems: Achievements and Challenges for the New Decade, M.C. Manuel Mora, Guisseppi Forgionne and Jatinder N.D. Gupta/ISBN: 1-59140-045-7; eISBN 1-59140-080-5, © 2003 • Architectural Issues of Web-Enabled Electronic Business, Nansi Shi and V.K. Murthy/ ISBN: 1-59140-049-X; eISBN 1-59140-081-3, © 2003 • Adaptive Evolutionary Information Systems, Nandish V. Patel/ISBN: 1-59140-034-1; eISBN 1-59140-082-1, © 2003 • Managing Data Mining Technologies in Organizations: Techniques and Applications, Parag Pendharkar/ ISBN: 1-59140-057-0; eISBN 1-59140-083-X, © 2003 • Intelligent Agent Software Engineering, Valentina Plekhanova/ ISBN: 1-59140-046-5; eISBN 1-59140-084-8, © 2003 • Advances in Software Maintenance Management: Technologies and Solutions, Macario Polo, Mario Piattini and Francisco Ruiz/ ISBN: 1-59140-047-3; eISBN 1-59140-085-6, © 2003 • Multidimensional Databases: Problems and Solutions, Maurizio Rafanelli/ISBN: 1-59140-053-8; eISBN 159140-086-4, © 2003 • Information Technology Enabled Global Customer Service, Tapio Reponen/ISBN: 1-59140-048-1; eISBN 159140-087-2, © 2003 • Creating Business Value with Information Technology: Challenges and Solutions, Namchul Shin/ISBN: 159140-038-4; eISBN 1-59140-088-0, © 2003 • Advances in Mobile Commerce Technologies, Ee-Peng Lim and Keng Siau/ ISBN: 1-59140-052-X; eISBN 159140-089-9, © 2003 • Mobile Commerce: Technology, Theory and Applications, Brian Mennecke and Troy Strader/ ISBN: 1-59140044-9; eISBN 1-59140-090-2, © 2003 • Managing Multimedia-Enabled Technologies in Organizations, S.R. Subramanya/ISBN: 1-59140-054-6; eISBN 1-59140-091-0, © 2003 • Web-Powered Databases, David Taniar and Johanna Wenny Rahayu/ISBN: 1-59140-035-X; eISBN 1-59140-0929, © 2003 • E-Commerce and Cultural Values, Theerasak Thanasankit/ISBN: 1-59140-056-2; eISBN 1-59140-093-7, © 2003 • Information Modeling for Internet Applications, Patrick van Bommel/ISBN: 1-59140-050-3; eISBN 1-59140094-5, © 2003 • Data Mining: Opportunities and Challenges, John Wang/ISBN: 1-59140-051-1; eISBN 1-59140-095-3, © 2003 • Annals of Cases on Information Technology – vol 5, Mehdi Khosrowpour/ ISBN: 1-59140-061-9; eISBN 159140-096-1, © 2003 • Advanced Topics in Database Research – vol 2, Keng Siau/ISBN: 1-59140-063-5; eISBN 1-59140-098-8, © 2003 • Advanced Topics in End User Computing – vol 2, Mo Adam Mahmood/ISBN: 1-59140-065-1; eISBN 1-59140100-3, © 2003 • Advanced Topics in Global Information Management – vol 2, Felix Tan/ ISBN: 1-59140-064-3; eISBN 159140-101-1, © 2003 • Advanced Topics in Information Resources Management – vol 2, Mehdi Khosrowpour/ ISBN: 1-59140-062-7; eISBN 1-59140-099-6, © 2003

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Advanced Topics in Global Information Management Volume 2

Table of Contents Preface ......................................................................................................................... vii Felix B. Tan, University of Auckland, New Zealand Section I: Global Themes Chapter I. Structural Influences on Global E-Commerce Activity ............................... 1 M. Lynne Markus, Bentley College, USA Christina Soh, Nanyang Technological University, Singapore Chapter II. Beyond Models of National Culture in Information Systems Research . 14 Michael D. Myers, University of Auckland, New Zealand Felix B. Tan, University of Auckland, New Zealand Chapter III. Inquiry into Definitions of Culture in IT Studies ................................... 30 Mark Srite, University of Wisconsin — Milwaukee, USA Detmar Straub, Georgia State University, USA Karen Loch, Georgia State University, USA Roberto Evaristo, University of Illinois — Chicago, USA Elena Karahanna, University of Georgia, USA Chapter IV. Methodological Issues in MIS Cross-Cultural Research ..................... 49 Elena Karahanna, University of Georgia, USA Roberto Evaristo, University of Illinois — Chicago, USA Mark Srite, University of Wisconsin — Milwaukee, USA Chapter V. The Role of Virtual Multicultural Teams in Corporate Culture ............ 62 Amira El Guindi, Maastricht School of Management, The Netherlands Sherif Kamel, The American University in Cairo, Egypt

Chapter VI. Lines of Advance in Global Information Technology Management: American /West European Approach ......................................................................... 87 Ana R. del Águila, University of Málaga, Spain Sebastián Bruque, University of Jaén, Spain Antonio Padilla, University of Málaga, Spain Chapter VII. Alternative Delivery Mechanisms in Distance Education .................. 112 M. Gordon Hunter, The University of Lethbridge, Canada Peter Carr, Athabasca University, Canada Chapter VIII. New Challenges in Privacy Protection .............................................. 125 Lech J. Janczewski, University of Auckland, New Zealand Section II: Regional Perspectives Chapter IX. Transfer of Information Technology to the Arab World: A Test of Cultural Influence Modeling ..................................................................................... 141 Detmar W. Straub, Georgia State University, USA Karen D. Loch, Georgia State University, USA Carole E. Hill, Georgia State University, USA Chapter X. The IS/IT Outsourcing Phenomenon in the Public Sector of a Developing Country: An Exploration of Critical Issues ........................................... 173 Abdulwahed Moh. Khalfan, College of Business Studies, The Public Authority for Applied Education and Training, Kuwait Tom G. Gough, University of Leeds, UK Chapter XI. Intangible Determinants in the Introduction and Development of Information Technology: Mediterranean Evidence ................................................... 207 Ana R. del Águila, University of Málaga, Spain Sebastián Bruque, University of Jaén, Spain Antonio Padilla, University of Málaga, Spain Chapter XII. An Overview of the Diffusion of Advanced Techniques ...................... 225 Davood Askarany, University of South Australia, Australia Chapter XIII. Critical Strategies for Information Systems Development Projects: Perceptions of Developers from the United States and Japan .................................. 251 Chung S. Kim, Southwest Missouri State University, USA Dane K. Peterson, Southwest Missouri State University, USA Chapter XIV. The State of Teledensity Diffusion in Least Developed Countries: A Review of the Literature ........................................................................................ 268 Victor W. A. Mbarika, Louisiana State University, USA

Chapter XV. Information and Communication Technology in Singapore: Lessons for Developing Nations on the Role of Government .................................... 293 Leo Tan Wee Hin, Nanyang Technological University and Singapore National Academy of Science, Singapore R. Subramaniam, Nanyang Technological University and Singapore National Academy of Science, Singapore About the Authors ..................................................................................................... 312 Index ........................................................................................................................ 318

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Preface This book is the second in a series of books on advance topics in global information management (GIM). GIM research continues to progress, with some scholars pushing the boundaries of thinking and others challenging the status quo. For the benefit of readers not familiar with the topic area, let’s define what global information management research is. GIM research can be broadly considered to be of two types — one that is global and the other regional. GIM is a field of study that examines the development, implementation, management, and use of information systems (IS) in a global/ international context; for example, cultural differences and their impact on various aspects of IS deployment, global sourcing/supply chain management, virtual teams in a multicultural setting, and global e-commerce issues. At the same time, GIM research deals with management, technological and IS use issues in a single- or multi-country organizational environment; for example, IS project experiences in US and Australian organizations, Information Technology (IT) transfer and diffusion in the Arab world, and the role of the government in Singapore’s IT success. Topics of study in GIM research continue to be highly diverse. It is hoped that Volume II will continue to advance our understanding of the field with a selection of research papers on a wide range of GIM topics. As with the first volume, Volume II is organized into two sections — global themes and regional perspectives.

GLOBAL THEMES The chapters in this section explore various IS issues in a global/international setting. The opening chapter by Markus and Soh exhorts GIM scholars conducting research into the effects of national culture on various aspects of IS deployment not to lose sight of structural conditions within which the culture exists, especially since structural conditions vary from country to country. Myers and Tan contend that the concept of national culture that has dominated IS research is too simplistic and challenge scholars to go beyond models of national culture by adopting a more dynamic view of culture. Srite, Straub, Loch, Evaristo, and Karahanna explore an alternate theory-based view of culture via the social identity theory, which suggests that each individual is influenced by a plethora of cultures and subcultures — some ethnic, some national, and some organizational. Karahanna, Evaristo, and Srite present a discussion of methodological issues that are relevant and idiosyncratic to cross-cultural IS research. El Guindi and Kamel report the results of a study that explores the effects of establishing a corporate culture on reducing virtual multicultural team conflicts. del Águila, Bruque, and Padilla suggest some connections between general management theories and global IT management by proposing several lines of advance in global IT

viii

research using different theories or frameworks. Hunter and Carr discuss the impact of technology on the delivery mechanisms employed in distance education and present a framework that describes alternative modes of generic delivery mechanisms. Janczewski presents new challenges in privacy protection in the wake of the September 11, 2001, terrorist attacks on US business and military facilities.

REGIONAL PERSPECTIVES The chapters in this section delve into various IS issues in a single- or multi-country organizational setting. The chapter by Straub, Loch, and Hill documents a study examining the effect of cultural beliefs and values on the transfer of IT in the Arab world. Khalfan and Gough explore the factors that give rise to IT outsourcing and the degree to which they influence the practices, procedures, and outcomes of IT-outsourcing arrangements within the public sector in Kuwait. del Águila, Bruque, and Padilla report on a research into the influence that intangible human and managerial factors have on the level of effective IT implementation in the Pharmaceutical Distribution Industry in Spain. Askarany discusses a variety of factors that influence the diffusion of advanced techniques in organizations. Kim and Peterson explore the cultural differences between Japanese and US developers’ perceptions of the relative importance of 18 strategies that prior research has indicated are important to IS implementation success. Mbarika presents the state of teledensity diffusion in least developed countries, discusses the obstacles to growth of teledensity and proposes a variety of strategies to advance teledensity in these countries. Tan and Subramaniam describe, using Singapore as an example, how governments can make a difference in entrenching a vibrant information and communication technology sector through appropriate policies, programs, and instruments.

ACKNOWLEDGMENTS I am grateful to the authors, without their contributions, this book would not have been possible. I would also like to thank Ms. Jan Travers, Dr. Mehdi Khosrow-Pour, and the team at Idea Group Publishing for their effort and assistance in getting this book to print. Felix B. Tan September 2002

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Section I: Global Themes

Structural Influences on Global E-Commerce Activity 1

Chapter I

Structural Influences on Global E-Commerce Activity M. Lynne Markus Bentley College, USA Christina Soh Nanyang Technological University, Singapore

ABSTRACT An important line of research on global information management examines the effects of national culture on information technology (IT) development, operations, management, and use. This chapter argues that global information management researchers should not lose sight of structural conditions related to business-to-business and business-to-consumer e-commerce activity. Structural conditions are physical, social, and economic arrangements that shape e-commerce business models and influence individual and organizational use of the Internet. Examples include geography (which affects the physical distribution of goods purchased online), space (which influences the choice of access technology for e-commerce), and financial infrastructure (which is related to credit card use). Structural conditions differ from country to country — and even from location to location within country, but they are not necessarily related to dimensions of natural culture. Therefore, valid explanations of global differences in e-commerce activity require a careful assessment of relevant structural factors.

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2 Markus & Soh

INTRODUCTION Information systems (IS) research interest in the global aspects of IT use is growing, partly due to the efforts of publications like the Journal of Global Information Management (JGIM). A popular type of study examines the effect of national culture on IT development, operations, management, and use (Gallupe & Tan, 1999), where national culture is frequently understood in terms of Hofstede’s (1983, 1991) concepts and operationalizations (Davison, 1996). This chapter reminds the IS community not to neglect the structural conditions (Markus & Benjamin, 1997; Orlikowski, 1992) within which IT use occurs. Structural conditions are physical, social, and economic arrangements that shape e-commerce business models and influence individual and organizational use of the Internet. Examples include geography (which affects the physical distribution of goods purchased online), space (which influences the choice of access technology for e-commerce), and financial infrastructure (which is related to credit card use). Structural conditions differ from country to country—and even from location to location within country, but they are not necessarily related to dimensions of natural culture. Therefore, analysis of cultural differences alone is unlikely to provide a satisfactory explanation of global differences in e-commerce activity. Valid explanations of global differences require a careful assessment of relevant structural, as well as cultural, factors. To make this point, we examine a few of the structural conditions likely to influence ecommerce activity that are significantly different in various parts of Asia than they are in the US. The next two sections of the chapter describe structural conditions related to businessto-consumer (B2C) and business-to-business (B2B) electronic commerce activity. The discussion section identifies implications for future research.

BUSINESS-TO-CONSUMER ELECTRONIC COMMERCE In this section, we address the adoption of B2C e-commerce by individuals and the development of B2C e-commerce business models by firms.

Structural Factors in Individual B2C E-Commerce Adoption One structural factor likely to affect IT adoption and e-readiness is the urban-rural distribution of a country’s population. People in rural districts generally have lower levels of access to the IT infrastructure necessary to sustain ordering over the Web; long distances may make “delivery to order” difficult, if not impossible. In North America, urban dwellers comprise 77% of the population; in Asia as a whole the figure is 37% (United Nations Population Division, 1998). But within Asia, there are huge differences. The percent urban is 100% in Singapore, 95% in Hong Kong, 81% in South Korea, 78% in Japan, 54% in Malaysia, 30% in China, 27% in India, and 20% in Thailand (http://www.xist.org/global/urban.htm). It is not surprising, therefore, that the latest Economist Intelligence Unit’s survey ranks largely urban countries or territories like Singapore and Hong Kong high on e-readiness while

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Structural Influences on Global E-Commerce Activity 3

relatively developed countries with a greater proportion of rural population like Taiwan, Japan, and South Korea rank lower (Yang, 2001). Similarly, A. Chen (2001) points out that “while packages in the US can be shipped cross-country in a matter of days…, in China the roads — or lack thereof — mean that, even if B2B e-commerce were to take off, there is no efficient way to deliver products.” (The same holds true for B2C.) By contrast, the big cities of Asia—Hong Kong, Singapore, Taipei, Tokyo, and Seoul — differ from most western urban areas in another dimension that inhibits the proliferation of B2C e-commerce , i.e., the vertical dimension. Most people in Asian cities are housed in highrise building complexes that are miniature cities. (The Mongkok district of Hong Kong is said to be the most densely populated place on earth.) At the base of residential and office buildings, people have access to public transportation and a myriad of conveniences — restaurants and stores selling food, sundries, entertainment items (reading matter, music, videos), clothing, housewares, furniture, jewelry, and more. People hardly need to travel at all to obtain either the necessities or the luxuries of life. And when they do, the businesses they buy from will usually deliver — a practice made practical by the geographic compactness of many Asian cities. The homes in which Asian people live are, on average, extremely small by US standards. In Hong Kong, the typical government-provided flat is a mere 300 square feet — and that flat may accommodate three generations of a family. Even when family income is sufficient to buy a PC, there is often no place at home to put one. Anyway, for obvious reasons, people do not spend much time in their homes. In Singapore, for example, many families take most of their meals in the public eating houses on the ground floors of their housing estates. As a result of such living arrangements, home PC penetration in parts of Asia is low1 (Dedrick & Kraemer, 2000), and Internet use is often more likely to occur in public places than in the home. About half of the people with Internet access in China, for example, log on from Internet cafes (a big business in Beijing!) or other public places — a factor believed likely to dampen prospects for online purchasing (Smith, 2001). Even in Singapore, where 44% of the population has access to the Internet, only 16% of Internet users have conducted purchase transactions online (Kuo, Choi, Mahizhnan, Lee, & Soh, 2001). In the US, where almost two-thirds have access to the Internet, over 50% have transacted online (Cole et al., 2000). The ease of access to most shopping facilities in compact Asian cities reduces the impact of the convenience afforded by Internet shopping. The lack of prior experience with traditional catalog shopping also makes online catalog shopping an unfamiliar proposition. Martinsons (2002) describes the case of Medcox Lane, a Shanghaibased online retailer; the company was founded in 1996 as one of the first mail-order businesses in China. Other structural dimensions contribute to low levels of online purchasing in Asia. Compared to the US, credit cards are used much less in Asia (Dedrick & Kraemer, 2000). In Hong Kong, for example, the generally poor consumer protection regime extends to credit cards; many Hong Kong consumers are liable for the entire amount charged to a stolen credit card before it is reported. There is no $50 limit as in the US. (This is also the case in China.) In Hong Kong stores that accept credit cards, the buyer is often asked if she would pay by cash instead — even when the purchase amount far exceeds what most American consumers would carry on their person. Daily cash withdrawal limits on Hong Kong ATMs are HK$20,000 (roughly US$2,500) — far higher than they are in the US. Ironically, for many small purchases, Asians are much more likely to use electronic payments than people in the US. Smart Card use for public transportation is widespread in both

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4 Markus & Soh

Hong Kong and Singapore. In Singapore, “Cashcards” are used in all vehicles as part of the country’s electronic road pricing scheme where readers mounted on road gantries automatically make deductions from the Cashcard based on the time of day and traffic flow. The ubiquity of Cashcards for both private and public transportation has led to businesses finding other uses for the card, such as for payment in public parking facilities. Hong Kong is also seeking alternative uses for its Octopus transportation payments card, e.g., for food and sundries in transportation-adjacent shopping facilities. While consumption taxes are increasingly being levied in Asia (Australia and Singapore are two recent examples), electronic purchasing does not confer the same tax advantages that it does in the US. Both Australia and Singapore, for example, collect GST on Internet purchases from abroad over a certain amount, and, within Australia, all electronic purchases are subject to GST (Jordan, 2000). The costs of shipping to Asia from the US and within Asia are also much higher than within the US. Typically, shipping costs for consumer purchases from the US to Singapore add another 20% to 25% to the purchase cost. In Hong Kong, Internet purchases also have no tax advantages, but for a different reason — there is no sales tax on purchases made in retail outlets. Another important structural dimension is the distribution of education levels across age groups. The developed countries in the West have a more even distribution of education across age groups, while in Asia, people 40 and older often did not have the opportunity to pursue tertiary education. In Singapore, for example, the proportion of those above 40 years old with a tertiary education is about 5%, compared to 25% for the developed countries in the West. Hence, when we compare Internet use across age groups between Singapore and the US, we find that, for the 18-24 age group, usage rates are quite similar, around 85% for both countries. However, when we compare the 45-55 age group, usage rates are 14% for Singapore and about 70% for the US (Cole et al., 2000; Kuo et al., 2001). In contrast to the adoption of PCs and the Internet, the penetration of mobile technology is much higher in Asia than in the US (Dedrick & Kraemer, 2000). People on the street, in public transportation, in stores, in places of entertainment, even in classrooms, use mobile devices for interpersonal communication, games, and access to information services such as stock quotes and movie listings. Interestingly, there are substantial differences even within Asia as to how these devices are used. In Hong Kong and Singapore, for example, mobile phones ring during every public lecture — even after the usual request for people to turn them off. In Japan, by contrast, people are said to be too polite to offend others by talking on mobile telephones. But the DoCoMo short messaging service is wildly popular there as a way to communicate unobtrusively during long train commutes to work. Altogether then, there are very different structural conditions surrounding individual business-to-consumer e-commerce adoption in Asia than in the US. In the US, many people both live and work far from convenient shopping. They have convenient access to PCs both at home and at work, where they can browse electronic catalogs, order using credit cards, and get a tax advantage for doing so. The average education level is higher. Not surprisingly, many people order and pay for everything from books and groceries to computer equipment electronically. In rural Asia, the barriers to individual e-commerce adoption are great. In Asian cities, many people both live and work close to convenient shopping. While they may not have convenient access to a PC or to the Internet in either location, they may be quite willing and able to use mobile devices for ordering goods and services. They may have a strong preference

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Structural Influences on Global E-Commerce Activity 5

for paying in cash and would receive no tax advantage from ordering electronically. A large proportion of the population 40 years of age or older are relatively less educated and are also less exposed to information technology. Not surprisingly, relatively few people purchase online, but use of mobile electronic information services has great potential.

B2C E-Commerce Business Models Successful Asian B2C e-commerce business models look very different than that of Amazon.com. For example, Japan’s Internet bookstore, e-Shopping!Books allows people to pick up their online purchases at 7-Eleven stores, and some 75% of them do (7-Eleven Japan, 2000). 7Dream.com — 7-Eleven Japan’s own e-commerce venture — involves Internet-based ordering from in-store multimedia terminals that are capable of producing custom music MiniDiscs, printed digital photos, and concert tickets (Williams, 2000). As another example, the Bank of East Asia (BEA), a Hong Kong-based leader in consumer electronic banking, found it necessary to develop seven different technology platforms—in addition to traditional ATMs—to address the structural conditions found in Hong Kong and China (Hui, 2000): • Cyberbanking. Cyberbanking is an online banking service, accessible by PCs and an Internet connection. • Telephone banking. Telephone banking has been widely accepted in Hong Kong since it was first introduced in 1989. BEA’s fully automated voice response system is integrated with its call center. • Mobile phone banking. With one of the highest mobile phone penetration rates in the world, mobile banking is a promising service, and BEA offers access through two major telecommunications operators (PCCW and Hutchison Telecom). • In-bank kiosks. BEA was the first bank in Hong Kong to launch kiosks for banking transactions; the touch-screen device is located in branches and other high traffic locations. • PowerPhones. PowerPhones are multimedia payphones located in subway and train stations, at the airport, and in shopping malls. In addition to payphone service, they provide free access to the Bank’s websites and electronic banking services. • “Web TV” banking. iCare Internet-on-TV requires a set-top box for home access to ebanking services. • Cyber Active Transaction Stations. These Internet-enabled kiosks, which provide direct access to the Bank’s websites, are being pilot tested in two 24-hour convenience stores. In Internet-savvy Hong Kong, this proliferation of banking platforms seems costly and unnecessary. However, the bank plans to expand into China, where PC ownership and personal Internet access are much lower than in Hong Kong. For tapping the China market, mobile phones, kiosks, WebTV, and CATS terminals are likely to be better e-banking platforms, at least in the short term. One of BEA’s platforms is “Cyberbanking” using PC-based Internet access (http:// www.hkbea-cyberbanking.com/index.htm). Many of BEA’s Cyberbanking services are familiar to customers in North America and Europe, e.g., balance inquiry, securities trading, bill payment, funds transfer. But some Cyberbanking services are more advanced than those

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6 Markus & Soh

available elsewhere. In the US, for example, e-banking customers cannot directly transfer funds to another unrelated person’s account or into their own accounts in other financial institutions. BEA’s customers can do so, in multiple currencies. This feature fits Hong Kong’s small geographic size and mobile, international population and reflects the relatively high concentration of banks in Honk Kong compared to the US. Two other BEA Cyberbanking services deserve mention. One is online loan application and approval. BEA claims a fully automated online application, qualification, and approval service for personal loans. All loan processing is done automatically from the customer’s online input; customers are only required to enter a branch and sign forms in person after the loan has been approved. BEA has been gratified by customer acceptance of online lending. In contrast to the often-cited preference of Chinese people to do business in person, it appears that they prefer the face-saving aspects of applying (and learning whether they qualify) for loans anonymously. It is also possible to be qualified and approved for mortgage loans online at BEA. Again, the Bank claims that processing is fully automatic; human intervention is required only when loan documents are signed at the branch. An interesting twist is that customers can also get property valuations online and at no charge via the Bank’s partnership with www.house18.com. House18 maintains a database of a large number of residential properties in Hong Kong. The consumer can type in the address of a property one wishes to buy and receive a valuation that the Bank will accept as the basis for a mortgage loan. Various calculators enable the consumer to estimate payments on mortgages of various terms; it’s a simple step in applying for the mortgage loan. House18 also supports a consumer’s “dream house search” — identification of listed properties meeting various requirements. Other features provide advice and directory listings in such matters as decoration and removals. All in all, BEA provides its customers with a complete real estate package — everything from finding the right property to closing the loan. This capability suits the bank’s Hong Kong clientele, for whom real estate is a favorite investment vehicle. In short, just as structural conditions in Asia promote very different patterns of consumer e-commerce behavior than in the US, structural conditions in Asia promote very different B2C business models. While cultural factors undoubtedly play a role in these e-commerce activity patterns, structural factors also exert independent influences on the observed behavior. The next section examines structural conditions in the context of business-to-business electronic commerce.

BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE In the realm of business-to-business electronic commerce also, notable structural differences exist between Asia and North America. They include the disproportionate contribution of direct goods to final products (80% versus 60% in the US), relatively inefficient and fragmented supply chains, smaller domestic markets, and less developed infrastructure for electronic commerce (Dhawan et al., 2000). Each of these structural differences has a significant influence on the patterns of B2B e-commerce emerging in Asia.

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Structural Influences on Global E-Commerce Activity 7

B2B E-Commerce Business Models — Asian E-Marketplaces Consider e-marketplaces. Many of the more successful Asian B2B e-marketplaces deal in direct goods (that is, primary raw materials), whereas many US e-marketplaces deal in indirect goods (such as office supplies, lubricants, and travel services). Direct goods often pose greater challenges in product specification and cataloging than indirect materials, and emarketplace operators necessarily develop capabilities in this domain. The potential benefits to e-marketplaces — increased supply chain efficiency through reducing the number of intermediaries or through informating the supply chain — are greater in Asia than in the West, where there are already fewer intermediaries and more efficient supply chains. Many Asian e-marketplaces target Asian MNCs and large buyers from the West and seek to link them with smaller Asian suppliers. Finally, the lack of supporting infrastructure in much of Asia means that e-marketplaces have to provide numerous complementary services in the areas of logistics, payments, assurance, and credit checks for a successful launch. These differences are well illustrated by an industry important in both locales — nonferrous metals (e.g., aluminum and copper) (Hempel & Kwong, 2001). In this industry, key structural characteristics plausibly related to e-commerce business models and e-business adoption differ sharply in China and the US, i.e., industry consolidation/fragmentation, spot vs. systematic sourcing patterns, and e-commerce infrastructure. Industry concentration is an important structural condition likely related to e-commerce activity because fragmentation (of buyers, suppliers, or both) is believed to promote the formation of electronic marketplaces and exchanges (Kaplan & Sawhney, 2000). In the US, the 10 largest companies account for 70% of aluminum extrusion production. In China, the 10 largest companies produce only 30%; about 600 small companies account for roughly half of all production. Therefore, one would expect that electronic marketplaces would be more successful in the highly fragmented Chinese nonferrous metals industry than in the US, where the industry is quite concentrated. Industry sourcing patterns — systematic versus spot — are also plausibly related to ecommerce activity, since widespread use of spot purchasing is believed favorable to the use of electronic exchanges (Kaplan & Sawhney, 2000). In the US, systematic sourcing of nonferrous metals predominates, whereas spot purchasing is more common in China. Again, one would expect electronic marketplaces to be more successful in China. However, while both industry fragmentation and spot sourcing patterns favor emarketplace activity, the quality of e-commerce infrastructure does not. The quality of the ebusiness infrastructure differs greatly between China and the US in a direction that bodes ill for the use of electronic marketplaces in China. For example, China lacks a well-functioning electronic payment system (Silwa, 2001). Most business funds transfers involve currency; business checks are uncommon, and use of credit cards is considered an unsound practice. Business interruption insurance is unknown; banks do not provide escrow services to facilitate large transactions; and inventory financing is unavailable (that is, banks do not accept warehouse receipts as collateral for business loans). Chinese businesses have been quite loath to adopt ERP systems and other technologies that formalize and routinize business practices (Martinsons & Hempel, 1995; Silwa, 2000). And Chinese managers are relatively unversed in some modern business practices, such as the use of hedging in the metals industry. These factors would lead one to expect that electronic marketplaces would be much less successful in the Chinese nonferrous metals industry than in the US.

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8 Markus & Soh

These differences in structural conditions mean that a successful electronic marketplace for the nonferrous metals industry in China would have to undertake the development of an infrastructure that its US counterparts take for granted. And, indeed, this pattern of activity can be observed in i-Metal.com, a wholly-owned subsidiary of Global Applied Technologies Holdings (GAT — China’s largest aluminum extruder and fabricator, headquartered in Hong Kong), founded in 2000 to operate an exchange for nonferrous metals industry (Hempel & Kwong, 2001; Lincoln, 2000; Trepp, 2000). i-Metal.com provides members with a full range of commercial services (some still under construction), including industry news and market information, online futures trading via the Shanghai Futures Exchange, online spot trading of primary and scrap metal, catalog and quotation model purchasing, and ancillary services such as transportation and payment. Today, i-Metal.com is well on its way to success. The exchange has over 100 member companies, and trades worth over 1B renminbi (US$120M) have been conducted through the site. But getting there has been challenging. i-Metal.com had to partner with three leading Chinese financial institutions to overcome the barriers to e-commerce in Chinese financial services industry: • i-Metal.com partnered with a leading bank to develop a web-based payment system and to implement procedures for freezing funds (to emulate escrow arrangements — a service not offered by Chinese banks). The company is also working with banks to introduce more flexible inventory financing. • i-Metal.com worked with a leading futures brokerage to enable electronic funds transfers to brokerage accounts for online futures trading. • i-Metal.com worked with the Shanghai Futures Exchange to develop new business practices that would ensure that buyers and sellers would honor their online transactions despite the high price volatility that gives them an incentive to renege. • i-Metal.com worked with warehousing and transportation companies to support critical services ancillary to the online purchasing of physical metals. • i-Metal is working with China Telecom to introduce the use of digital certificates. The point of this example is that there are important aspects of cross-cultural B2B ecommerce activity (both in business model creation and in the adoption or success of these business models) than one cannot understand solely through cultural comparisons. Existence of a supportive banking infrastructure and comfort with credit financing are relevant factors that are not captured in measures of national culture. Like i-Metal.com, many Asian emarketplaces have had to partner extensively in order to assemble the requisite level of supporting infrastructure. Even within a specific area of service, such as logistics or financing, the e-marketplace may have to forge multiple partnerships in order to obtain pan-Asian coverage and the required degree of functionality. By contrast, in the US, many e-marketplaces can take the existence of a supportive infrastructure for granted and devote greater attention to attracting buyers and sellers. The likely consequences for e-marketplace success are clear.

Other Structural Factors in B2B E-Commerce Activity Two other important structural dimensions of the Asian business context are language and family businesses. Billboards (advertising IS consulting services) in the Hong Kong airport and elsewhere in Asia point out that by the year 2007, Chinese will be the number one language of the Web. But which Chinese? Although there are many spoken Chinese dialects,

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Structural Influences on Global E-Commerce Activity 9

there is only one written Chinese language — or, there was only one, until Mao introduced a “simplified” Chinese character set to increase peasant literacy. By now, the two written languages have diverged to such an extent that many overseas Chinese (e.g., Hong Kongers, Taiwanese) who have learned the traditional written language frequently have to guess the meaning of simplified Chinese. Some 20 years ago, Singapore began teaching simplified Chinese in schools — as part of the country’s strategy for building relations with China. In the process, something of a literacy gap has developed between younger and older generations. Clearly, then, the language of an e-business website is a plausible structural factor in its success. (i-Metal.com, the e-marketplace described earlier, supports business in traditional Chinese, simplified Chinese, and English.) Another small, but interesting, structural factor related to language concerns the structure of people’s names. Whereas western names are given first, middle, last, Chinese names are given last, first, middle, and Vietnamese immigration documents require names to be reported last, middle, first. To add to the confusion, when Hong Kong people have both Western and Chinese given names, the names are listed in the following order: [western first name] [Chinese last name] [Chinese first names]. Not surprisingly, customer service workers often have great difficulty parsing names—a factor important in their ability to successfully use software developed in the West (Soh, Sia, & Tay-Yap, 2000). Other, more important, structural factors include the role of family business in Asia, which interacts with the important cultural concepts of guanxi (or quanzi, loosely “connections”) (Chen, 2001; Hempel & Chang, 2002). Family businesses account for a large proportion of businesses in Asia. In Hong Kong and Singapore, for example, considerably more than 90% of businesses have fewer than 100 employees. Asian family businesses differ systematically from the typical mature Western business. For example, Hempel and Chang’s (2002) summary of overseas Chinese business characteristics includes: • simple organizational structures; • growth by opportunistic expansion; • a high degree of strategic adaptability; • centralized decision making, usually by the founder or his immediate family; • very few written guidelines and formal control measures; and • low trust in subordinates. Family businesses tend to be slow in adopting sophisticated information technology, so that B2B e-commerce has not reached many of these companies. The reliance on guanxi also means that there may be a high level of discomfort with the often anonymous or armslength nature of some types of B2B activity. Similarly, Berger and Lester (1997) note that most business financing in Hong Kong comes from relatives and family connections — a factor that places important constraints on patterns of investment and technological innovation. A final important structural difference concerns national policies that may promote or inhibit business-to-business e-commerce. China’s attempts to regulate Internet content are well known (A. Chen, 2001). And differences in national policy regimes have been credited with the greater early success of electronic customs and trade declarations in Singapore than in Hong Kong (Damsgaard & Lyytinen, 1997). In short, as is the case with B2C e-commerce, structural conditions in Asia lead to significantly different B2B e-commerce business models and patterns of e-commerce activity than can be found in the US. Cultural factors certainly play a role in these outcomes, but they

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10 Markus & Soh

cannot provide as satisfactory an explanation alone as they can in combination with structural conditions.

DISCUSSION AND CONCLUSION The examples presented above suggest that global e-commerce activity is strongly shaped by structural conditions — physical, social, and economic factors — in addition to the dimensions of national culture. Examples of key structural conditions are: • financial infrastructure (e.g., electronic payment systems, credit financing); • legal and regulatory infrastructures (e.g., consumer protection legislation, taxation); • national policies about promoting or regulating Internet usage and e-commerce; • space and logistics (e.g., home size, distance to shopping, transportation, warehousing); • telecommunications infrastructure and prices, IT penetration, types of IT used (e.g., PC versus mobile); • local business practices (e.g., purchasing, payment, financing); • language and education; • firm size, structure, and control systems; and • industry concentration. These structural conditions vary from country to country and even within country2. They are not fully captured in measures of national culture (Hofestede, 1983, 1991), and they may not co-vary with measures of national culture. In other words, while the cultural orientations of people in Beijing and Singapore might be similar, the structural conditions in these two locales differ considerably — and so does electronic commerce activity. Therefore, while Hofstede’s cultural measures capture to some extent the differences between eastern and western business practices (Davison, 1996), they do not provide adequate insight into how (in what ways and the processes by which) and why e-commerce activity differs in various parts of the world. For that one also needs an understanding of structural factors. Just how important it is to look beyond broad characterizations of national culture is amply demonstrated by a study of organizational control practices in Chinese joint ventures. Robins and Zhiang (2000) found significant differences between Sino-American and SinoJapanese joint ventures, indicating that the multinational parent, not just the local culture, is an important explanatory factor. The conclusion is that national cultural alone does not make a satisfying explanation of e-commerce activity. Further, an accurate understanding of cross-country (and cross-location within countries) electronic commerce behavior requires careful attention to local structural factors. These observations have several implications for future global information management research. First, the line of argument presented in this chapter suggests the value of systematic research on the relationship between structural factors and various measures of e-commerce activity. Further, one wants to know to what extent do structural factors exert an effect on ecommerce activity independent of cultural dimensions. One type of study addressing such issues would be a multivariate analysis of individual e-commerce purchasing behavior in different locales with average home size, home Internet access, credit card penetration rates, taxation benefits, and cultural dimensions as dependent variables. Another would be a quasi-

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Structural Influences on Global E-Commerce Activity 11

experimental design in which locales are selected for cultural homogeneity but variation on structural factors — hypotheses about effects of structural factors would be tested by pattern matching. Second, an exciting direction for future research is the relationship between certain structural conditions and cultural dimensions. For example, to what extent do local business practices and control systems reflect cultural values? To what extent are they independent of cultural values? In short, structural conditions have important and understudied influences on global ecommerce activity; the study of structural conditions can complement research on cultural factors. Systematic empirical investigation is needed to address this promising line of global information management research.

ENDNOTES 1 2

However, this is not the case in Singapore and Hong Kong. In China, there are vast differences in structural conditions important for e-commerce (e.g., telecommunications access, banking services) between the Southern and Eastern coastal regions and the Northern and Western interior regions.

REFERENCES 7-Eleven Japan: Blending e-commerce with traditional retailing. (2000). The Economist, (May 24). Retrieved August 7, 2001: http://www.ebusinessforum.com/ index.asp?layout=rich_story&doc_id=3544. Berger, S. & Lester, R.K. (eds.)(1997). Made by Hong Kong. Oxford, UK: Oxford University Press. Chen, A. (2001). Scaling the wall. eWeek, (June 18). Retrieved August 7, 2001: http:// www.zdnet.com/eweek/stories/general/0,11011,2773643,00.html. Chen, M.-J. (2001). Inside Chinese business: A guide for managers worldwide. Boston, MA: Harvard Business School Press. Cole, J. I. et al. (2000). The UCLA Internet report: Surveying the digital future. Retrieved August 7, 2001 from University of California, Los Angeles, Center for Communication Policy: http://www.ccp.ucla.edu./pages/internet-report.asp. Damsgaard, J. & Lyytinen, K. (1997). Hong Kong’s EDI bandwagon: Derailed or on the right track? In T. McMaster, E. Mumford, B. Swanson, B. Warboys, & D. Wastell (Eds.), Facilitating technology transfer through partnership: Learning from practice and research, (pp. 39-63). London: Chapman and Hall. Davison, R. M. (1996). National cultures, organisational forms and group support systems. Retrieved August 7, 2001 from City University of Hong Kong Website: http:// www.is.cityu.edu.hk/Research/Publication/paper/9607.pdf. Dedrick, J. & Kraemer, K. L. (2000). Japan e-Commerce report. Retrieved August 7, 2001 from University of California, Irvine, Center for Research on Information Technology and Organizations (CRITO) Website: http://www.crito.uci.edu/git/. Dhawan, R., Mangaleswaran, P., Padhi, A., Sankhe, S., Schween, K., & Vaish, P. (2000). The Asian difference in B2B. McKinsey Quarterly (Asia), 4. Retrieved August 7, 2001 from http://www.mckinseyquarterly.com. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Gallupe, R. B. & Tan, F.B. (1999). A research manifesto for global information management. Journal of Global Information Management, 7(3), 5-18. Hempel, P. S. & Chang, C.-Y. D. (2002). The changing management culture of Taiwan: Reconciling traditional Chinese management with high-technology business. Human Resource Management Journal, 12(1), 77-95. Hempel, P. S. & Kwong, Y. K. (2001). B2B e-commerce in emerging economies: i-Metal.com’s nonferrous metals exchange in China. The Journal of Strategic Information Systems, 10(4), 335-355. Hofestede, G. (1983). The cultural relativity of organizational practices and theories. Journal of International Business Studies, 63, 75-89. Hofstede, G. (1991). Cultures and organizations: Software of the mind. New York: McGraw Hill. Hui, V. (2000). Electronic banking at the Bank of East Asia. Presentation given at the City University of Hong Kong, November 10. Jordan, E. (2000). Leading edge e-commerce in Australia. Presentation given at the City University of Hong Kong, October 26. Kaplan, S. & Sawhney, M. (2000). E-hubs: The new B2B marketplaces. Harvard Business Review, 78(3), 97-100+. Kuo, E., Choi, A., Mahizhnan, A., Lee, W.-P., & Soh, C. (2001). Singapore Internet project: Key findings of 2000 adult survey. Nanyang Technological University. Lincoln, A. (2000, October). Bank to the future. [Electronic version]. CFO Asia. Retrieved August 7, 2001 from http://www.cfoasia.com/archives/200010-45.htm. Markus, M. L. & Benjamin, R. I. (1996). Change agentry - The next IS frontier. MIS Quarterly, 20(4), 385-407. Martinsons, M. G. (2002). Electronic commerce in China: Theory and emerging success stories. Information and Management, 39(7), 571-579. Martinsons, M. G. & Hempel, P.S. (1995). Chinese management systems: Historical and crosscultural perspectives. Journal of Management Systems, 7(1), 1-11. Orlikowski, W. (1992). The duality of technology—Rethinking the concept of technology in organizations. Organization Science, 3(3), 398-427. Robins, J. A. & Zhiang L. (2000). Institutional influences on organizational control: A comparative examination of agency theory in Sino-Japanese and Sino-American joint ventures. Advances in International Comparative Management, 12, 119-148. Silwa, C. (2001). China: The Web’s next frontier, Computerworld, (May 28). Retrieved August 7, 2001 from http://www.computerworld.com/cwi/story/ 0,1199,NAV47_ STO60907,00.html. Smith, C. S. (2001). Across China, new economy is being absorbed into the old. The New York Times on the Web, (July 6). Retrieved August 7, 2001 from http://www. nytimes.com. Soh, C., Sia, S.-K., & Tay-Yap, J. (2000). Enterprise resource planning: Cultural fits and misfits: Is ERP a universal solution? Communications of the ACM, 43(4), 47-51. Trepp, L. (2000). i-Metal.com: China’s first mover in futures trading and spot procurement of nonferrous metals over the Internet. Philadelphia, PA: Electronic Market Center, Inc. Retrieved August 7, 2001 from http://www.netmarketmakers.com. United Nations Population Division. (1998). Urbanization Prospects 1998 Revision- Key Trends. Retrieved August 7, 2001 from http://www.undp.org/popin/wdtrends/ wdtrends.htm#Population & Development.

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Structural Influences on Global E-Commerce Activity 13

Williams, M. (2000). Seven Eleven Japan, others to launch e-commerce JV. IDG.net, (January 6). Retrieved August 7, 2001: http://www.idg.net/ec?idgns_path=%2Fidgns%2F2000% 2F01%2 F06%2FSevenElevenJapanOthers ToLaunch%2E. Yang, M. (2001). Asia: E-ready or not? MISweb Online. Retrieved August 7, 2001 from http:/ /www.misweb.com/.

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14 Myers & Tan

Chapter II

Beyond Models of National Culture in Information Systems Research Michael D. Myers University of Auckland, New Zealand Felix B. Tan University of Auckland, New Zealand

ABSTRACT Many IS scholars argue that global organizations need to understand cultural differences if they are to successfully deploy information technology. We agree that an understanding of cultural differences is important, but suggest that the concept of “national culture” that has tended to dominate the IS research literature is too simplistic. In this article, we challenge information systems researchers to go beyond models of national culture. We propose that IS researchers should adopt a more dynamic view of culture – one that sees culture as contested, temporal and emergent.

INTRODUCTION Over the past decade there has been increasing interest in the IS research literature in the impact of cultural differences on the development and use of information and communications technologies. Since many companies are now doing business beyond their national

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Beyond Models of National Culture 15

boundaries – and these global activities are facilitated and supported to a large extent by current communications and information technologies – it is important to understand the impact of cultural differences on these activities (Ives & Jarvenpaa, 1991; Shore & Venkatachalam, 1995; Tractinsky & Jarvenpaa, 1995). Many have argued that transnational organizations need to understand cultural differences if they are to successfully deploy IT throughout the world (Applegate, McFarlan, & McKenney, 1999; Harris & Davison, 1999; Tan, Watson, & Wei, 1995). While we agree that an understanding of cultural differences is important, we believe that attempting to understand these cultural differences in terms of “national culture” is overly simplistic. By far the majority of studies concerned with various cultural aspects of the development, implementation, use and management of IT have relied on Hofstede’s (1980; 1991) model of national culture (e.g., Keil et al., 2000; Straub, 1994; Tan et al., 1995; Watson, Ho, & Raman, 1994). But Hofstede’s concept of national culture – which assumes that cultural differences are in some way aligned with the territorial boundaries of the nation state–is problematic. It glosses over the fact that ethnic and cultural groups can exist across many nations, just as it glosses over the existence of cultural and ethnic differences within nations (Harris & Davison, 1999; Huo & Randall, 1991; Peppas, 2001). Our argument is that the concept of national culture is theoretically weak and ignores some of the facts of history. We suggest that IS researchers should move beyond the concept of “national culture” to one that recognizes the emergent and dynamic nature of culture. If there is such a thing as “national culture,” then it is something that is invented and re-invented and always in a state of flux. This article is organized as follows. We begin with a review of the IS literature on national culture. Here we show that many IS researchers have taken the concept of national culture as given. We then provide an overview of the concept of national culture and consider its various definitions and dimensions. In the ensuing section, we critique the concept of national culture and argue that it ignores the facts of history and has little explanatory power. In the next section, we propose that IS researchers interested in conducting research on culture and globalisation should adopt a more dynamic view of culture – one that sees culture as contested, temporal and emergent. The final section is the conclusion.

INFORMATION SYSTEMS RESEARCH AND NATIONAL CULTURE In this first section we provide a brief review of the IS literature on national culture. Here we show that many IS researchers have taken the concept of national culture for granted. In a recent survey of global IT research, Gallupe and Tan (1999) found that a wide variety of IS issues have been studied from a national culture perspective. Much of the IS research using the concept of national culture is summarised in Table 1. From Table 1 it can be seen that most of the IS research into the effects of national culture has relied on Hofstede’s (1980, 1991) dimensions to test and validate propositions relating to a variety of IS issues. Of the 36 studies listed, 24 used some or all of Hofstede’s dimensions. It would appear that most IS researchers have taken the concept of national culture as given (although a small number also recognise the limitations of Hofstede’s model). Generally, these studies agree that culture is important and an understanding of culture and its impact can lead to successful IT deployment in a global setting. For instance, the results Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

16 Myers & Tan

Table 1: IS Research on National Culture Authors (Burn, Saxena, Ma, & Cheung, 1993)

Cultural Dimensions Explored Individualism, Uncertainty Avoidance, Power Distance, & Masculinity

(Cummings & Guynes, 1994) (Ein-Dor, Segev, & Orgad, 1993)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity Economic, Demographic, & Socio-psychological

(Garfield & Watson, 1998)

Uncertainty Avoidance, & Power Distance

(Harvey, 1997)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity Ethnographic Approach

(Hasan & Ditsa, 1999)

Individualism, Uncertainty Avoidance, Power Distance, Masculinity, Time Orientation, Context, Mono/Polymorphic & Mono/Polychrony

(Hill, Loch, Straub, & El-Sheshai, 1998) (Hofstede, 2000)

Critical Approach - No Predefined Cultural Dimensions Tested Individualism, Uncertainty Avoidance, Power Distance, & Masculinity

(Hunter & Beck, 2000)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity

(Keil et al., 2000)

Uncertainty Avoidance

(Keil, Mixon, Saarinen, & Tuunainen, 1994/1995)

Uncertainty Avoidance

(Lally, 1994) (Martinsons & Westwood, 1997)

Individualism Culture in General

(Mcleod et al., 1997)

Individualism, Uncertainty Avoidance, & Power Distance

(Mejias, Shepherd, Vogel, & Lazaneo, 1997)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity

(Menou, 1983)

Objective/Subjective

(Milberg, Burke, Smith, & Kallman, 1995)

Individualism, Uncertainty Avoidance, & Power Distance

(Moores & Gregory, 2000)

Avoidance of Group Debates & Use of Multiple Languages

(Niederman, 1997)

(Png, Tan, & Wee, Forthcoming)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity Individualism, Uncertainty Avoidance, Power Distance, & Masculinity Uncertainty Avoidance & Power Distance

(Robey & Rodriguez-Diaz, 1989)

Culture in General

(Shore & Venkatachalam, 1994)

Power Distance & Uncertainty Avoidance

(Palvia & Hunter, 1996)

Topic Studied IS and Culture - top management issues in HK

HQ versus subsidiaries Effect of National Culture on IS Impact of National Culture on National Information Infrastructure Comparing GIS Designs and Implementation between USA and Germany National Culture and the Adoption of IT

IT transfer in Arab Culture Effects of differences in National Culture within MNCs Cultural differences in the perception of the qualities of ‘excellent’ systems analyst Effect of National Culture on project risk propensity/perception Effect of National Culture on escalating commitment to IT projects Emerging technologies MIS in Chinese Business Culture Views of CIO roles and IRM process Perceived satisfaction and consensus levels in GSS/non-GSS Impact of culture on information generation, presentation, and use Information Privacy and Culture Cultural problems in applying Soft Systems Methodology Comparing US and Mexican GSS facilitators’ views IS development methods Culture and corporate adoption of IT infrastructure MNC implementation in Latin America Cross culture transfer of IS applications

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Beyond Models of National Culture 17

Table 1: IS Research on National Culture (continued) (Shore & Venkatachalam, 1995)

Uncertainty Avoidance & Power Distance

(Straub, 1994)

Uncertainty Avoidance & Language Style

(Tan et al., 1995)

Power Distance

(Tan, Wei, Watson, Clapper, & McLean, 1998)

Individualism

(Tan, Wei, Watson, & Walczuch, 1998)

Power Distance

(Thanasankit & Corbitt, 2000)

Ethnographic Approach - No Predefined Cultural Dimensions Tested

(Trauth, 2001)

Ethnographic Approach – No Predefined Cultural Dimensions Tested

(Trauth & Thomas, 1993) (Tricker, 1988)

Bottom up / top down Family Orientation

(Walczuch, Singh, & Palmer, 1995)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity

(Watson & Bracheau, 1991)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity Individualism & Power Distance

(Watson et al., 1994) of GSS (Watson, Kelly, Galliers, & Brancheau, 1997)

Individualism, Uncertainty Avoidance, Power Distance, & Masculinity

Culture in Systems Analysis and Design Diffusion of IT across cultures GSS to dampen power distance effects National Culture, majority influence & Computer-mediated Communication National Culture, status influence & Computer-mediated Communication Cultural Context and its Impact on Requirements Elicitation in Thailand Influences and Impacts of Cultural, Economic and Political Factors in the Republic of Ireland Global EDI Cross-Cultural Information Resource Management Cultural motivations for transborder data flow legislation Key issues in IS management Culture as a 4th Dimension Concerns of IS executives across nations

of a study on the impact of computer-mediated communication (CMC) on majority influence were contingent on national culture (Tan, Wei, Watson, Clapper et al., 1998). The authors found significant differences between individualistic (US) and collectivistic (Singa-pore) cultures in the way CMC dampens or strengthens majority influence in a group setting. Utilizing Hofstede’s (1980, 1991) uncertainty avoidance dimension of culture, Keil et al. (1994/ 1995) found discern-able differences between Finnish and US experiments relating to escalation of commitment to IT projects. The authors argue that although it was tempting to conclude that the observed outcome was due to differences in uncertainty avoidance, there may be other cultural and non-cultural factors involved due to the design of the experiment. While the above examples have taken the quantitative approach, there are some (although very few) that have gone into the study with no predefined cultural archetypes. For instance, Hill et al. (1998) used a critical approach in a study of IT transfer in Arab nations. They found that specific components of Arab culture and society have an influence on how IT is viewed and the extent to which it is utilized. In an ethnographic study, Thanasankit and Corbitt (2000) argue that understanding the nature of the impact of Thai culture on requirements engineering processes can ensure that project failure due to poor understanding of requirements for systems would be lessened.

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18 Myers & Tan

THE CONCEPT OF NATIONAL CULTURE In this section we provide a brief overview of the concept of national culture and consider its various definitions and dimensions. Groeschl and Doherty (2000) point out that culture is complex and very difficult to define: “Culture consists of several elements of which some are implicit and others are explicit. Most often these elements are explained by terms such as behaviour, values, norms, and basic assumptions” (p. 14). The theories of national culture that have gained prominence over the last few decades have concentrated mostly on the study of cultural values (Jackson, 1995). These include those of Hall (1959; 1960), Hofstede (1980; 1991), and more recently, Trompenaars (1993). Morden (1999) identifies three categories of national culture models: • single dimension models • multiple dimension models • historical-social models Using Morden’s categorization, we have listed some models of national culture and their dimensions in Table 2. As can be seen from Table 2, national culture has been defined in a myriad of ways. Erez and Earley (1993) provide a comprehensive discussion of the differences among some of these definitions. Although there are many different definitions of national culture, most IS research has tended to rely almost solely on Hofstede’s definition. This is perhaps not surprising, given that Hofstede’s typology of culture has been one of the most popular in many different fields of management. Sondergaard (1994), using data from the Social Science Citation Index (SSCI), found 1036 quotations from Hofstede’s work in journals during the period 1980 to September 1993. Clearly, Hofstede’s work has had a significant influence on management studies in general and IS research in particular. The rest of this paper will therefore focus on Hofstede’s model of national culture, although many of our criticisms of Hofstede’s model apply equally well to most of the other models. Hofstede defines national culture as “the collective programming of the mind which distinguishes the members of one group or category of people from another” (Hofstede, 1991, p. 5). He suggests that people share a collective national character that represents their cultural mental programming. This mental programming shapes values, beliefs, assumptions, expectations, perceptions and behaviour. We believe it is important to understand how Hofstede developed his particular model of national culture. Hofstede arrived at his conclusions about the importance of national culture without conducting any empirical research himself. Rather, the data he used had already been collected by IBM as part of two worldwide rounds of employee attitude surveys. As Hofstede himself describes: The data consisted of answers to questionnaires about employee values and perceptions of the work situation that were collected in the context of two worldwide rounds of employee attitude surveys. Their use for studying differences in national cultures was an unintended, serendipitous by-product, for which the corporation opened its files of 116000 survey questionnaires collected between 1967 and 1973 (Hofstede et al., 1990, p. 287).

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Beyond Models of National Culture 19

Table 2: Models of National Culture Models Single Dimension

Multiple Dimensions

Historical Social

Source Hall, 1960, 1976; Hall & Hall, 1990 Lewis, 1992 Fukuyama, 1995 Triandis, 1995 Bottger, Hallein, & Yetton, 1985 Hofstede, 1980, 1983, 1991; Hofstede, Neuijen, & Ohavy, 1990

Cultural Dimensions High Context - Low Context Monochronic - Polychronic High Trust - Low Trust Idiocentric - Allocentric Monomorphic and Polymorphic Power Distance, Uncertainty Avoidance, Individualism - Collectivism, Masculinity - Femininity

Hampden-Turner & Trompenaars, 1994

Universalism - Particularism Analyzing - Integrating Individualism - Communitarianism Inner-directed - Outer-directed Time as sequence - Time as synchronization Achieved Status - Ascribed Status Equality - Hierarchy

Lessem & Neubauer, 1994

Pragmatism - Idealism/Wholism Rationalism - Humanism

Kluckhohn & Strodbeck, 1961

Free Will - Determinism Accumulation of Wealth - “Just Enough”

Newman, Summer, & Warren, 1977

Bloom, Calori, & de Woot, 1994

Improvement - Maintaining Status Quo Social Action - Maintaining Relationship Merit-based - Relationship-based Wide Sharing - Non-Sharing Objective - Emotional Euromanagement Model

Chen, 1995; Cragg, 1995; Seagrave, 1995

South East Asian Management Model

We can see, therefore, that Hofstede did not study national culture directly, nor was the data collected with this in mind. Rather, as Tayeb (1994) points out, “culture was used as an explanation after the findings revealed interesting patterns. In other words, the study was not planned in advance as an investigation into effects of culture on organizations and their members.” The data used by Hofstede was limited in other ways. Hofstede says that the survey data was collected from 40 organisations across 40 different countries. However, 39 of the organisations were subsidiaries of the same US-based multinational (IBM). The 40th organisation was not a subsidiary but imported and serviced IBM’s products in Yugoslavia. As Huo and Randall (1991, p. 159) describe, the 116,000 respondents within IBM thus “shared the same corporate superstructure and policies, belonged to the same occupational categories, did the same kind of work, were of the same educational level and varied only marginally in age and gender.” Additionally, almost all respondents were male (Nicholson & Stepina, 1998), and had been trained by IBM and shared the same IBM corporate culture. Thus, the sample

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20 Myers & Tan

data was not representative of people in the respective countries. Not surprisingly, his methodology has received considerable criticism (Korman, 1985; Robinson, 1983). Subsequently, Hofstede developed a survey instrument called the “Value Survey Module” (VSM). Hofstede (1983) also increased his database to 50 nations. The value of the VSM is claimed to be as follows: The VSM permits the culture of a country to be summarised across a limited number of common dimensions. As comparisons across countries are controlled by matching respondents on age, gender, education, and percentage of the respondents who hold positions in higher management, it is assumed that systematic and stable differences between respondents from different countries can only be explained by the culture of the country (Huo & Randall, 1991).

A CRITIQUE OF THE CONCEPT OF “NATIONAL CULTURE” A fundamental assumption of Hofstede’s work is that there is such a thing as “national culture.” The unit of analysis is deemed to be the nation-state, and each nation is assumed to have its own culture. It is argued that the VSM permits the culture of each country to be summarised across a limited number of dimensions. We suggest, however, that the fundamental assumption upon which Hofstede’s work is based in questionable. Some of the problems with using “national culture” are as follows. First, the nation-state is a relatively recent phenomenon - it did not exist for the greater part of human history. “Before the close of the 19th century, the effective mobilization of governmental powers on a national basis had occurred only in Europe, the United States, and Japan. It was not until the 20th century and the collapse of the Ottoman, Habsburg, French, and British empires that the world could be fully organized on a national basis” (Encyclopaedia Britannica DVD, 2000). In fact, it is only in the last 100 years that most nation-states have been formed. Thus, there appears to be a mismatch between the nation-state (which is a recent phenomenon) and culture (which in some cases has existed for thousands of years, e.g., Confucianism). Second, the nation-state has continued to change in its form and makeup. For example, a host of new nation-states have been formed in recent years, such as those that were formed as a result of the break up of the Soviet Union after the Cold War, or those that we formed as a result of the Balkan wars. Also, many older nation-states have experienced dramatic changes in their population and ethnic composition. For example, many European nations now have significant numbers of immigrants from Asia. Thus, not only have the physical boundaries of many nation-states changed in recent years, but so has the ethnic and racial mix within them. Groeschl and Doherty (2000) point out that with globalization, individuals today have much more opportunity to live and work within cultures different to their own. This can lead them to embrace, to different extents, some of the cultural values and basic assumptions shared by the host culture. Third, the idea that each nation-state has its own distinct culture is not correct. We do not believe that there is any necessary alignment between a nation-state (which is a political entity) and culture. For example, the nation-states of India, Switzerland and Yugoslavia all came

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Beyond Models of National Culture 21

into existence without any common basis in race, language, or culture (Encyclopaedia Britannica DVD, 2000). In Africa and Asia, many of the nation-states were created by the colonial powers without any regard for cultural or tribal differences. Many nations are composed of more than one culture and/or many sub-cultures (Huo & Randall, 1991; Peppas, 2001), and the same cultural group may span multiple countries. As an example of the former, the nation of Vanuatu in the South-West Pacific is comprised of people who speak over 110 different languages (Tonkinson, 1982). As an example of the latter, there a millions of Chinese who do not live in China. Tayeb says that: The nation state is essentially a western-and northern-European invention; elsewhere the nation state is a novelty, and corresponds even less to any sense of cultural homogeneity or identity. Throughout history, national political boundaries have been arbitrarily drawn, cutting across cultural/linguistic groupings. They are internally riven by divisions of class, region, and ethnicity. They also change over time (Tayeb, 1994, p. 431). Fourth, Hofstede’s view of culture – that culture is something which identifies and differentiates one group or category of people from another – is not a view that finds much support in the contemporary anthropological research literature. As Billing says, the view of culture expressed by the new cultural determinists such as Hofstede “tends to be the static, synchronic version beyond which anthropology has largely progressed” (Billig, 1994, p. 659). Avison and Myers (1997) point out that the particular view of culture represented by Hofstede – which happens to be the predominant view of the culture in the IS research literature–is not significantly different from Ruth Benedict’s formulation of the culture concept in her book “Patterns of Culture” published in 1934. Carrithers, in summarizing Benedict’s view, says that Benedict thought of the human world as composed of separate, distinguishable entities. Each culture was thought to be a natural kind, just as entities of the physical world – kinds of plants, kinds of animals, kind of minerals – are natural kinds. Benedict’s imagery was “something like that of exhibits in a museum, where one finds an array of distinct, separate, integral objects, each unique and yet each sharing some essential attribute with the others” (Carrithers, 1992, p. 17). However, in the intervening sixty years anthropologists have largely rejected the idea of culture as having hard and fast boundaries. Although there is much disagreement and there is a range of perspectives that operate concurrently, anthropology as a discipline has long since moved on from Benedict’s museum-like view of culture (Avison and Myers, 1997). Contemporary anthropologists have moved away from a static view of culture to one where “culture is contested, temporal and emergent” (Kahn, 1989, p. 13). Culture is seen as something that is interpreted and re-interpreted, and constantly produced and reproduced in social relations. Fifth, an increasing number of researchers have found that the relationship between “national” cultural values and culturally-influenced work-related values and attitudes is extremely complex and not well explained by Hofstede’s model. Tayeb (1994) conducted an in-depth study of the societal culture and work organization in three “collectivist” nations, Japan, India and Iran. He found that people in India and Iran do not behave as Hofstede’s model would lead one to expect.

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22 Myers & Tan

These societies are characterized by, among others, a strong sense of the group and the community. A typical Japanese, Indian or Iranian person is very loyal to his or her own group or team, and places the interest of the group before his or her own interests. On the face of it, one would expect to see this characteristic— collectivism—to have been carried over into their work organizations, in the form of, for instance, hard work and a high degree of commitment, dedication and emotional attachment to the company. However, a closer examination of societal cultures, employees’ attitudes and values, and the management structure of work organizations in these countries (Tayeb 1979, 1988, 1990) reveals that it is only in Japan where the collectivism of Japanese culture has been carried over into its companies. The Iranians and Indians as employees are as detached from their work organizations and have as individualistic a relationship with their work places as any individualistic nation. There are, of course, several cultural and non-cultural reasons for this, but the reasons will reveal themselves only through a careful and detailed study of these nations and their organizations (Tayeb, 1994). Winch et al. (1997), using a cultural values instrument taken from Hofstede together with a behavioral instrument derived from Van de Ven, compared the cultural values of British and French managers working on the Channel Tunnel project. The results largely replicated the findings of Hofstede regarding cultural values, but did not support the predicted implications for behavior. In essence, the British were found to be more bureaucratic and more team-oriented than their French counterparts, who tended to be more competitive. The authors suggest their results indicate that the relationship between culture and behavior might be more complicated than research to date suggests (Winch et al., 1997). Harvey, who compared the designs of geographic information systems (GIS) in a German and a US county in order to evaluate Hofstede’s cultural dimensions, found that “Hofstede’s dimensions of national culture are a good basis for understanding the influence of national culture on organizations’ self-representation, but miss the actual practice of social activities.” He recommended an ethnographic-based reconsideration of Hofstede’s framework with “an emphasis on negotiations and the web of relationships between cultures, institutions, and disciplines in practice (Harvey, 1997, p. 145). Lastly, Yeh and Lawrence (1995) found that the simple model presented by Hofstede and associates did not allow for an understanding of the complex interrelationships that link culture and economic growth. In their review of studies looking at the relationship between economic growth and Confucianism, they concluded that “the findings from these studies do not greatly enhance our understanding of the relationship between culture and economic growth and may actually mislead us.”

A RESEARCH AGENDA FOR GLOBAL INFORMATION SYSTEMS AND CULTURE We have argued that there is no necessary alignment between culture and the nationstate, for a variety of reasons. In this section, therefore, we propose that IS researchers interested in conducting research on culture and global information systems should adopt a more dynamic view of culture – one that sees culture as contested, temporal and emergent.

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Beyond Models of National Culture 23

We propose a research agenda for global information systems that takes seriously the idea that culture is complex and multidimensional and can be studied at many different levels. It can be studied at the international (e.g., West vs. East), national, regional, business, and organisational levels of analysis (Fan, 2000), and these levels are often inter-connected and intertwined. Redding (1994) says that the comparative management literature as a whole suffers from an excess of simple empirical reportage, and is theoretically weak at the middle and higher levels. We suggest that Redding’s criticisms of much of the research on national culture in the management literature apply equally well to much of the IS research literature on national culture. This paper can be seen as a call for much stronger theoretical development in the area of culture and global information systems. As well as calling for stronger theoretical approaches, we also make a call for an improvement in the research methodologies used to study culture and global information systems. Tayeb says that the enthusiasm for, and interest in, cross-cultural research has not generally been matched by careful attention to the design and methodologies required to conduct such research (Tayeb, 1994). We agree, and call for IS researchers to conduct more in-depth case studies and ethnographies of the relationship between IT and culture in many different parts of the world. D’Iribarne, who compared the work of Hofstede using questionnaire surveys with his own ethnographic research in three countries, found that an ethnographic approach to international comparisons between organizations, even if it involves much smaller samples, “leads to a more certain and precise understanding of the societies under investigation” (d’Iribarne, 1996/1997, p. 30). An exemplar in IS research of the use of ethnography is Trauth’s study of the influences and impacts of culture, economic and political factors on the information economy in the Republic of Ireland (Trauth, 1997, 1999, 2000; Trauth & O’Connor, 1991). In her ethnographic research, Trauth combined a number of data gathering methods – participant observation, open-ended interviews and documentary analysis. A reflexive approach also permitted Trauth to refocus and make changes as the research progressed – as answers to questions influenced the direction of later questions. Trauth argued that her study could be viewed as an in-depth case study, but at the level of an entire society. A discussion of the decisions leading to the choice of the ethnographic methods and details of the challenges and lessons learned in employing ethnography are presented in Trauth and O’Connor (1991) and Trauth (1997). A broader treatment of qualitative research in IS, including case study and ethnography, can be found in Trauth (2001). Other researchers have also used multiple data gathering methods to study culture. For instance, Hasan and Ditsa (1999), in an interpretive study of the impact of culture on the adoption of IT in Australia, Middle East and West Africa, used interviews, document analysis and observation. Similarly, Hill et al. (1998) used focus groups and open-ended interviews in an attempt to identify the salient cultural factors that enhance or obstruct the transfer of IT in Arab countries. As can be seen, we are not suggesting that culture can only be studied via qualitative approaches such as ethnography. Nor are we suggesting that the concept of national culture should be abandoned altogether. But if there is such a thing as national culture, then we suggest it is something that is continually invented and re-invented (often by politicians). It is, in effect, a moving target. A good example of national culture being a “moving target” is the nation of Vanuatu in the South-West Pacific. As mentioned previously, this country is comprised of people who

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24 Myers & Tan

speak over 110 different languages. When this country achieved independence from Britain and France in 1980, the new government saw the task of creating a national identity as one of its biggest priorities. As part of this it emphasized one language as a unifying force (Bislama, or pidgin English), and it also re-invented “traditional culture” as something that united rather than divided the new nation (Tonkinson, 1982). The key point here is that there was no such thing as a national identity or national culture among the indigenous people before the 1970s. This only emerged within the past 30 years. Another good example of how national culture is a moving target is the case of Singapore. In recent years senior government ministers have set out to mandate cultural change in Singapore, as can be seen in the following statement: Handsome rewards await those who dare to take risks, says PM. SINGAPOREANS have to be more entrepreneurial and less averse to taking risks if they want to succeed in the global economy, said Prime Minister Goh Chok Tong (Straits Times, Feb. 4, 2000). The government of Singapore feels that Singaporeans have to become more entrepreneurial. This approach has led to the development of a government program to encourage “technopreneurship.” It has also led to plans to change the educational curriculum so as to better develop creativity and problem solving ability. The two examples above show that national culture is not as straightforward a concept as one might think. Culture is much more dynamic than has been assumed in much of the comparative management and IS research literature. We suggest a research agenda that adopts a more dynamic view of the relationship between culture and global information systems – one that does not simply take culture as given and one which uses appropriate research methodologies to develop thick descriptions of the culture and its impact on IT development, implementation, management and use.

CONCLUSION We have suggested that the concept of national culture is problematic. In our view there is no necessary alignment between culture and the nation-state. The nation-state is a relatively recent invention and has changed in its form and makeup. Also, many nation-states do not have a common basis in race, culture or language. Our view is that many of the studies purporting to study national culture are simplistic and tend to suffer from theoretical and methodological flaws. We agree entirely that culture is an important topic of research for global information systems. As Smith says, given the global nature of competition, managers need to be able to interact with those who possess different values and work orientations. However, we also agree with Smith when he says that “we need a better understanding of such cross-cultural diversity for the management of multi-cultural organisations” than what is currently offered by the somewhat simplistic models of national culture (Smith, 1998). Despite the popularity of the Hofstede framework, the representation of culture as a limited set of aggregate dimensions ignores a variety of other important factors (Smith, 1998) and in many ways is misleading (Yeh & Lawrence, 1995). Given the theoretical and methodological weaknesses of much of the work in this area, we challenge information systems researchers to go beyond simplistic models of national Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

Beyond Models of National Culture 25

culture. We propose that IS researchers should adopt a more dynamic view of culture – one that sees culture as contested, temporal and emergent.

ACKNOWLEDGMENTS We are grateful to K. S. Raman for providing us with the reference to cultural change in Singapore.

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Beyond Models of National Culture 27

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Contemporary Approaches and Emergent Traditions (pp. 131-144). Amsterdam: North-Holland. Trauth, E. M., & Thomas, R. S. (1993). Electronic data interchange: A new frontier for global standards policy. Journal of Global Information Management, 1(4), 6-27. Triandis, H. C. (1995). Individualism & Collectivism. Boulder, Colorado: Westview Press. Tricker, R. I. (1988). Information resource management - A cross cultural perspective. Information & Management, 15(37-46). Trompenaars, F. (1993). Riding the Waves of Culture. Lodon: Nicholas Brealey. Walczuch, R. M., Singh, S. K., & Palmer, T. S. (1995). An analysis of the cultural motivations for transborder data flow legislation. Information Technology & People, 8(2), 37-58. Watson, R. T., & Bracheau, J. C. (1991). Key issues in information systems management: An international perspective. Information & Management, 20, 213-223. Watson, R. T., Ho, T. H., & Raman, K. S. (1994). Culture: A fourth dimension of group support systems. Communications of the ACM, 37(10), 44-55. Watson, R. T., Kelly, G. G., Galliers, R. D., & Brancheau, J. C. (1997). Key issues in information systems management: An international perspective. Journal of Management Information Systems, 13(4), 91-115. Winch, G., Millar, C., & Clifton, N. (1997). Culture and organization: The case of TransmancheLink. British Journal of Management, 8(3), 237-249. Yeh, R., & Lawrence, J. J. (1995). Individualism and Confucian dynamism: A note on Hofstede’s cultural root to economic growth. Journal of International Business Studies, 26(3), 655669.

This article was previously published in the Journal of Global Information Management, January - March, Copyright © 2002.

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30 Srite, Straub, Loch, Evaristo, & Karahanna

Chapter III

Inquiry into Definitions of Culture in IT Studies Mark Srite University of Wisconsin — Milwaukee, USA Detmar Straub Georgia State University, USA Karen Loch Georgia State University, USA Roberto Evaristo University of Illinois — Chicago, USA Elena Karahanna University of Georgia, USA

ABSTRACT In reviewing the history of the conceptualization and measurement of “culture,” one quickly realizes that there is wide-ranging and contradictory scholarly opinion about which values, norms, and beliefs should be measured to represent the concept of “culture.” We explore an alternate theory-based view of culture via social identity theory (SIT), which suggests that each individual is influenced by a plethora of cultures and sub-cultures – some ethnic, some national, and some organizational. In information system (IS) research, the culture of subjects and respondents is problematic because it is typically an overly simplistic categorization. IS research nearly always assumes that an individual living in a particular place and time belongs to a single “culture,” e.g., someone living in Egypt is automatically classified as being a member of the Egyptian culture, or, more broadly, the Arab culture. This

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Definitions of Culture in IT Studies 31

dearth of clear concepts and measures for “culture” may explain why cross-cultural research has been so exceedingly difficult to conduct. It may also explain why it has been hard to develop and refine theories. Moreover, it may give insight into why reasonable, explained variance in predictive models has not been higher. Finally, it is very possible that much cross-cultural business research could be rightly accused of advancing an “ecological fallacy” by not recognizing the individual makeup of persons with respect to culture.Using SIT (or other theory bases) as grounding for cultural research programs implies the use of certain methodological approaches. Each study would have to establish the salient “cultures” in each individual’s background and include these different “cultures” as independent variables in positivist research. In qualitative research, there would need to be an equally rigorous assessment of the cultural identifiers of each individual.

INTRODUCTION Globalization of business highlights the need to understand the management of organizations that span different nations and cultures. In modern multinational and/or transnational organizations, information technology (IT) must be utilized to achieve efficiencies, coordination, and communication. Clearly, though, cultural differences between countries impact the effectiveness and efficiency of this IT deployment. A study of cultural conflicts, therefore, is of paramount importance for modern organizations and for IT scholars. Despite its universally recognized importance, the effect of cultural factors on IT outcomes has received limited attention from information systems (IS) researchers. As a result cross-cultural information systems research, in general, remains in a state of infancy. Although several important research endeavors have been recently published in the top-ranked, established IS journals, the overall number of cross-cultural articles is fairly low, considering the number of practical and theoretical critical questions that remain unanswered (Gallupe & Tan, 1999). This disparity can be partly explained by methodological and resource difficulties inherent in cross-cultural research and the long time horizon required to complete/conduct these types of studies. It may also be explained by the lack of unanimity about the underlying meaning and definition of the underlying construct, “culture.” In this chapter, therefore, we explore the meaning of “culture” and consider new ways of conceptualizing and measuring it for global information management research. In reviewing the history of definitions of “culture,” one quickly realizes that there is wideranging and contradictory scholarly opinion about what constitutes “the” set or even a reasonable set of values, norms, and beliefs for “culture.” We explore an alternate theorybased view of culture via social identity theory (SIT), which suggests that each individual is influenced by a plethora of cultures and sub-cultures – some ethnic, some national, and some organizational. In IS research, the culture of subjects and respondents is problematic because it is typically an overly simplistic categorization. IS research nearly always assumes that an individual living in a particular place and time belongs to a single “culture,” e.g., someone living in Egypt is automatically classified as being a member of the national Egyptian culture, or, more broadly, the ethnic Arab culture. This dearth of clear concepts and measures for “culture” may explain why cross-cultural research has been so exceedingly difficult to conduct. Rather, we suggest that an individual’s social identity represents that amalgamation of cultures across boundaries (national, organizational, professional, etc.), which fuse together to create one’s overall culture. The

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32 Srite, Straub, Loch, Evaristo, & Karahanna

combination is unique to each individual. It may also give insight into why it has been hard to find reasonable, explained variance in predictive models. Finally, it is very possible that much of the work could be rightly accused of advancing an “ecological fallacy” by not recognizing the individual makeup of individuals with respect to culture. Using SIT (or other theory bases) as grounding for cultural research programs implies the use of certain methodological approaches. Each study would have to establish the salient “cultures” in each individual’s background, the composition of these “cultures,” and then include these different “cultures” as independent variables in positivist research. In qualitative research, there would need to be an equally rigorous assessment of the cultural identifiers of each individual. This approach also has the advantage of explicitly recognizing that these different layers of culture can intertwine in complex ways. Therefore, a particular behavior may be more influenced by a given layer of culture than others, implying that the layers do not have a fixed sequential position (Evaristo, Karahanna, & Srite, 2000). If we consider an “onion” metaphor to describe these layers, where layers closest to the core of the onion are more relevant, then the picture is of a “virtual onion” with inner layers occasionally exchanging places with outer layers. The layers are permeable. The thickness of the layers signals the strength of the value held by the individual. Moreover, the interrelationship between a layer and a specific behavior may vary depending on external circumstances – creating a virtual onion where each layer may move in or away from the core.

WHAT IS CULTURE? “Culture” has always been a thorny concept and an even thornier research construct. It has been studied for over a hundred years in disciplines such as cultural anthropology and in numerous other academic areas ranging from psychology to cross-cultural business management. The wide variety of scholars working in these areas have produced numerous definitions of culture. These definitions range from the simple to the complex, incorporate and extend previous definitions, and even contradict prior definitions. Many researchers have used more than one definition of culture depending upon the time the definition was formulated and the subject matter to which it referred. In this section, we first examine the term culture from a historical perspective by assembling some of its earliest and most general definitions. We next group these historical definitions into three classes.

“Culture” in Early Work According to Kroeber (1949), the word “culture” came into English usage (as distinct from cultivation and refinement, from nurture, from agriculture and pearl culture, and from test tube cultures) in 1871. Tylor’s Primitive Culture (1871) defined culture as “that complex whole which includes knowledge, beliefs, art, morals, laws, customs and any other capabilities and habits acquired by man as a member of society” (p. 1). Prior to that, the term culture was used with its modern meaning in the German word “Cultur” as early as 1843 (Kroeber, 1949). Kroeber and Kluckholn’s early review (1952) of cultural definitions found over 160 different instantiations. Definitions in the 1950s were instrumental in establishing distinctions and etiological perspectives. Kroeber (1952) defined culture as “the historically differentiated and variable mass of customary ways of functioning of human societies” (p. 157). Under this broad umbrella

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term, he further divided it into reality culture, which is concerned with the diffusion of preexistent scientific and technological discoveries, and value culture, which is concerned with the diffusion of philosophic, religious, and artistic findings. Parsons and Shils (1951) intimate that culture is composed of a set of values, norms, and symbols that guide individual behavior. Herskovits (1955) later argued that there “is a general agreement that culture is learned; that it allows man to adapt himself to his natural and social setting; that it is greatly variable; that it is manifested in institutions, thought patterns, and material objects” (p. 305). Subsequently, there has been a multiplicity of definitions of culture, classifiable into three main groups. The first group represents the most common view on culture and is labeled Definitions Based on Shared Values. The second group is Definitions Based on Problem Solving, while the third group details a number of General All-Encompassing Definitions. We discuss key definitions in each of these categories.

Definitions Based on Shared Values A number of scholars have focused on shared values as the central feature and distinguishing characteristic of a culture. Values refer to relationships among abstract categories that are characterized by strong affective components and imply a preference for a certain type of action. According to Rokeach (1973), a value is: An enduring belief that a specific mode of conduct or end-state of existence is personally or socially preferable to an opposite or converse mode of conduct or end-state of existence. A value system is an enduring organization of beliefs concerning preferable modes of conduct or end-states of existence along a continuum of relative importance. (p. 5) Values are acquired early in life, mainly through the family and neighborhood and later through school, which provide us with fundamental values and assumptions about how things are. Once a value is learned it becomes integrated into an organized system of values where each value has a relative priority. This value system is relatively stable in nature but can change over time, reflecting changes in culture as well as personal experience. Therefore, based on their unique experiences, individuals not only differ in their value systems but also in the relative stability of these value systems. There are a host of culture definitions based on values. Identifying and describing culture as a set of value patterns that are shared across individuals and within groups is common in this work. As early as the 1950s, both Parsons and Shils (1951) and Kroeber (1952) include values as a core concept in their definitions of culture. As mentioned above, Parsons and Shils view culture as comprised of three distinct aspects: (1) types of cultural symbol systems; (2) types of standards of value-orientation (values); and (3) types of orientation action (norms) (p. 166). Furthermore, they suggest five different value orientations or pattern variables that categorize and define culture: (1) affective versus affective neutrality; (2) ascription versus achievement; (3) self-orientation versus collectivity orientation; (4) universalism versus particularism; and (5) specificity versus diffuseness.1 Taking a similar point of view, Kroeber (1952) asserts that culture has the following qualities: 1. it is transmitted and continued not by the genetic mechanism of heredity but by the interconditioning of zygotes;

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34 Srite, Straub, Loch, Evaristo, & Karahanna

2. 3. 4.

whatever its origins in or through individuals, culture quickly tends to become suprapersonal and anonymous; it falls into patterns, or regularities of form and style and significance; it embodies values, which may be formulated (overtly, as mores) or felt (implicitly, as in folkways) by the society carrying the culture, and which it is part of the business of the anthropologist to characterize and define. (p. 104)

Kluckholn’s (1951) definition of culture draws attention to shared patterns of thinking based on values. He defines culture as: Patterned ways of thinking, feeling and reacting, acquired and transmitted mainly by symbols, constituting the distinctive achievements of human groups, including their embodiments in artifacts; the essential core of culture consists of traditional (i.e., historically derived and selected) ideas and especially their attached values. (p. 86) These patterned values are said to differentiate cultures in Kluckholn and Strodbeck (1961), who list five major variations in values: 1. Is innate human nature basically evil, good and evil, or good? Is innate human nature mutable or immutable? 2. Is the relation of people to nature one of subjugation, harmony, or mastery? 3. What is the temporal focus? Is human nature oriented toward the past, present, or future? 4. What is the action orientation of the people? Is it toward intensive appreciation of experience (being), toward total development of the person (being-in-becoming), or toward accomplishment (action)? 5. What is the human orientation toward other humans? Are people to do what seems right to them (individualism), what is mandated by their social group (collaterality), or what is correct from the point of view of the elites of their social group (lineality)? The presence of shared values that recur with regularity was so evident that Murdock (1965) felt that universal cultural traits, or values, that exist in some form in all known cultures could be listed, as in Table 1. The list is extensive and useful for identifying universal points of similarities and differences across cultures, but provides no insight regarding the enactment of a particular value in a specific context. Another shared values commentator, Geertz (1973), defined culture as “an historically transmitted pattern of meanings embodied in symbols, a system of inherited conceptions expressed in symbolic forms by means of which men communicate, perpetuate, and develop their knowledge about and attitudes toward life” (p. 89). Also focusing on patterns of thinking and values, Triandis (1972) examined subjective culture, which he defined as a “group’s characteristic way of perceiving the man-made part of its environment. The perception of rules and the group’s norms, roles, and values are aspects of subjective culture” (p. 4). Triandis further states that “people who live next to one another, speak the same dialect, and engage in similar activities (e.g., have similar occupations) are likely to share the same subjective culture” (p. 4). Triandis’ definition is unique in that it embeds patterns of action and values within an extensive nomological network of proximal and distal antecedents that include, among others, historical events, economic activities, social

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Table 1: Murdock’s (1965) Universal Cultural Values Age-Grading Athletic Sports Bodily Adornment Calendar Law Cleanliness Training Cooking Cooperative Labor Cosmology Courtship Dancing Decorative Art Divination Division of Labor Dream Interpretation Education Eschatology Ethics Ethnobotany Etiquette Faith Healing Family Feasting Fire Making Folklore

Universal Values Food Taboos Funeral Rites Games Gestures Gift Giving Government Greetings Hair Styles Hospitality Housing Hygiene Incest Taboos Inheritance Rules Joking Kin-Groups Kinship Nomenclature Language Law Luck Superstitions Marriage Mealtimes Medicine Modesty about Natural Functions Mourning

Music Mythology Numerals Obstetrics Penal Sanctions Personal Names Population Policy Postnatal Care Pregnancy Usages Property Rights Propitiation of Supernatural Beings Puberty Customs Religious Ritual Residence Rules Sexual Restrictions Soul Concepts Status Differentiation Surgery Tool Making Trade Visiting Weaning Weather Control

and political organizations, language, religion, occupation, roles, tasks, and ideals. This worldview is intuitively attractive in that clanning or “staying with your own,” whether determined by historical events, religious belief, or occupation, is a readily observable behavior. It is also closely related to the social identification theories that we explore later as a new possible basis for cultural research. Patterns of thinking based on values underline the definition of culture proposed by one of the most prominent scholars in this school of thought. Hofstede (1980) defined culture as “the collective programming of the mind which distinguishes the members of one human group from another” (p. 260). In his study of 150,000 individuals across the world, he developed the following four heavily used cultural patterns or dimensions: (1) individualism/collectivism; (2) power distance; (3) uncertainty avoidance; and (4) masculinity/femininity . Individualism reflects the way members emphasize their own needs over the group’s needs. Individualism can be seen as a concern for one’s self as opposed to a concern for the group to which one belongs. On the other hand, in collectivistic cultures the needs of the group or clan are more important than a single individual’s needs. Power distance is the extent that large differentials of power and, therefore, inequality are accepted in a given culture. High-power distance implies that employees will accept that

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36 Srite, Straub, Loch, Evaristo, & Karahanna

their supervisor’s decisions and opinions are correct because he or she is the boss not because his or her opinions are qualitatively or quantitatively good. Employees in low-power distance cultures accept that their supervisor has more power and is right only when he or she knows the best way to do something and knows the correct answers. Uncertainty avoidance is the level of risk accepted by a culture, which can be gleaned from the emphasis on rule obedience, ritual behavior, and labor mobility. Cultures with low levels of uncertainty avoidance have greater tolerance for ambiguity and less need for formal rules. The opposite will hold true for high-uncertainty avoidance cultures. Finally, masculinity/femininity refers to culture differentiation on the basis of activity. This dimension does not relate to attitude toward gender, although it is frequently misinterpreted to mean that. Masculine cultures tend to emphasize work goals such as earnings, advancement, and assertiveness. Feminine cultures tend to emphasize personal goals such as a maintaining a friendly atmosphere, getting along with the boss and others, and a having a comfortable work environment. In collaboration with a group of Chinese researchers, Hofstede and Bond (1988) subsequently added a fifth dimension of culture: long-term orientation. In this cultural pattern, particularly observable in East Asia, groups have a much longer time horizon in their decisions, and, therefore, the immediacy of any given situation is not as pressing as in the western cultures. Hofstede makes a distinction between values2 and practices. He suggests that while values are acquired in early life and are enduring, practices, which can be altered, are learned later through socialization at the workplace, after an individual’s values are firmly in place. Among others, symbols, heroes, and rituals are all learned practices (Hofstede, 1991). Hofstede suggests that national cultural differences are composed primarily of differences in values and, to a lesser extent, of differences in practices. In a similar vein, Lachman (1983) argues that “there are values and attitudes that are more central, important, or dominant to the individual than others and hence will be called ‘core values’; second the core values resist change more than those which are peripheral” (pp. 566567). He also states that these core values are formed during childhood and are reinforced throughout life. Like Hofstede, Lachman also considers culture to be composed primarily of the core values and beliefs of people in a society. Lachman opens a line of thinking about “core” and noncore values that dovetails nicely with our virtual onion model, which will be discussed later. In the 1990s, the “shared values” perspective was advanced by numerous researchers. Trompenaars (1993) believes that culture is composed of shared values. In particular, Hampden-Turner and Trompenaars (1993) say, “Members of a culture are likely to share common attitudes because they share a common history” (p. 13). Differing in many ways from Hofstede, they propose seven dimensions of culture: (1) universalism/particularism; (2) individualism/collectivism; (3) neutral/affective relationships; (4) specific/diffuse relationships; (5) achievement/ascription; (6) internal/external control; and (7) perspectives on time.3 The shared patterns view was still being advocated near the turn of the millennium. Erez and Earley (1997), for example, defined culture as the “shared way a group of people view the world” (p. 23).

Hofstede’s Universal and Geographic Sense of “Culture” Hofstede’s (1980) work is unique because it offers a mechanism whereby a culture value can be assigned to a particular group of people determined by a geographical boundary. The

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Definitions of Culture in IT Studies 37

shortcomings in this approach are that (1) there are recognized subcultures that span national geographical boundaries (Arab and Latin America cultures come to mind) and (2) there are nations that have strong internal cultural differences (English and French-speaking Canada; India with over 14 official languages & hundreds of dialects) or recognized intra-regional differences (United States and Germany). Organizational and professional cultures have also been ascribed identifiable value sets (Laurent, 1991; Martin, 1992; Schein, 1985) such as management styles, appraisals, reward systems, communication styles, and manner of making decisions that vary across context.4 Fundamentally, these instantiations of culture are all value based; the key distinction is the boundary, e.g., the nation-state/geographic borders, organization, or profession. In summary, this categorization of definitions of culture suggests that culture consists of patterned ways of thinking that are shared across people in a society; these patterns are based on values. These values influence individuals’ cognitions, attitudes, and behaviors. Furthermore, there is a distinction between core and peripheral values. Culture is primarily a manifestation of core values. Finally, many researchers have attempted to capture cultural patterns in a set of dimensions. Table 2 contains a summary of the most commonly cited cultural patterns identified in the literature. However, researchers differ not only in which cultural patterns underlie culture, but also in their views on how these cultural patterns define culture. For example, Parsons and Shils (1951) suggest that culture is defined by the unique combination of cultural patterns-. Viewing each pattern variable in isolation would likely lead to misleading conclusions. Kluckholn and Strodtbeck (1961), on the other hand, suggest that each of the pattern variables can be meaningful viewed separately. Furthermore, they argue that rank ordering of these cultural patterns distinguishes one culture from another. Thus, even though there appears to be a convergence in these conceptual definitions of culture, there is still

Table 2: Cultural Patterns Value Orientation/Pattern Variable

Citation

Associative versus Abstractive Ideologists versus Pragmatists Individualism versus Collectivism Masculinity versus Femininity Power Distance Uncertainty Avoidance Long-Term Orientation, Temporal Focus

Glenn, 1981 Glenn, 1981 Hofstede, 1980; Trompenaars, 1993 Hofstede, 1980 Hofstede, 1980 Hofstede, 1980 Hofstede & Bond, 1988; Kluckholn & Strodbeck, 1961 Kluckholn & Strodbeck, 1961 Kluckholn & Strodbeck, 1961 Kluckholn & Strodbeck, 1961 Kluckholn & Strodbeck, 1961 Morris, 1956 Parsons & Shils, 1951 Parsons & Shils, 1951; Trompenaars, 1993 Parsons & Shils, 1951; Trompenaars, 1993 Parsons & Shils, 1951; Trompenaars, 1993 Parsons & Shils, 1951; Trompenaars, 1993 Trompenaars, 1993 Trompenaars, 1993

Human Nature Man-Nature Activity Orientation Relational Orientation Dionysian, Promethean, Budhistic Self-Orientation versus Collectivity-Orientation Universalism versus Particularism Achievement versus Ascription Specificity versus Diffuseness Affective versus Affective-Neutral Internal versus External Control Time Perspective

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38 Srite, Straub, Loch, Evaristo, & Karahanna

considerable divergence in the specific nature of values that underlie culture and in the exact nature of the relationship between these values and culture.

Definitions Based on Problem Solving Rather than trying to define culture from the perspective of its composition (as in the previous section), another group of scholars have looked at the outcomes of culture and what it can accomplish. These researchers focus on problem solving and how this defines a particular group of people. This view persisted from the 1940s through the 1980s and into the early 1990s. Ford (1942) sees problem solving as the outcome when he states that culture is “traditional problem solving through accepted responses that have met with success. It consists of learned problemsolutions” (p. 546). Part of Kluckholn and Leighton’s (1946) reasoning also is responsive to this theme. They argue that culture consists of “habitual and traditional ways of thinking, feeling, and [reacting] to that [is] characteristic of the ways a particular society meets its problems at a particular point in time” (p. 28). The group’s need to deal with its environment is also central to Schein (1999), who views culture as “the sum total of all the shared, taken-for-granted assumptions that a group has learned throughout its history” (p. 29). Schein (1985) also believes that culture involves learning within a group as that group solves its problems of survival in an external environment and its problem of internal integration. Finally, a goals-oriented definition also characterizes Moran and Stripp’s (1991) definition when they define culture as “a group problem-solving tool that enables individuals to survive in a particular environment” (p. 43).

General All-Encompassing Definitions and Distinctions There are scholars who define culture in other ways than through shared values or outcomes. These tend to be more abstract, and in some cases esoteric or spiritual.6 Sheldon (1951) is a case in point. He splits culture into two categories – that of explicit and implicit culture: Culture is a theoretical model, and the abstractions and principles from which it is made up are free creations of the mind. Some of these abstractions and principles deal with matters that are close to the minds of the individual culture bearers. This aspect of culture is usually called explicit culture or some similar term. Other aspects of culture, the implicit culture, are so generalized that in many cases the cultural bearers are unable to formulate them. (p. 39) Later, Hall (1976) extended the concept of unconscious culture which he defined as: Those out-of-awareness cultural systems that have yet to be made explicit…Such systems have various features and dimensions which are governed by the order, selection, and congruence rules. These rules apply to the formative and active aspects of communications, discourses, perception (in all modalities), transactions between people, and the action chains by which humans achieve their goals in life. Significant portions of extension systems still function out of awareness. Much of the formation, development, use, and change processes

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Definitions of Culture in IT Studies 39

of these extension systems, therefore, fall within the scope of out-of-awareness culture and not only exert a hidden influence on life but are subject to the same rules and laws… Culture is therefore very closely related to if not synonymous with what has been defined as ‘mind.’ (pp. 146-147)

NEED FOR A THEORY-BASED INDIVIDUAL (VERSUS UNIVERSAL) CONCEPTUALIZATION AND MEASUREMENT OF CULTURE The prior section compared and contrasted different approaches to defining and subsequently examining cultural differences. Of import is the lack of theory for the identification and examination of various proposed sets of cultural beliefs and values. Moreover, there is a link between what culture is held to be and the manner in which it is investigated. Two critical questions frame the theoretical conceptualization of culture and, subsequently, the manner in which it is investigated. First, is culture a structural phenomenon with properties irreducible to individuals, or is culture the sum of properties of individuals that constitute the cultural group? The answer to this question has significant implications for the level of analysis. Second, can culture be characterized by universal dimensions or should it be understood in terms of the unique characteristics by a particular conceptualization of culture? Is there a way to define culture so as to avoid some of the complicating factors that have historically led to ambiguity and uncertainty in our research findings? Or are we destined to remain utterly vague about a concept that itself seems to resist precise definition? As discussed, culture may be a set of values, a set of outcomes, or a way of being. Whereas there is little doubt that these definitions vary widely, there is no doubt that, historically, the line of reasoning has tended to be atheoretical (conceptual rather than being derived from deductive processes). The epistemological basis for most definitions of culture has been formulated through argumentation or empirically derived and supported, as demonstrated by Hofstede’s work, one of the more frequently used frameworks for crosscultural research. Even though such empirically derived definitions of culture may adequately explain macro-level behavior, they often lack precision in explaining behavior at the individual level. Most such definitions rely on the assumption that an individual’s membership in a cultural group, such as his or her national culture, defines the nature of values he or she espouse. However, an individual’s values are influenced and modified by membership in other professional, organizational, ethnic, religious, and various other social groups, each of which has its own specialized culture and value set. Thus, individuals vary greatly in the degree in which they espouse, if at all, values dictated by a single cultural group, such as their national culture. Would a deductive, as opposed to inductive, approach make sense in this context? There are sociopsychological theories that may have a direct or indirect bearing on what culture is as a scientific construct, and how it could be measured. In the current study, we offer one such theory as a candidate. There may be others that would work equally well or better. Our intention here is to stimulate thinking along these lines and not to offer the definitive solution.

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40 Srite, Straub, Loch, Evaristo, & Karahanna

SOCIAL IDENTITY THEORY AS A CANDIDATE THEORY BASE A theory that deals with the underlying mechanisms of group identification is Social Identity Theory (SIT) (Tajfel, 1970b, 1978). In SIT, individuals perceive that they belong to a group or not. If they belong to the group, they are part of the “ingroup”; if not, they are part of the “outgroup.” Other people are also classified in this same manner. The “ingroup” becomes a prominent way that individuals evaluate themselves and others, as to whether the group norms are adhered to, whether these norms are distinct from the norms of other groups, and so forth. The “ingroup” in this fashion becomes the “referent” for beliefs, attitudes, values, norms, and behavior (Deaux, 1984; Hogg, 1996; Tajfel, 1970a; Turner, 1982). The social identification process marks how similar individuals feel they are to others, as in organizational contexts such as the relationships between IT vendors and their clients (Gefen & Straub, 2001). The strength of the feeling of cultural similarity depends on how many of the characteristics individuals believe they have in common with others in the group. Thus, self-inclusive social grouping creates referents for country of origin (Hogg, 1996); support for a sports club (Hogg, 1996); gender (Brown, 1996). The deeper level of this process is that perceptions of referent norms are internalized and incorporated into one’s sense of self, a process Turner (1982) calls Referent Informational Influence (RII). Internalization goes beyond what others do and say and how we respond to them, however. There is a proactive psychological process known as social categorization in which we attribute values to our own and others’ future actions. This attribution tells us that as members of the “ingroup,” we and others in the group act in certain ways and think in certain ways. It is what defines us, in a real sense (Brown, 1996; Hogg, 1996; Tajfel, 1978). Professors, for instance, are believed to feel, think, and act in certain ways, and identification with this group determines at least some of the attitudes and behaviors of members of their social group, or culture. SIT has been examined in many environments and in IT studies of the cultural similarity between vendors and clients by Gefen and Straub( 2001). Their argument is that clients’ attitudes toward software are related to the “cultural similarity” they feel toward the vendors. The more alike clients find themselves to be to the vendor support personnel, the more positive they will be toward the software products associated with these vendors. Gefen and Straub (2001) found strong empirical evidence for SIT as a relevant theory base for cultural similarity. The use of SIT to theoretically enhance definitions of culture is consistent with the large body of work on shared values as a cultural foundation, since SIT is also value based. However, it departs and augments the explanatory power of earlier definitions for two reasons. First, it provides a theoretical framework that can explain the influence of several cultural layers (the “virtual onion”) on behaviors and outcomes; and second, it acknowledges that members of a cultural group vary in the extent to which they hold the values of the group (if at all).

IMPLICATIONS FOR THEORY-BASED MEASUREMENT OF CULTURE Assuming that SIT is a reasonable theory base from which to assess culture, how shall we proceed to measure it? Can culture even be measured? If it is unconscious, then it is Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

Definitions of Culture in IT Studies 41

embedded in values and behaviors and difficult to tease out. Use of the method of comparison and contrast is helpful in this aspect. This method is one of the primary scientific tools in robust positivist designs (Cook & Campbell, 1979). In our view, instead of assuming that individuals espouse certain cultural values based on membership in a cultural group, individuals need to be queried as to the extent to which their values are similar to those of others in relevant cultural groups, and queried as to whether the outcomes of those values are perceived to be similar. This approach is also a culturespecific approach, as advocated by Hill, Loch, Straub, and El-Sheshai (1998) and Hill, Straub, Loch, Cotterman, and El-Sheshai (1994). A viable format is to elicit responses by embedding specific cultural values in scenarios along with other “distractor” variables (see Straub, Loch, & Hill for more details of the approach). Thus, we advocate querying individuals about the layers of the onion that make up their overall “culture.” Clearly, the set of sub-cultures that can be investigated is limited, but IT researchers can diffuse this risk to a certain extent by exploiting their knowledge of the people being studied and limiting the set of sub-cultures that are queried. In fact, culture must be measured at an individual level even though it is assumed that it is a group-level phenomenon. Thus, while Kroeber (1952) asserts that culture “quickly tends to become supra-personal and anonymous” (p. 102), it can only manifest itself through the individual. There is no way to query or probe into the collective unconscious of an entire culture. We argue, therefore, that the individual unit of analysis is both appropriate and meaningful. Once the individual-level data is aggregated, it will also be possible to assert that certain cultural characteristics do or do not belong to certain cultures. A sample size as large as Hofstede’s would be desirable for such an assertion, but is not necessary if stratified sampling is utilized. This approach also has the advantage of explicitly recognizing that different layers of culture can intertwine in complex ways. Therefore, a particular behavior may be more influenced by a given layer of culture than others, implying that the layers do not have a fixed sequential position (Evaristo et al., 2000). Adopting an “onion” metaphor to describe these layers where layers closest to the core are more salient, we employ the metaphor of the “virtual onion” where inner layers occasionally exchange places with outer layers. The layers are permeable. The thickness of the layers signals the strength of the value held by the individual. Moreover, the interrelationship between a layer and a specific behavior may vary depending on external circumstances – creating a virtual onion where each layer may dynamically move toward or away from the core. Measures of a person’s social identification with others who are presumed to be members of a given culture could serve as surrogates for an individual’s cultural ties. Questions related to values important to the study would be most critical, since, as Murdock’s (1965) values list suggests, it is highly unlikely that a researcher could very often query individuals about all of their cultural values. This implies that each study needs to determine the specific subcultures (e.g., national, organizational, professional) that are pertinent to a specific behavior and identify the values espoused by these cultures (Evaristo et al., 2000). For example, researchers who have focused on work- and task-related cultural values, such as Hofstede (1991), would test on values that are more aligned with what takes place in the workplace. Organizational culture may be critical, especially when these values are distinct from ethnic and national values. It would be useful to create instrument items that exploit the learning that has accumulated in this arena (Hofstede, Neuijen, Ohayv, & Sanders, 1990).

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Our “virtual” onion metaphor assumes that the layering of the onion that makes up a person’s culture is not a permanent and immutable set of relationships. In certain circumstances, the sub-culture associated with religious values is most important. In other circumstances, the values that are most critical to an individual’s thinking or behaviors are his/ her corporate sub-cultural values. While a person may be a cultural composite of only certain elements, he or she attributes importance to these sub-cultures according to changing conditions and stresses. The approach proposed has another pertinent practical advantage: improving the internal validity of studies that adopt it. Much current cross-cultural research (Evaristo et al., 2000) is performed by studying a given behavior, belief, or attitude without employing corresponding and concurrent measurements of culture. Near the end of the scholarly exposition, conclusions are typically drawn between one’s measurement and cultural dimensions proposed by studies 10 to 30 years old. These studies also develop generalizations for a given group within a country, therefore opening themselves to several criticisms. First, the group being studied may have self-selected into a particular function (e.g., programmers), and such self-selection could override some of the earlier group characteristics. Second, national groups change over time. Therefore, when current studies try to compare two or more cultures that may have changed in sundry directions (potentially bringing them closer or farther apart on the studied cultural dimensions), researchers are introducing confounds, potentially rendering culturally-based conclusions meaningless. The development of new theoretically based cultural measurement would allow future cross-cultural research endeavors to avoid these problems.

INSTANTIATING THE VIRTUAL ONION MODEL Offered tentatively, an instantiation of theory-based instrumentation of culture could help to flesh out the concepts, constructs, and metrics we are positing. The context is a study of Arab culture, specifically the influence of the sense of time in the Arab world and its influence on IT diffusion. As Straub, Loch, and Hill (2001) point out, there is good evidence that Arabs perceive time differently from other cultures, for example, Americans. Arabs tend to be polychronic, to see many strands of time moving at once, and to parallel-process work and tasks (Hall, 1976,1984; Hall & Hall, 1990). Taking a culture-specific stance, an IT researcher would be well served to measure the strength of particular cultural values held by the study participants. In cross cultural studies in Japan, it is very common to assume that all Japanese demonstrate the universal cultural characteristic of collectivism (Hofstede, 1980); yet we know that there will be variation in the strength of this characteristic and, in the case of highly entrepreneurial Japanese, it may not manifest itself at all. To generalize cultural characteristics across an entire nation of people is to flirt dangerously with what Robinson (1950) calls the “ecological fallacy,” where stereotypes are substituted for individualistic and idiosyncratic traits. Therefore, an in situ measurement of culture is appropriate. Cultural values of an individual can be calibrated by the extent to which a study participant identifies with a social group in certain settings. The settings can be stimulated through such methods as policy scenarios. Policy capturing offers the advantage of having respondents evaluate a set of feasible real-world alternatives. A methodological technique reviewed by Webster and Trevino (1995), it has been used in IS and management research

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(Daft, Lengel, & Trevino, 1987; Straub & Karahanna, 1998; Straub et al., 2001; Zmud, Lind, & Young, 1990). The scenario and metrics below are merely illustrative of how a theory-based approach to measuring a specific-cultural characteristic could be operationalized. It is not meant to be a considered attempt at possible scale items. Please note that the Arab sense of time is embedded in the scenario by showing how the top manager is able to parallel process several task at the same time (Straub, Loch, & Hill, 2001).

Scenario An associate of a top manager with whom you are having a formal meeting walks into the office, and soon there is a side meeting taking place between the associate and the top manager. The top manager’s other assistant engages you in further discussion until the top manager is able to resolve the other matter and return to the discussion. The side meeting transpired over a 10-minute period. Which sub-cultures should respondents be queried about with respect to this setting? Sub-cultures for ethnicity, nationality, religion, organizations, urban-rural, etc., are some of the social groups in which many cross-cultural researchers are interested, and are very likely relevant in this cultural setting. The key to creating an adequate surrogate for culture, we feel, is to measure the strength of identification with these salient social groups. Item x. In the context of the scenario you just read, to what extent do you identify with the following groups in determining how you feel about the top manger’s actions? Please use the following scale: 1 = Not at all, 2 = To a slight extent, 3 = To a moderate extent, 4 = To a large extent, 5 = To a very large extent. • • • • • • • • • • •

Members of your organization Members of your profession or occupation Devout Muslims Egyptians Arabs Devout Coptic Christians City dwellers Europeans Educated persons Well-to-do persons Villagers

Assigning values to each of these sub-cultures, a respondent is, in effect, indicating which group values are most personally relevant in this context. Thus, these values resemble layers of an onion, with the most important values—the highest scored values— being closest

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44 Srite, Straub, Loch, Evaristo, & Karahanna

to the core. One may expect that the extent to which one identifies with a particular behavior or circumstance (i.e., the importance of the value) will vary across context. Thus, for each individual, the layers of the onion do not have a fixed sequential order. Rather, they resemble a virtual onion in which layers exchange places depending on the specific behavior (Evaristo et al., 2000). The thickness of each layer signals the level of similarity between the individual and the cultural group that espouses that specific value. Finally, aggregating responses across respondents enables researchers to infer the values espoused by a certain cultural group. Measuring the impact of culture on IT effects may also be complicated by the extent to which an individual identifies with persons in the scenario, and this, therefore, may also be probed, perhaps even prior to the various social group identifications immediately above. Item y. To what extent do you identify with the manner and actions of the top manager? Using the [semantic differential] scales below, place an “X” to represent the extent to which you identify with the top manager. ˆ ˆ ˆ ˆ

Seems perfectly usual ……………………….……..seems unusual to me. Seems polite………………………………..…….....seems impolite. Seems acceptable …………………………..….…...seems unacceptable. Makes me identify with the top manager ………….makes me not identify with the top manager.

Next Steps A worthwhile, future scientific project would be to create a cultural instrument and examine the extent to which various cultures and sub-cultures could be teased out of the data. Nomological validity tests could be implemented to ensure that the cultures being identified were, indeed, influencing outcomes in an expected manner. Rigorous validation would help to establish the viability of the approach. Follow-up work by researchers could also test the generalizability of the approach across cultural features, across populations, and across technologies (in the case of IT research). Having culture measured on scales rather than via assumption is a stronger scientific test, and one might predict that some relationships that were not significant in past work would suddenly become so, once culture was more carefully delineated.

CONCLUSION Global information management researchers frequently examine the issue of culture and how it affects the international deployment of information systems (Gallupe & Tan, 1999). But cross-cultural studies are rife with problems, some of which hinge, seemingly, on the inability of the field to operationalize “culture,” even provisionally. An additional complication lies in the view that there is homogeneity in the espoused cultural values across all individuals in a specific culture. We propose that a possible solution to the problem is: (1) to adopt a theory-based conceptualization and measurement of an individual’s culture and (2) to measure the strength of particular cultural features as part of the data gathering in positivist research. Thus, we adopt

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a more complex view of culture that avoids reliance on assumed espoused cultural values. This view acknowledges the multiplicity of diverse cultural influences received by an individual that contributes to a unique idiosyncratic set of values. Towards this end, social identity theory provides a useful, candidate theoretical framework to identify, integrate, measure, and aggregate these influences. The implications of accepting this theory-based definition of culture are apparent. There are methodological implications and practical implications. Methodologically, researchers will need to inquire as to the identification priorities of respondents and subjects in addition to the context-area queries or domain-area queries that are the main point of study. From a practical point of view, the collection of data in any group may be drawn from numerous cultures and sub-cultures, some of which will be overlapping. Practically speaking, future cross-cultural work will have to be flexible, inventive, and adaptable to accommodate this fluidity in the sampling procedures and the operational framing of culture that emerges.

ENDNOTES 1

2

3

Affective versus affective-neutral refers to the extent to which emotions are expressed openly. Self- versus collectivity-orientation refers to pursuit of one’s own interests versus pursuit of the interests of the group. Ascription versus achievement refers to how individuals are judged in society. In achievement-oriented cultures, status is based on what someone does. In ascription-oriented cultures, power and status are based on who or what someone is. Universalism versus particularism describes how rules govern action. In universal cultures, general rules guide action, whereas in particular cultures, the specifics of a situation are more important than general rules. Finally, specificity versus diffuseness refers to relationships among individuals. In specific cultures, individuals tend to keep their private and public lives separate. Hofstede (1984) defines values as “a broad tendency to prefer certain states of affairs over others” (p.18). This characterization of individualism versus collectivism is essentially the same as that of Hofstede. Universalism implies a belief that something that is “true” and “good” can be universally defined, and therefore applicable everywhere. Particularism, on the other hand, prevails with a belief that unique circumstances and relationships determine what is “right” and “good.” In neutral cultures, people are more reserved, keeping emotions from being out of the control in the workplace – which would be considered unprofessional. Affective cultures tend to display emotions more openly in all venues and may consider a neutral culture as intentionally deceitful. In the specific and diffuse relationships dimension the idea is that an individual may have an inner private space and a larger public space. The difference between specific and diffuse cultures is the relative size of these “spaces.” In a specific culture, there is a tendency to have larger public areas and smaller private areas. In achievement-based cultures, people are evaluated based on their performance in their functional role while in ascriptive cultures, people who naturally have certain attributes are admired and therefore gain status. Internal versus external orientation refers to the idea that there are two guides to action. Action can either be determined by inner-directed judgments, decisions, and commitments or by the signals, demands, and trends of the outside world. Time perspective

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4

5 6

refers to the idea that cultures can view time in two ways. Activities can be done as quickly as possible in the shortest possible sequence of passing time or synchronized so that completion is coordinated. Laurent (1991) found however that corporate culture was skin deep in comparison to the intensity of national culture. Cultural patterns, value orientations, and pattern variables are used interchangeably. Although not covered here in greater depth, Herskovits (1955) offers a definition that is neither complex nor abstract; i.e., “the man-made part of the human environment” (p. 305). As might be expected, Skinner (1971) viewed culture as a complex series of reinforcement contingencies moderated by a schedule of rewards.

REFERENCES Brown, R. J. (1996). Tajfel’s contribution to the reduction of intergroup conflict. In W. P. Robinson (Ed.), Social groups and identities: Developing the legacy of Henri Tajfel. Oxford, UK: Butterworth-Heinemann. Cook, T. D. & Campbell, D. T. (1979). Quasi-experimentation: Design and analysis issues for field settings. Boston, MA: Houghton Mifflin. Daft, R. L., Lengel, R. H., & Trevino, L. K. (1987). Message equivocality, media selection, and manager performance: Implications for informational systems. MIS Quarterly, 11, 355366. Deaux, K. (1984). From individual differences to social categories. Analysis of a decade’s research on gender. American Psychologist, 39(2), 105-116. Erez, M. & Early, C. P. (1997). The transplanted executive. New York: Oxford University Press. Evaristo, J. R., Karahanna, E., & Srite, M. (2000). Culture and information systems. In the Proceedings of the Global Information Technology Management (GITM) World Conference, Memphis, TN. Ford, C. S. (1942). Culture and human behavior. Scientific Monthly, 55, 546-547. Gallupe, R. B. & Tan, F. B. (1999). A research manifesto for global information management. Journal of Global Information Management, 7(3), 5-18. Geertz, C. (1973). The interpretation of cultures. New York: Basic Books. Gefen, D. & Straub, D. W. (2001). Perceived cultural similarity and technology acceptance. Georgia State University Working Paper. Glenn, E. (1981). Man and mankind: Conflict and communication between cultures. Norwood, NJ: Ablex Publishing Corporation. Hall, E. (1984). The dance of life: Another dimension of time. New York: Doubleday. Hall, E. & Hall, M. R. (1990). Understanding Cultural Differences. Yarmouth, ME: Intercultural Press, Inc. Hall, E. T. (1976). Beyond culture. Garden City, NY: Doubleday. Hampden-Turner, C. & Trompenaars, F. (1993). The seven cultures of capitalism. New York: Doubleday. Herskovits, M. J. (1955). Cultural anthropology. New York: Alfred A. Knopf. Hill, C., Loch, K., Straub, D. W., & El-Sheshai, K. (1998, Summer). A qualitative assessment of Arab culture and information technology transfer. Journal of Global Information Management, 6(3), 29-38.

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Hill, C. E., Straub, D. W., Loch, K. D., Cotterman, W. W., & El-Sheshai, K. M. (1994). Arab culture and the transfer of information technology: A culture-driven model. Paper presented at the International Federation of Information Processing, WG 9.4 Conference, Havana, Cuba. Hofstede, G. (1980). Culture’s consequences: International differences in work-related values. Beverly Hills, CA: Sage. Hofstede, G. (1984). Culture’s consequences: International differences in work-related values. Newbury Park, CA: Sage. Hofstede, G. (1991). Cultures and organizations: Software of the mind. London: McGraw-Hill. Hofstede, G. & Bond, M. H. (1988). The Confucius connection: From cultural roots to economic growth. Organizational Dynamics, 16(4), 5-21. Hofstede, G., Neuijen, B., Ohayv, D. D., & Sanders, G. (1990). Measuring organizational cultures: A qualitative and quantitative study across twenty Cases. Administrative Science Quarterly, 35, 286-316. Hogg, M. A. (1996). Social identity, self-categorization, and the small group. In E. H. W. J. H. Davis (Ed.), Understanding group behavior. Mahwah, NJ: Lawrence Erlbaum Associates. Kluckholn, C. (1951). The study of culture. In D. Lerner & H. D. Lasswell (Eds.), The policy sciences. Stanford, CA: Stanford University Press. Kluckholn, C. & Leighton, H. D. (1946). The Navaho. Cambridge, MA: Harvard University Press. Kluckholn, C. & Strodbeck, F. L. (1961). Variations in value orientations. Evanston, IL: Row and Peterson. Kroeber, A. L. (1949). Man and his works. New York: Alfred A. Knopf. Kroeber, A. L. (1952). The nature of culture. Chicago, IL: Chicago University Press. Kroeber, A. L. & Kluckholn, C. (1952). Culture: A critical review of concepts and definitions. New York: Vintage Books. Lachman, R. (1983). Modernity change of core and peripheral values of factory workers. Human Relations, 36, 563-580. Laurent, A. (1991). In N. J. Adler (Ed.), International dimensions of organizational behavior. Boston, MA: PWS-Kent Publishing. Martin, J. (1992). Cultures in organizations: Three perspectives. Oxford, UK: Oxford University Press. Moran, R. T. & Stripp, W. G. (1991). Successful international business negotiations. Houston, TX: Gulf Publishing Company. Morris, C. W. (1956). Varieties of human value. Chicago, IL: Chicago University Press. Murdock, G. P. (1965). Culture and society. Pittsburgh, PA: The University of Pittsburgh Press. Parsons, T. & Shils, E. E. (1951). Toward a general theory of action. New York: Harper & Row Publishers. Robinson, W. S. (1950). Ecological correlations and the behavior of individuals. American Sociological Review, 15, 351-157. Rokeach, M. (1973). The nature of human values. New York: Free Press. Schein, E. H. (1985). Organizational culture and leadership: A dynamic view. San Francisco, CA: Jossey-Bass. Schein, E. H. (1999). The corporate culture survival guide: Sense and nonsense about culture. San Francisco, CA: Jossey-Bass Publishers.

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Sheldon, R. C. (1951). Some observations on theory in the social sciences. In T. Parsons, & E. A. Shils (Eds.), Toward a general theory of action. New York: Harper & Row Publishers. Skinner, B. F. (1971). Beyond freedom and dignity. New York: Alfred A. Knopf. Straub, D., Loch, K., Evaristo, R., Karahanna, E., & Srite, M. (2002) Toward a theory-based measurement of culture. Journal of Global Information Management 10(1),13-23. Straub, D. W. & Karahanna, E. K. (1998). Knowledge worker communications and recipient availability: Toward a task closure explanation of media choice. Organization Science, 9(2), 160-175. Straub, D. W., Loch, K., & Hill, C. (2001). Transfer of information technology to the Arab world: A test of cultural influence modeling. Journal of Global Information Management. Tajfel, H. (1970a). Aspects of national and ethnic loyalty. Social Science Information, 9(3), 119-144. Tajfel, H. (1970b). Experiments in intergroup discrimination. Scientific American, 233(5), 96102. Tajfel, H. (1978). Differentiation between social groups. Cambridge, UK: Cambridge University Press. Triandis, H. C. (1972). The analysis of subjective culture. New York: Wiley. Trompenaars, F. (1993). Riding the waves of culture. London, UK: The Economist Books. Turner, J. C. (1982). Towards a cognitive redefinition of the social group. In H. Tajfel (Ed.), Social identity and intergroup relations: 15-40. Cambridge, UK: Cambridge University Press. Tylor, E. B. (1871). Primitive culture. New York. Webster, J. & Trevino, L. K. (1995). Rational and social theories as complementary explanations of communication media choices: Two policy capturing studies. Academy of Management Journal, 38, 1544-1572. Zmud, R. W., Lind, M. R., & Young, F. W. (1990). An attribute space for organizational communication channels. Information Systems Research, 1(4), 440-457.

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Chapter IV

Methodological Issues in MIS Cross-Cultural Research Elena Karahanna University of Georgia, USA Roberto Evaristo University of Illinois — Chicago, USA Mark Srite University of Wisconsin — Milwaukee, USA

ABSTRACT This paper presents a discussion of methodological issues that are relevant and idiosyncratic to cross-cultural research. One characteristic that typifies cross-cultural studies is their comparative nature, i.e., they involve a comparison across two separate cultures on a focal phenomenon. When differences across cultures are observed, the question arises as to whether the results are true cultural differences or merely measurement artifacts. Methodological considerations in cross-cultural research focus on ruling out alternative explanations for these differences and thus enhancing the interpretability of the results. The paper presents an overview of key methodological issues in cross-cultural research and reviews methods of preventing or detecting methodological problems.

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50 Karahanna, Evaristo, & Srite

INTRODUCTION Globalization of business has highlighted the need to understand the management of organizations that span different nations and cultures. In these multinational and transcultural organizations, there is a growing need to utilize information technology (IT) to achieve efficiencies, coordination, and communication. However, cultural differences between countries may have an impact on the effectiveness and efficiency of IT deployment. Despite its importance, the effect of cultural factors has received limited attention from information systems (IS) researchers. Cross-cultural information systems research, in general, remains relatively undeveloped. Although several important research endeavors have been recently published in the better IS journals, the overall number of cross-cultural articles is fairly low considering the number of practical and theoretical questions that remain unanswered. This incongruence can be partly explained by methodological and resource difficulties inherent in cross-cultural research as well as the long time horizon required to complete and conduct these types of studies. This paper focuses on these difficulties. Methodological considerations are of the utmost importance to cross-cultural studies since valid comparisons require cross-culturally equivalent research instruments, data collection procedures, research sites, and respondents. Ensuring equivalency is an essential element of cross-cultural studies and is necessary to avoid confounds and contaminating effects of various extraneous elements. In the next section, we provide a brief discussion of key methodological issues in crosscultural research, presenting both threats to making valid cross-cultural comparisons as well as methods of preventing or detecting potential problems. Next, sampling considerations and guidelines for instrument wording and translation are presented. The paper concludes with a summary discussion of the issues.

METHODOLOGICAL ISSUES Cross-cultural research has some unique methodological idiosyncrasies that are not pertinent to intracultural research. One characteristic that typifies cross-cultural studies is their comparative nature, i.e., they involve a comparison across two or more separate cultures on a focal phenomenon. Any observed differences across cultures give rise to many alternative explanations. Particularly when results are different than expected (e.g., no statistical significance, factor analysis items do not load as expected, or reliability assessment is low), researchers may question whether results are true differences due to culture or merely measurement artifacts (Mullen, 1995). Methodological considerations in carrying out cross-cultural research attempt to rule out alternative explanations for these differences and enhance the interpretability of results (van de Vijver and Leung, 1997). Clearly, the choice and appropriateness of methodology can make a difference in any research endeavor. In cross-cultural research, however, one could go to the extreme of classifying this as one of the most critical decisions. In this section, we briefly review such cross-cultural methodological considerations. Specifically, this section will address equivalence (Hui and Triandis, 1985; Poortinga, 1989; Mullen, 1995) and bias (Poortinga and van de Vijver, 1987; van de Vijver and Leung, 1997; van de Vijver and Poortinga, 1997) as key methodological concerns inherent in cross-cultural research. Then

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sampling, wording and translation are discussed as important means of overcoming some identified biases.

Equivalence Achieving cross-cultural equivalence is an essential prerequisite in ensuring valid cross-cultural comparisons. Equivalence cannot be assumed a-priori. Each cross-cultural study needs to establish cross-cultural equivalence. As such, equivalence has been extensively discussed in cross-cultural research, albeit using different terms to describe the phenomenon. For instance, Mullen (1995) uses the term measurement equivalency and describes its three key aspects: translation equivalence, metric equivalence, and calibration equivalence. He then defines the term metric equivalence to imply that subjects across cultures respond to measurement scales in the same way. Furthermore, he views scalar inequivalence and inconsistent scoring across populations as two major threats to metric equivalence. Poortinga’s (1989) categorization of equivalence distinguishes between equivalence at the construct level (termed identical and non-identical domains of generalization) and measurement scale equivalence. The latter includes equivalence at the following hierarchy of levels: same scale origin and same metric, same metric, and same metric after linear transformation. To alleviate confusion created by the multiplicity of concepts and terms used to describe different but somewhat overlapping aspects of equivalence, Hui and Triandis (1985) have integrated prior research into a summary framework that consists of four levels of equivalence: conceptual/functional equivalence, equivalence in construct operationalization, item equivalence, and scalar equivalence. Van de Vijver and Leung (1997) use a similar typology: construct inequivalence, construct equivalence (also called structural equivalence), measurement unit equivalence, and scalar equivalence. Even though each level of equivalence is a prerequisite for the subsequent levels, in practice the distinction between adjacent levels of equivalence often becomes blurry. Nonetheless, the objective in crosscultural research is to achieve all four types of equivalence. Hui and Triandis’ (1985) four levels of equivalence are discussed next. Conceptual/functional equivalence is the first requirement for cross-cultural comparisons and refers to whether a given construct has similar meaning across cultures. Furthermore, to be functionally equivalent, the construct should be embedded in the same nomological network of antecedents, consequents, and correlates across cultures. For instance, workers from different cultures may rate “supervisor is considerate” as a very important characteristic; however, the meaning of “considerate” may vary considerably across cultures (Hoecklin, 1994). Equivalence in construct operationalization refers to whether a construct is manifested and operationalized the same way across cultures. Not only should the construct be operationalized using the same procedure across cultures, but the operationalization should also be equally meaningful. Item equivalence refers to whether identical instruments are used to measure the constructs across cultures. This is necessary if the cultures are to be numerically compared. Finally, scalar equivalence (or full score comparability (van de Vijver and Leung, 1997)) occurs if the instrument has achieved all prior levels of equivalence and the construct is measured on the same metric. This implies that “a numerical value on the scale refers to same degree, intensity, or magnitude of the construct regardless of the population of which the respondent is a member” (Hui and Triandis, 1985). Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Bias: Sources, Detection, and Prevention To achieve equivalence, one has to first identify and understand factors that may introduce biases in cross-cultural comparisons. Van de Vijver and Poortinga (1997) describe three different types of biases: construct bias, method bias, and item bias. Construct bias occurs when a construct measured is not equivalent across cultures both at a conceptual and at an operational level. This can result from different definitions of the construct across cultures, lack of overlap in the behaviors associated with a construct (e.g., behaviors associated with being a good son or daughter (filial piety) vary across cultures (van de Vijver and Leung, 1997)), poor sampling of relevant behaviors to be represented by items on instruments, and incomplete coverage of the construct (van de Vijver and Leung 1997). Construct bias can lead to lack of conceptual/functional equivalence and lack of equivalence in construct operationalization. There are a number of techniques used to detect the presence of construct bias. First, informants in each culture should be asked to describe the construct and associated behaviors (Serpell, 1993) to ascertain that the construct is not only identical across cultures, but that it also encompasses similar behaviors. Second, internal structure congruence techniques can be used to assess the anatomy of the construct across cultures (Hui and Triandis, 1985). These include techniques such as factor analysis which can be used to examine the factor structures of an instrument across cultures (Hui and Triandis, 1985; van de Vijver and Leung, 1997). Differences in factor structures point to possible construct bias. Other internal structure congruence techniques include multidimensional scaling (Hui and Triandis, 1985), “Simultaneous Factor Analysis in Several Populations” (which relies on confirmatory factor analysis using structural equation modeling tools such as LISREL), and comparison of correlation matrices (Hui and Triandis, 1985). Finally, construct bias may be detected by embedding the construct in a nomological set of relationships (Hui and Triandis, 1985). If the construct antecedents and consequents differ across cultures, then construct bias may be suspected. Method bias refers to bias in the scores on an instrument that can arise from characteristics of an instrument or its administration (van de Vijver and Leung, 1997) which result in subjects across cultures not responding to measurement scales in the same manner (Mullen 1995). Method bias gives rise to concerns about the internal validity of the study. One source of method bias is sample inequivalency in terms of demographics, educational experience, organizational position, etc. Other method bias concerns relate to differential social desirability of responses (Ross and Mirowsky, 1984) and inconsistent scoring across populations (termed selection-instrumentation effects by Cook and Campbell (1979). For instance, on Likert scales Koreans tend to avoid extremes and prefer to respond using the mid-points on the scales (Lee and Green, 1991), while Hispanics tend to choose extremes (Hui and Triandis, 1985). Differential scoring methods may also arise if respondents from a particular culture or country are not familiar with the type of instrument being used. Other biases include differences in physical conditions of administering the instrument (such as noise and lighting), communication problems between interviewer and interviewee particularly when the language used in the study is not the native language of the interviewer/ interviewee, differential response procedures, and differential familiarity with the stimuli used in the study. Method bias can influence both conceptual/functional equivalence, equivalence of operationalization, and item equivalence. Before attributing a significant main effect for culture to true cultural differences, method bias needs to be ruled out. To detect method bias, van de Vijver and Leung (1997) Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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suggest administering the same instrument to the different cultures repeatedly and examining differential changes in scores. If these changes are dissimilar then method bias is present. Furthermore, method triangulation can also be used to assess method bias (Lipson and Meleis, 1989). Method bias can be reduced if careful attention is devoted to sampling and administration of the instrument. Sampling equivalence can be achieved if the cross-cultural groups are matched on key demographic, educational, and socio-economic characteristics. Furthermore, identical administration procedures should be followed across cultures (i.e., a detailed instruction manual should be developed that anticipates contingencies), including the physical environment within which the instrument is administered. Familiarity of respondents across cultures with the testing techniques, item formats, test conventions, and procedures should also be assessed and only those that are appropriate across cultures should be employed. In addition, communication between the interviewer and respondent is enhanced when the two have similar cultural backgrounds. Item bias refers to measurement artifacts. These can arise from poor item translation, complex wording of items, or items inappropriate for a cultural context. Consequently, item bias is best prevented through careful attention to these issues. Like method bias, item bias can influence both conceptual/functional equivalence, equivalence of operationalization, and item equivalence. Item bias can be detected via a number of statistical techniques known collectively as item bias or differential item functioning techniques (see Hui and Triandis (1985) and van de Vijver and Leung (1997) for a comprehensive review and Berk (1982) for a set of articles). These techniques are based on the premise that irrespective of culture, individuals of the same standing on the construct should have the same expected average score on the construct. Differential item functioning techniques include regression methods (Poortinga, 1971, 1975), analysis of variance (Cleary and Hilton, 1968; Clauser, Mazor et al., 1994), item response theory (Lord and Novick, 1968; Lord, 1980; Shepard, Camilli et al., 1981; Thiesen, Steinberg et al., 1993), response pattern methods such as Delta plots (Angoff, 1982), standardized pdifference (Dorans and Kulick, 1986); the Mantel-Haenszel procedure (Holland and Thayer, 1988; Dorans and Holland, 1993); Alternating Least Squares Optimal Scaling, and Multiple Group LISREL (Mullen, 1995). However, use of these techniques is not without its drawbacks. The most significant concerns in using differential item functioning techniques to detect item bias are: (a) the frequent lack of convergence of bias statistics among the different techniques (Ironson and Subkoviak, 1979; Rudner, Getson et al., 1980; Shepard, Camilli et al., 1981; Devine and Raju, 1982; Reise, Widaman et al., 1993); (b) the poor stability of item bias statistics in test-pretest studies (Hoover and Kolen, 1984; Skaggs and Lissitz, 1992), and (c) the low agreement between statistical methods and experts’ subjective judgments about item bias (Plake, 1980; Englehard, Hansche et al., 1990). Table 1 presents a summary of how the three types of bias can be prevented or detected. The next section discusses three important methods of bias prevention: sampling, and wording and translation. The paper concludes by presenting a set of cross-cultural methodological guidelines derived by a committee of international scholars.

Sampling Sampling decisions in cross-cultural studies involve two distinct levels: sampling of cultures and sampling of subjects (van de Vijver and Leung 1997). Sampling of cultures Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

54 Karahanna, Evaristo, & Srite

Table 1: Types of Bias, Prevention, and Detection

Construct Bias (focus: Constructs)

Method Bias (focus: Administration Procedures)

Item Bias (focus: Operationalizations)

Detection • Informants describe construct and associated behaviors • Factor Analysis • Multidimensional Scaling • Simultaneous Confirmatory Factor Analysis in Several Populations • Comparison of correlation matrices • Nomological Network • Repeated administration of instrument • Method Triangulation • Monomethod-Multitrait matrix

• Analysis of variance • Item response theory • Delta plots • Standardized p-difference • Mantel-Haenszel procedure • Alternating Least Squares Optimal Scaling • Multiple Group LISREL

Prevention • Informants describe construct and associated behaviors in each culture

• Sampling (matching, statistical controls) • Identical physical condi tions of administering the instrument • Unambiguous communication between interviewer and interviewee • Ensure familiarity with the stimuli used in the study • Wording • Translation

involves decisions associated with selecting the cultures to be compared in the study. Many studies involve a convenience sample of cultures, typically ones where the researcher has pre-established contacts. Even though this strategy reduces the considerable costs of conducting cross-cultural research, it may hinder interpretability of results particularly when no differences are observed across cultures (van de Vijver and Leung, 1997). Systematic sampling of cultures, on the other hand, identifies cultures based on theoretical considerations. Typically, this involves selecting cultures that are at different points along a theoretical continuum such as a cultural dimension. Random sampling of cultures involves selection of a large number of cultures randomly and allows wider generalizability of results. Most cross-cultural studies discussing sampling considerations, however, refer to sampling of subjects. Ensuring sample equivalency is an important methodological consideration in cross-cultural research and it refers to the inclusion of subjects that are similar on demographic, educational, and socio-economic characteristics. Sample equivalency can be

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achieved by either the matching of subjects across groups based on these background variables or statistically controlling for the differences by including such demographic variables as covariates in the cross-cultural comparisons (van de Vijver and Leung, 1997). Many studies choose students as subjects both for convenience reasons and also because these students provide an ideal matched sample in terms of their demographic characteristics. Students are readily available, are normally cooperative, follow instructions well, and the experimenter can even claim that she is improving the student’s educational experience (Hampton, 1979). Moreover, with the internationalization of education, sometimes one does not even have to go to another country to find a sizable sample. In the US, many universities have a large body of foreign students. Several researchers, however, have taken exception, or at least presented cautionary notes, with the use of students as subjects (Khera and Benson, 1970; Shuptine, 1975). Hampton (1979) found that in nine of the ten studies reviewed in international marketing students had been used as subjects. His own analysis was inconclusive, suggesting that although the use of students may be acceptable in some cases, external validity of studies would be enhanced by choosing an appropriate sample. For instance, Englehard, Hansche, and Rutledge (1990), when describing the international meaning of work (MOW) project, mention that their samples were matched across countries on occupation, a way to reach equivalence. In the choice of an appropriate sample for cross-cultural survey research, a distinction is made between representativeness and scope of the sample. Representativeness is critical when the objective is to demonstrate differences between nations, whereas for other specific needs – such as studying the effect of education on citizenship participation – representativeness is not enough (Brislin and Thorndike, 1973), and stratified sampling becomes relevant. A special sampling design may be needed depending on the question asked. A common sampling problem, however, encountered in many cross-cultural studies is the lack of (or limited) existence of lists from which to draw samples, or the fact that many existing lists contain many errors. In deciding on the nature of the sampling frame, Brislin and Thorndike (1973) suggest that several questions need to be answered, some similar to questions pertinent to non-crosscultural research: (a) Should a national sample be attempted, given the goals of a specific project, the adequacy of national lists, and the possibility of different response rates from country to country? (b) How many call-backs to not-at-home people should be attempted? (c) What replacement procedures should be used? (d) On what basis, if any, can respondents be self-selected? The answers to points b, c and d should be included in the final description of the sample; and (e) how good is the sampling frame? Are there different sets of information in existence to check the adequacy of the frame? Finally, in surveys administered personally, the choice of interviewers is critical since unambiguous communication between interviewer and respondent is crucial in reducing method bias. Interviewers should, to the extent possible, belong to the same socio-economic cultural strata as the interviewees. They should also be appropriately trained, assigned to specific tasks and areas, and their work checked to avoid nightmares such as fabricated data.

Wording and Translation This is one of the key problems in cross-cultural methods, since in most cases different cultures also have different languages. Even in cases when subjects from different countries are conversant with English, they may miss the nuances of the intended meanings in

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56 Karahanna, Evaristo, & Srite

questionnaire items (e.g., British, Canadian, and American English all have unique terms). Researchers should ensure that measurement instruments keep the same meaning after translation. Moreover, a given latent construct should be measured by the same questionnaire items in different populations. In fact, researchers such as Irvine and Carrol (1980) made a convincing case to use factor matching procedures to test for invariance of factor structures across groups before any quantitative analysis is performed. To translate correctly, there is a need to translate to the target language – which needs to be performed by a native speaker of the target language–and then back translate to the original language, this time by a different native speaker of the original language. Brislin (1986) provides fairly complete guidelines about this process. He starts by suggesting that the original instrument should be written with an eye toward translation. Therefore, he recommends that the original instrument should: (a) use short simple sentences of less than sixteen words, (b) use the active rather than the passive voice, (c) repeat nouns instead of using pronouns, which may not be translatable, (d) avoid colloquialisms and metaphors, (e) avoid the subjunctive such as could, would or should, (f) add short sentences to add context, (g) avoid adverbs and propositions, (h) avoid possessives, (i) use specific rather than general terms, (j) avoid vagueness, (k) use wording that is familiar to translators, and (l) avoid sentences with two different verbs. Similarly, when modifying items, one should: (a) attempt to retain functional equivalency, (b) use knowledge about the target culture to improve translation, and (c) keep in mind the translation problems when evaluating the results. To develop new items, adequate pretesting with the correct bilingual population should be performed, perhaps in collaboration with colleagues from other cultures.

Implications of Methodological Issues Judging by the issues described above, achieving cross-cultural equivalence is all but straightforward. However, it is also clear that many precautions can be taken to prevent construct, method, and item bias and thus increase the level of equivalence. These range from sampling, wording, and translation to careful attention to administration procedures across cultures. A number of guidelines for cross-cultural research have been put forth by an international committee of scholars (Hambleton, 1994; van de Vijver and Hambleton, 1996). Even though the primary focus of these is on research on psychological and educational issues, these guidelines easily generalize to MIS research. These guidelines, taken from van de Vijver and Leung (1997), are shown in Appendix A. In addition to prevention, various statistical tools can assist in the detection of the various types of biases. In summary, similar patterns of functional relationships among variables need to be shown (Triandis, 1976). Moreover, multi-method measurement not only can avoid the confound between the interaction of the method and groups studied, but also is unlikely to share the same statistical underlying assumptions, or even require strong conceptualization ability (Hui and Triandis, 1985). This idea is similar to the notions of multiple operationism and conceptual replication (Campbell and Fiske, 1959). Hui and Triandis (1985) claim that this may not be as difficult as one may think, as long as there is prior planning of research. As an example they mention that an instrument may be improved by proper translation techniques, and “then establish conceptual/functional equivalence as well as instrument equivalence by the nomological network method and by examination of internal structure congruence. After that, the response pattern method and regressional methods can be used to test item equivalence and scalar equivalence” (p. 149). Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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The major implication of methodological problems is complications in making valid inferences from cross-cultural data. Clearly, there are many problems with correctly inferring from data in a cross-cultural research project and attributing results to true cross-cultural differences. To do so, alternative explanations need to be ruled out. Establishing (and not merely assuming) the four levels of cross-cultural equivalence previously discussed in this paper is a major step in this direction.

CONCLUSION Initial attempts at reviews of cross-cultural research in MIS (Evaristo, Karahanna, and Srite, 2000) show that for the most part MIS studies have refrained from testing theories across cultures and when comparisons are made they are often post hoc comparisons utilizing data from prior published studies in other countries. Clearly, this provides some insights into differences across cultures but suffers from a number of methodological shortcomings. In fact, the conclusions of those authors were: In summary, we suggest that there are mainly three points where the MIS Crosscultural research is lacking: lack of theory base (testing or building); inclusion of culture as antecedents of constructs, and general improvement in methodologies used. All three points are related, although to different extents, to methodological issues. The conclusion is that, to reach the same level of sophistication and quality already attained by mainstream MIS research, cross-cultural MIS research needs to seriously attend to crosscultural methodological issues. The current paper is a step ahead in this direction.

REFERENCES Angoff, W. H. (1982). Use of Difficulty and Discrimination Indices for Detecting Item Bias. Handbook of Methods for Detecting Item Bias. R. A. Beck. Baltimore, MD, Johns Hopkins University Press.: 96-116. Berk, R. A., Ed. (1982). Handbook of Methods for Detecting Item Bias. Baltimore, MD, John Hopkins University Press. Brislin, L. and Thorndike (1973). Cross-Cultural Research Methods. Brislin, R. (1986). The Wording and Translation of Research Instruments. Field Methods in Cross-Cultural Research. Lonner and Berry. Campbell, D. T. and D. W. Fiske (1959). “Convergent and Discriminant Validation by the Multitrait-Multimethod Matrix.” Psychological Bulletin 56, 81-105. Clauser, B. E., K. M. Mazor, and R.K. Hambleton (1994). “The Effect of Score Group Width on the Mantel-Haenszel Procedure.” Journal of Educational Measurement 31, 67-78. Cleary, T. A. and T. L. Hilton (1968). “An Investigation of Item Bias.” Educational and Psychological Measurement 28, 61-75. Cook, T. and D. Campbell (1979). Quasi-experimentation: Design and Analysis Issues for Field Settings. Boston, Houghton Mifflin. Devine, P. J. and N. S. Raju (1982). “Extent of Overlap Among Four Item Bias Methods.” Educational and Psychological Measurement 42, 1049-1066. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Dorans, N. J. and E. Kulick (1986). “Demonstrating the Utility of the Standardization Approach to Assessing Unexpected Differential Item Performance on the Scholastic Aptitude Test.” Journal of Educational Measurement 23, 355-368. Dorans, N. J. and P.W. Holland (1993). DIF Detection and Description: Mantel-Haenszel and Standardization. Differential Item Functioning. P. W. H. a. H. Wainer. Hillsdale, NJ, Lawrence Erlbaum, 35-66. Englehard, G., L. Hansche, and K.E. Rutledge (1990). “Accuracy of Bias Review Judges in Identifying Differential Item Functioning on Teacher Certification Tests.” Applied Measurement in Education 3, 347-360. Evaristo, J. R., E. Karahanna, and M. Srite. (2000). Cross-Cultural Research in MIS: A Review. Global Information Technology Management Conference, Memphis, TN. Hambleton, R. K. (1994). “Guidelines for Adapting Educational and Psychological Tests: A Progress Report.” European Journal of Psychological Assessment 10, 229-244. Hampton, G. (1979). “Students as Subjects in International Behavioral Studies.” Journal of International Business Studies 10(2): 94-96. Hoecklin, L. (1994). Managing Cultural Differences - Strategies for Competitive Advantage. Workingham, England, Addison-Wesley Publishing Company. Holland, P. W. and D. T. Thayer (1988). Differential Item Performance and the MantelHaenszel Procedure. Test Validity. H. W. a. H. I. Braun. Hillsdale, NJ, Lawrence Erlbaum, 129-145. Hoover, H. D. and M. J. Kolen (1984). “The Reliability of Six Item Bias Indices.” Applied Psychological Measurement 8, 173-181. Hui, H. and H. Triandis (1985). “Measurement in Cross-Cultural Psychology.” Journal of Cross-Cultural Psychology 16(2): 131-152. Ironson, G. H. and M. J. Subkoviak (1979). “A Comparison of Several Methods of Assessing Item Bias.” Journal of Educational Measurement 16, 209-225. Irvine, S. and W. Carrol (1980). Testing and Assessment Across Cultures: Issues in Methodology and Theory. Handbook of Cross-Cultural Psychology: Methodology. H. C. Triandis and W. Lonner. Boston, Allyn and Bacon, 181-244. Khera, S. P. and J. Benson (1970). “Are Students Really Poor Substitutes for Businesmen in Behavioral Research?” Journal of Marketing (November), 529-532. Lee, C. and R. Green (1991). “Cross-cultural Examination of the Fishbein Behavioral Intentions Model.” Journal of International Business Studies 22(2), 289-305. Lipson, J. G. and A. I. Meleis (1989). “Methodological Issues in Research with Immigrants.” Medical Anthropology 12, 103-115. Lord, F. M. (1980). Applications of Item Response Theory to Practical Testing Problems. Hillsdale, NJ, Lawrence Erlbaum. Lord, F. M. and M. R. Novick (1968). Statistical Theories of Mental Test Scores. Reading, MA, Addison-Wesley. Mullen, M. (1995). “Diagnosing Measurement Equivalence in Cross-National Research.” Journal of International Business Studies (Third Quarter), 573-596. Plake, B. S. (1980). “A Comparison of a Statistical and Subjective Procedure to Ascertain Item Validity: One Step in the Test Validation Process.” Educational and Psychological Measurement 40: 397-404. Poortinga, Y. H. (1971). “Cross-Cultural Comparisons of maximum Performance Tests: Some Methodological Aspects and Some Experiments with Simple Auditory and Visual Stimuli.” Psychologia Africana Monograph Supplement 6.

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Poortinga, Y. H. (1975). Some Implications of three Different Approaches to Inter-cultural Comparison. Applied Cross-Cultural Psychology. J. W. B. a. W. J. Lonner. Amsterdam, The Netherlands, Swets and Zeitlinger, 329-332. Poortinga, Y. H. (1989). “Equivalence in Cross Cultural Data: An Overview of Basic Issues.” International Journal of Psychology 24(6), 737-756. Poortinga, Y. H. (1989). “Equivalence in Cross-Cultural Data: An Overview of Basic Issues.” International Journal of Psychology 24, 737-756. Reise, S. P., K. F. Widaman, and R.H. Pugh (1993). “Confirmatory Factor analysis and Item Response Theory: Two approaches for Exploring Measurement Invariance.” Psychological Bulletin 114, 552-566. Ross, C. E. and J. Mirowsky (1984). “Socially-Desirable response and Acquiescence in CrossCultural Survey of Mental Health.” Journal of Health and Social Behavior 25: 189-197. Rudner, L. M., P. R. Getson, and D.L. Knight (1980). “A Monte Carlo Comparison of Seven Biased Item Detection Techniques.” Journal of Educational Measurement 17, 1-10. Serpell, R. (1993). The Significance of Schooling: Life Journeys in an African Society. Cambridge, UK, Cambridge University Press. Shepard, L., G. Camilli, and M. Averill (1981). “Comparison of six Procedures for Detecting Test Item Bias Using Both Internal and External Ability Criteria.” Journal of Educational Statistics 6, 317-375. Shuptine, K. (1975). “On the Validity of Using Students as Subjects in Consumer Behavior Expectations.” Journal of Business (July): 383-390. Skaggs, G. and R. W. Lissitz (1992). “The Consistency of Detecting Item Bias Across Different Test Administrations: Implications of Another Failure.” Journal of Educational Measurement 29, 227-242. Thiesen, D., L. Steinberg, and H. Wainer (1993). Detection of Differential Item Functioning Using the Parameters of Item Response Models. Differential Item Functioning. P. W. H. a. H. Wainer. Hillsdale, NJ, Lawrence Erlbaum, 67-113. Triandis, H. (1976). “Methodological Problems of Comparative Research.” International Journal of Psychology 11(3), 155-159. van de Vijver, F. and K. Leung (1997). Methods and Data Analysis for Cross-Cultural Research. Thousand Oaks, CA, SAGE Publications. van de Vijver, F. and R. K. Hambleton (1996). “Translating Tests: Some Practical Guidelines.” European Psychologist 1, 89-99. van de Vijver, F. and Y. H. Poortinga (1997). “Towards an Integrated Analysis of Bias in CrossCultural Assessment.” European Journal of Psychological Assessment 13, 21-29.

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60 Karahanna, Evaristo, & Srite

APPENDIX A: GUIDELINES FOR TRANSLATING AND ADAPTING INSTRUMENTS FOR CROSS CULTURAL RESEARCH (Source: Hambleton 1994; van de Vijver and Hambleton 1996; van de Vijver and Leung 1997)

Context (Defining the General Background) 1. 2.

Effects of cultural differences that are not relevant or important to the main purposes of the study should be minimized to the extent possible. The amount of overlap in the constructs in the population of interest should be assessed.

Instrument Development, Translation, and Adaptation 3.

4.

5. 6. 7.

8.

9.

10. 11. 12.

Instrument developers should ensure that the translation/adaptation process takes full account of linguistic and cultural differences among the populations for whom the translated/adapted versions of the instrument are intended. Instrument developers should provide evidence that the language used in the directions, rubrics, and items themselves as well as in the handbook are appropriate for all cultural and language populations for whom the instrument is intended. Instrument developers should provide evidence that the testing techniques, item formats, test conventions, and procedures are familiar to all intended populations. Instrument developers should provide evidence that item content and stimulus material are familiar to all intended populations. Instrument developers should implement systematic judgmental evidence, both linguistic and psychological, to improve the accuracy of the translation/adaptation process and compile evidence on the equivalence of all language versions. Instrument developers should ensure that the data collection design permits the use of appropriate statistical techniques to establish item equivalence between the different language versions of the instrument. Instrument developers should apply appropriate statistical techniques to (a) establish the equivalence of different versions of the instrument and (b) identify problematic components or aspects of the instrument which may be inadequate to one or more of the intended populations. Instrument developers should provide information on the evaluation of validity in all target populations for whom the translated/adapted versions are intended. Instrument developers should provide statistical evidence of the equivalence of questions for all intended populations. Nonequivalent questions between versions intended for different populations should not be used in preparing a common scale or in comparing these populations. However, they may be useful in enhancing content validity of scores reported for each population separately.

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Administration Procedures 13.

14.

15.

16. 17. 18.

Instrument developers and administrators should try to anticipate the types of problems that can be expected and take appropriate actions to remedy these problems through the preparation of appropriate materials and instructions. Instrument administrators should be sensitive to a number of factors related to the stimulus materials, administration procedures, and response modes that can moderate the validity of the inferences drawn from the scores. Those aspects of the environment that influence the administration of an instrument should be made as similar as possible across populations for whom the instrument is intended. Instrument administration instructions should be in the source and target languages to minimize the influence of unwanted sources of variation across populations. The instrument manual should specify all aspects of the instrument and its administration that require scrutiny in the application of the instrument in a new cultural context. The administration should be unobtrusive, and the examiner-examinee interaction should be minimized. Explicit rules that are described in the manual for the instrument should be followed.

Documentation/Score Interpretations 19. 20.

21. 22.

When an instrument is translated/adapted for use in another population, documentation of the changes should be provided, along with evidence of the equivalence. Score differences among samples of populations who were administered the instrument should not be taken at face value. The researcher has the responsibility to substantiate the differences with other empirical evidence. Comparisons across populations can only be made at the level of invariance that has been established for the scale on which scores are reported. The instrument developer should provide specific information on the ways in which the sociocultural and ecological contexts of the populations might affect performance of the instrument and should suggest procedures to account for these effects in the interpretation of results.

This article was previously published in the Journal of Global Information Management, January - March, Copyright © 2002.

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62 El Guindi & Kamel

Chapter V

The Role of Virtual Multicultural Teams in Corporate Culture Amira El Guindi Maastricht School of Management, The Netherlands Sherif Kamel The American University in Cairo, Egypt

ABSTRACT Information and communication technologies are impacting today’s organizations and businesses in many diverse ways. The implications are perceived at the individual, organizational, and national levels. The old accustomed-to boundaries of national economies and markets are giving way to globalization and newly emerging trends. Competition is increasing, and due to the forces of change, the world market will sweep aside the small market players to make way for global organizations that are capable of penetrating the world markets through a massive global outreach strategy. In that respect, there is a need to invest in innovative business models such as virtual multicultural teams that are capable of handling the pressures of growing competition while capitalizing on the evolution of information and communication technology. Global organizations need to operate through a very flexible structure that allows freedom and speed, and replaces the hierarchical models with structures that are flatter and adequate for stronger and more efficient communication. Such a structure will allow bottom-up decision making and self-management and will capitalize on the advantages of

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The Role of Virtual Multicultural Teams 63

employing multicultural teams; the diversified capacities, knowledge and business perception of these teams will be conducive to more in-depth innovation and creativity. Virtual teams can provide an organization with a solid opportunity to compete, making it easier to adapt to different situations and reducing conflicts. This chapter reflects the results of a study conducted in Egypt that targeted the determination of the possibility of reducing multicultural team conflicts by establishing a corporate culture that could have a strong influence on team members using virtual teams. The study covered six organizations operating through virtual multicultural teams and describes the analysis of the findings that relate to the role of corporate culture, the management style, and conflict resolution, among other elements. Global organizations face the challenge of operating through global multicultural teams whose members—coming from different cultural backgrounds—often stumble into conflicts that influence the overall performance of the organization. The core issue of this study is the impact of multicultural team conflicts on the overall organizational performance. Therefore, the objective of the study was to examine the relationship between corporate culture and multicultural team conflicts and to determine whether it is possible to reduce multicultural team conflicts by building a corporate culture in which all individual cultures would fit and where the management plays a vital role in transmitting the corporate culture to different teams in order to help global organizations become more efficient using virtual multicultural teams.

INTRODUCTION Globalization is the new way to economic growth today, representing a strategy that should ensure open, unregulated access to the world’s markets, integrating societies in a way that enables individuals, corporations, and nations to reach around the world farther, faster, and cheaper in an attempt to close the digital divide. Globalization is coupled with the continuous developments taking place in information and communication technology that have contributed to the emergence of the global organization that operates through multicultural and virtual teams. These teams are made up of people coming from different countries and having various cultural backgrounds—factors that could stand in the way of communication (Wederspahn & Solow, 2000). However, it is also important to note that even team members coming from the same cultural backgrounds face conflicts that jeopardize their efficiency (Wagner-Johnson, 1999). There are many reasons behind such conflicts, including different views, attitudes, expectations, and perspectives, conflicting interests, misunderstandings, backgrounds, social or moral levels. However, the difference in cultures comes at the top because it has most of the impact on teams’ conflicts, which suggests that multicultural teams are more susceptible to face conflicts (Wederspahn & Solow, 2000). Virtual teams’ conflict is another dimension to be considered by global organizations, which are an outcome of the evolution of information and communication technology. In “Taxonomy of Virtual Organizations,” Bultje and van Wijk (1998) suggested that a virtual organization is characterized as being a network of independent, geographically dispersed organizations with a partial mission overlap. Virtual organizations use virtual teams supported by information technology to communicate and coordinate their activities irrespective of their location. Virtual teams, if operating efficiently, provide the organization with a better

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chance to compete since they facilitate the adaptation to different situations in different geographic areas and the response to emergent markets needs everywhere. However, multicultural aspects need to be well integrated, forming an all-star team that works in favor of the organization and become capable in reaching a wider and more diversified range of customers. Many global organizations operating with multicultural teams need to modify their culture or create a new corporate culture that supports and enhances global team building. However, there are organizations that have strong corporate cultures and are able to direct their team members towards their desired channel, using their culture to unify their multicultural teams under one target, one culture, and one way of doing business; i.e., the company’s (Elkington, 1999). This chapter reflects the outcome of a study1 that was conducted in Egypt studying the challenges facing global organizations operating through multicultural teams, whose members—coming from different cultural backgrounds—eventually stumble into conflicts that influence the overall performance of the organization. However, having a strong corporate culture is not enough to increase the efficiency of multicultural teams; the culture should be flexible and encourage openness to new ideas and different ways of doing things. Additionally, it is important to address the role of management in setting a strong corporate culture and in formulating a winning multicultural team; this can be realized by enabling new and innovative ideas to encourage team members to be creative and to accept each other’s differences. The study also covered some important, related elements such as size and type of the business, the environment in which the organization operates, and the nationalities and cultures amongst others. When studying sample organizations in Egypt, the study focused on a number of issues, including the influence of a strong corporate culture on multicultural team conflicts; the degree of its flexibility; whether conflicts increase among virtual teams; management role’s in reducing conflicts, and what should the culture preach to reduce cultural conflicts in multicultural teams. The methodology used in the study was mainly descriptive; i.e., attempting to describe the problems faced by multicultural teams and the relationship between the level of such problems and the corporate culture. There were a set of interviews conducted with top- and middle-level managers in a number of organizations, as well as the distribution of a questionnaire among organizations using multicultural teams. The study assumed a definition for a “strong” corporate culture—namely, one that has a certain influence on its employees’ initial values and perceptions that succeeds in changing some of their pre-existing, individual values.. For instance, if the corporate culture is strong in which values promotes honesty and transparency, a person who comes from a culture where people are usually too proud or too shy to talk openly about their mistakes would find themselves changing their habits because of the influence of the corporate culture on their values, which are translated into their behavior and actions. The study assumed a definition for a “flexible” corporate culture—namely one that does not confine its employees to one set of procedures they have to follow; rather, it tries to group them under the same values and goals and gives them enough space to try to use their own ways to realize organizational objectives, thus fostering creativity and innovation. The study was more concerned with cultural differences; hence, the main criterion in choosing the samples was the diversification of cultures rather than comparing certain industrial or economic sectors. The second criterion was choosing organizations that need and are currently operating through multicultural teams. Finally, it is important to note that all organizations studied were operating in Egypt.

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GLOBALIZATION — “ONE WORLD, ONE TEAM” The world economy is undergoing a fundamental transformation as a result of globalization. To maintain global competitiveness, international business must address rapid, sudden, and complex changes in the world economic environment. Devoting long periods of time to developing new products, establishing new systems or entering new markets ensures extinction. Choosing to be second into a new market is no longer a successful strategy, and taking the safer, slower route is no longer safer. Some local businesses are already suffering from the impact of globalization with overseas competitors infiltrating their markets. Therefore, easier and more open access to markets, continuing improvement in performance, the ability to respond rapidly and flexibly, technological innovation, difficulty of doing it alone, and tolerance for diversity all should be considered if a company wants to go global (O’Hara-Devereaux & Johansen, l994). Today’s business environment is driven by change; an organization has to have a flexible structure that enables it to keep transforming, increase its responsiveness and speed, and cope with the unexpected (Trompenaars & Hampden-Turner, 1998). The continuous change in information and communication technology is dramatically affecting the way people do business in terms of organizational structure and working environment. The technology is making the global work more possible; it forms an essential tool for coordinating global production and distribution, exercising operational control, and driving policy formulation and implementation (Lipnack & Stamps, 1998). Consequently, this has been giving birth to the new virtual organization using international and virtual teams, with a lot to manage with respect to diversity and corporate culture. In “Team Work and Group Dynamics,” Stewart, Manz, and Sims (1999) point out that the early days of the team system were heavily influenced by a concept known as socio-technical systems that stresses the need to optimize both the social and technical aspects of work. The technical aspect is concerned with the equipment and processes that produce goods and services, and the social aspect is concerned with relationships among workers. The application of socio-technical systems resulted in the shift to work groups or teams in which technology and people can be matched together. The introduction of teams was associated with performance improvement and productivity increase in many companies. Business Week claims that teams can increase productivity by 30% or more and can substantially improve quality. Procter and Gamble2 (P&G) is considered one of the pioneering corporations in applying teams to its operations for organizational development as well as a competitive advantage (Lipnack & Stamps, 1998). As a corporation, P&G also benefited from the team strategy in realizing up to 50% decrease in manufacturing costs as well as improving quality, customer service, and leveraging reliability, in addition to intangible benefits such as quickness, decisiveness, and toughness (Stewart, Manz, & Sims, 1999). Moreover, through the 1970s and 1980s, General Motors3 (GM) Corporation made many efforts to use teams in its operations. GM’s trials were very successful and led to the Saturn experiment, currently GM’s most successful division in terms of customer satisfaction. Motorola, Ford, Chrysler, Boeing, Honeywell, General Electric, and Xerox are among the prominent companies who are active with teams (Stewart, Manz, & Sims, 1999). Federal Express4 has a thousand clerical workers divided into teams of five to 10 people; these teams helped the company reduce service problems by 13% (www.fedex.com).

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FORMATION OF VIRTUAL TEAMS In their book “Virtual Teams,” Lipnack and Stamps define five basic stages that outline team development: forming, storming, norming, performing, and adjourning. Most teams pass through the five stages, but some of them skip some phases, others go through them in different order, and the length of time for each phase might be different for some teams. Team composition is not easy; it demands a lot of cooperation and compromise, and failure can occur at any point in the sequence (Hellriegel, Slocum, & Woodman, 1998). When team members are dispersed in more than one location or organization, they need to pay special attention to these five stages. Having fewer opportunities for face-to-face interaction, these virtual teams should use the five stages to anticipate their life cycle and predict their moments of stress in order to avoid them (Fisher, Rayner, & Belgard, 1991). The globalization of economies enabled organizations to work across countries and explore new markets. Electronic media are dissolving the connection between physical and social places. People can sleep in different time zones and still be members of the same team. Although separated by great distances, they can still discuss matters, argue points, solve problems, exchange documents, share files, and make presentations together (Bhalla, 2000). Today’s virtual organization is sometimes a complex mix of permanent, temporary, face-toface, ad hoc, geographically distributed, culturally diverse, vertical, and horizontal teams moving across space, time, and organizational boundaries (Knoll & Jarvenpaa, 1995). The new forms of organizations do not wipe out the old ones—they add to them and change them, demonstrating why today’s networked organization benefits from the positive aspects of the old organizational forms, namely, the specialized functions of bureaucracy, the levels of hierarchies, and the coherence of small groups (Lipnack & Stamps, 1997). A virtual team, like every team, is a group of people who interact together to accomplish complementary tasks leading to the same objectives. They are unified by the same purpose but, “unlike conventional teams, a virtual team works across space, time, and organizational boundaries with links strengthened by webs of communication technologies” (Lipnack & Stamps, 1997). People working at the same place can communicate easily. They have meetings together, can drop into each other’s office, or even encounter each other in the hallway. Today, organizations need to conduct work in different countries. They need to reach other markets and increase their responsiveness. Virtual teams enable them to be competitive (Brake, Walker, & Walker, 1995). Today’s virtual teams’ site or workplace is a computer or a cluster of machines and an ephemeral place of bits in cyberspace, as in a World Wide Web site (Lipnack & Stamps, 1997). Teams and organizations expand their presence online; they create online places and load them with the information that used to be available in the physical sites of places. Global companies that do not acknowledge that will find themselves at a great disadvantage; sooner or later, they will have to adjust to this new reality (Neuhauser, Bender, & Stromberg, 2000). Trust is the cornerstone of the virtual team structure. Virtual teams operate in complex and changing environments. They need both flexibility and speed for adaptation. A lack of trust could lead to the interruption of the flow of information, which drives teams to stumble into confusion (Wederspahn & Solow, 2000). Without trust, each team member will be working alone and protecting his or her own interest, heading towards a disaster for the whole organization. In virtual organizations, absolute cooperation inside the same team and between different teams is mandatory (Neuhauser, Bender, & Stromberg, 2000). Team members do not only need to trust each other’s integrity, they also need to feel they have

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at least the same level of competence, otherwise how could they depend on each other’s results and use them as a basis for further work (Lewis, 1999). Virtual or not, each organization has a network of relationships formed by past experiences and interactions between team members. This network is the social capital of the organization, its “stock of relationship resources” (Lipnack & Stamps, 1997). In virtual teams, trust is not easy to establish but so easy to lose. Mistrust is easily spread among the organization; one bad experience with a team member influences his reputation and results in people warning others about working with him. Misunderstandings constitute a part of virtual teams’ conflicts. They are usually caused by the lack of trust. Smart communication tools should help to minimize this lack of trust and consequently misunderstandings. It is difficult to prove how good you are by sending emails. You need to work with your team members and show them reliable results. At-the-same-place teams have the advantage of being able to establish trust faster; they will have because proficiency can be more easily demonstrated through face-to-face meetings (Saphiere & Hofner, 1996). One has a better chance to explain and communicate information in a face-to-face meeting. Moreover, it is easier for others to judge if a person can be a reliable team member to count on from the way he/she presents idea. However, if he/she presents the ideas online, one would find it hard not to be skeptical, at least at the beginning, simply because the tools available to utilize for explanation are reduced to the minimum. For these reasons, face-to-face meetings are very important for virtual teams, especially at the beginning when people need to trust each other in order to start working together while scattered in many places (Neuhauser, Bender, & Stromberg, 2000). After establishing the team, meetings can become less frequent, but they should never stop because they are essential to renew team members’ trust in each other and keep the relationships going. That’s why instant communication is needed, like that provided by a high-speed full bandwidth continuously available audio/video/data link (Lipnack & Stamps, 1997).

MULTICULTURAL TEAMS Team members’ compatibility is an important factor in understanding team composition. This compatibility is referred to as “fit” by Stewart, Manz, and Sims (1999): “Team fit exists when there are positive social relationships among team members.” People are usually attracted to those who share the same interests, beliefs, and values; this creates synergy and homogeneity, which foster cooperation among team members. However, a counterargument suggests that diversity can be more useful for teams because too much homogeneity blocks creativity and pushes teams to operate within very limited boundaries and keep doing things the same way, no matter how changing and dynamic the environment is (Andrews, 1998). One study quantitatively demonstrated this by comparing culturally diverse teams with culturally homogeneous teams. In the early stages of team performance, culturally homogeneous teams were found to have more positive social interactions and performance. However, over time the processes of the culturally diverse teams improved and became as effective as those of the homogenous teams. After about four months, the culturally diverse teams scored higher than the homogeneous teams for some measures of creative performance (Stewart, Manz & Sims, 1999). This indicates that links between group diversity and workers perceptions are complex, and additional research needs to be done to understand how individuals react to groups with varying composition (Andrews, 1998). Teams from different cultures with different cultural values and beliefs stress the importance of understanding the Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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areas of cultural impact where performance is critically influenced by the most invisible, yet ingrained elements of the human character (Kennedy, 1998). This raises a very important question: Does a country’s culture stand alone in affecting team member’s way of seeing and doing things? And where does the organization’s corporate culture stand in that regard?

CORPORATE CULTURE The organizational infrastructure is composed of hardware, software, and, more importantly, peopleware; the corporate culture is the peopleware in action” (Neuhauser, Bender & Stromberg, 2000). Corporate culture has been present since the first groups banded together to accomplish a common task (e.g., hunting, farming, defense). It is the beliefs of an organization, its values, and actions. It makes up the corporate personality and is an accumulation of the organization’s shared experiences (Elkington, 1999). In order to work on a global scale, the organization needs to adapt to change both externally in terms of designing, marketing, selling, and delivering, and internally in terms of developing new strategies and building a new corporate culture to fit the strategies. Unless this is done, the old culture could get in the way of the organization success (O’Hara-Devereaux & Johansen, 1994). Culture is often defined as the way to do things. Neuhauser, Bender and Stromberg (2000) describe the three layers of corporate culture in their book, “Culture.Com,” as follows: (1) the first layer is the shared underlying assumptions and core values of the organization, the deepest layer of culture that is more related to what employees and management believe in, and what makes them loyal to the organization; (2) the second layer is behaviors and habits, i.e., “the way we do things around here”; and (3) the third layer is symbols and language, i.e., the most visible and simplest level of culture, how the people dress, how they treat each other, how their offices look, and how they use time. Sometimes the organizational culture turns into a set of ingrained habits so that it becomes invisible. If another way of doing things is suggested, employees start acting with confusion, and any other way of doing things seems to them less practical. Neuhaser et al. (2000) discuss a study of firms with strong cultures in the electronics industry that identified five possible limitations of a strong culture: 1. making employees vulnerable to burn out from continuous long hours; 2. making people unwilling to change what they do; 3. coloring the interpretation of information and events; 4. encouraging everyone to participate in behaviors that few people do well; and 5. encouraging ego involvement that heightens the emotionality of events. The idea of self-managed, empowered teams frightens managers who are used to the hierarchical structure and feel their authority and power in the organization threatened. However, current trends associated with both the needs of modern workers and improving productivity indicate that the number of organizations using teams will continue to grow and that teams may eventually become the dominate organizational form for accomplishing work (Stewart, Manz & Sims, 1999). The following is the outcome of the study that was conducted in Egypt in 2001 in six different organizations to determine the impact of virtual multicultural teams on organizational performance and the role played by corporate culture and management in reducing multicultural conflicts.

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CASE STUDIES During the course of the study, 21 interviews were conducted with senior and middle managers and 300 questionnaires were distributed to staff members in the different organizations. It important to note that the response rate was relatively high—86% of the resources addressed. The focus of the questions was mainly on corporate culture and its role in influencing the performance of multicultural teams. The questions were aimed at discovering the management role in each organization and how it contributed to the transmission of corporate culture to different teams. The questionnaire provided information on multicultural team conflicts and culture flexibility in each of the six organizations. Table 1 represents the six organizations studied; they were selected because they all operate through multicultural teams and have diversified cultures in an attempt to include as many different cultural backgrounds as possible. Following the description of each case is the analysis of the survey conducted that provides information on corporate culture strength, team members’ willingness to work in teams in general and in multicultural teams in specific, their preference for multicultural teams when it comes to long and short term assignments, culture flexibility, virtual teams use in the organization, and management role. It is important to note that for each case the corporate culture has been studied according to 10 cultural variables: environment, time, action, space, power, competitiveness, structure, communication, individualism, and thinking. Moreover, it is important to mention that the percentage of expatriates in the organizations used as case studies varied dramatically from one case to another, ranging from less than 1% to 30% of the total staff.

CASE #1 – DAELIM GROUP Daelim Group includes four main divisions; its first division, “Daelim Industrial Co., Ltd.,” was founded in 1939. It is one of South Korea’s leading international engineering and construction contractors, with projects in more than 20 countries and 2600 engineering and construction professionals. The other three divisions are “Daelim Petrochemical Division,” “Web-Tech Venture Capital Co., Ltd.,” and “Icitro for Internet services.” Daelim Group is a global company based in South Korea with overseas offices in Egypt, Iran, Malaysia, the Philippines, Saudi Arabia, Singapore, Taiwan, the United Arab Emirates, the United States, Vietnam, Indonesia, Kuwait, and India (Daelim, 1999). Daelim Industrial Co., Ltd. provides a complete range of services such as feasibility studies, project management and financing, engineering, procurement, construction, startup operation, and maintenance. Daelim Petrochemical Division provides a complete product combination ranging from basic petrochemicals to high-functioning, value-added products. Web-Tech Venture Capital Co., Ltd. invests in the development of promising hi-tech venture business dealing in high value-added products, and Icitro provides state-of-the-art Internet service networks. Daelim’s Egypt Branch was established in Cairo in 1980. Its team was formed of 15 members including Egyptians and Koreans to supervise and support various projects undertaken by the company in Egypt. Daelim Group’s culture is strong in South Korea, where people have a common understanding of the norms, goals, and processes and are proud to wear the company’s uniform in their offices. In Egypt, both the language and the culture presented barriers in communications between Koreans and Egyptians. However, this did not deter the Daelim Group from engaging in mergers, restructuring, and venturing into new

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Table 1: Case Studies Company Daelim Group Lucent Technologies Procter and Gamble Regional IT Institute

Seavin

Field Engineering and Construction Communication Consumer Goods Information Technology and Human Resources Development Services

Technip Group

Engineering and Construction

6 Organizations

6 Professions/sectors

Teams’ Nationalities Egyptians and Koreans Egyptians, Americans and Dutch Egyptians, British, Yemenis Egyptians, Lebanese, Palestinians and British

Egyptians and Americans Egyptians, French, Italians, Filipinos, South Africans, Polish, Canadians, and Americans. 14 Nationalities

Sample Surveyed 8 Egyptians 4 Expatriates 74 Egyptians 3 Expatriates 124 Egyptians 5 Expatriates 16 Egyptians 2 Expatriates

5 Egyptians 2 Expatriates 10 Egyptians 5 Expatriates

237 Egyptians 21 Expatriates Total = 258

businesses, which reflected a determination to keep a global position. This was emphasized through operating multicultural teams in the countries where it has established subsidiaries (www.daelim.com).

Daelim Group Survey Analysis In the case of Daelim Group, 80% of the respondents agreed on one cultural variable and indicated that they have different perspectives of the cultural variables and therefore are not influenced by one strong culture. With respect to teamwork, all respondents expressed a belief in it and in the positive impact it has on company performance, with 63% admitting to having conflicts with their team members. As for multicultural team conflicts, 88% of the respondents agreed that conflicts increase with team members from different cultural backgrounds; 63% of them have faced ethnocentric behaviors from their team members; and only 25% thought their own cultural orientations might be counterproductive. However, it is important to note that only 25% think teams should be made up of people from different cultural backgrounds and only 12% preferred to work with expatriates. Daelim Group seemed to be a company with a weak5 culture, with team members coming from different cultural backgrounds having great difficulties understanding each other and working together, and most of them preferring to work with people from their own culture, confirming the natural human tendency that is to stick more to similar people. However, 63% of the respondents indicated that when it comes to work in multicultural teams, they usually stick to the company’s way of doing things in order to get the job done,. This indicates that corporate culture had an influence on team members’ behavior and represented a key factor that grouped them around the same concepts, despite their differences. Although 25% acknowledged having more differences than common grounds with their multicultural team members, 63% was a majority indicating an influential corporate culture and representing a contradiction with the previous indications. Thus, interviews’ analysis was the only way to

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explain and understand the reason behind this contradiction6. Daelim Group had a strong inflexible culture that needs to be modified in order to suit a global presence. Team members are forced to follow the company’s way of doing things, but when they are asked about the way they conceive things, their answers are very diversified and denote the fact that the corporate culture influences their behavior but not their thinking. With respect to team performance ratings, Daelim Group’s respondents preferred both teams from the same cultural background working together for a short time (50% rated the performance as very good) and teams from different cultural backgrounds working together for a long time (38% agreed on a very good performance for this team). This again denoted a preference for change since people from the same culture risk becoming too homogeneous to add anything new to the team when they work together for a long time, while people from different cultural backgrounds are more able to form a creative team if they work together for a long time and cross the stage of intense conflicts. With respect to culture flexibility, when faced with multicultural conflicts, 50% of the respondents indicated that they stick to the company culture; 25% involve the supervisor; and only 25% try to solve the problem themselves. These results indicate the influence of corporate culture on employees’ actions, especially with 88% of the respondents more loyal to the company than to the team or the work getting done. With respect to virtual teams, Daelim Group does not rely heavily on virtual communication. The office in Cairo reports to the head office in South Korea, but written reports are usually sent by mail, and the most frequent form of virtual communication used in Daelim Group is phone calls. Management thinks that face-to-face meetings are the best way to communicate and that electronic mail create a lot of confusion, which confirms that in the absence of strong and reliable communication tools, virtual teams find it very hard to function properly. As for the role of management, management needs to play a stronger role in transmitting the corporate culture to the branch office and to present suggestions to the head office about how to modify the corporate culture in order to make it more readily absorbed by Egyptian team members. “Daelim Group corporate culture is not strong in Egypt. Egyptians should travel to South Korea and spend time in our offices there to develop a sense of loyalty to the company,” according to Daelim’s general manager, Choi.

CASE #2 – LUCENT TECHNOLOGIES Lucent Technologies’ history goes back to 1869 when Elisha Gray and Enos Barton formed Gray and Barton in Cleveland, Ohio, in the United States. Later, their enterprise became Western Electric. In 1881, American Bell purchased a controlling interest of Western Electric, which became the manufacturing arm of all the Bell Telephone companies. AT&T took over American Bell in 1899, and Bell Labs was created in 1925 from the AT&T and Western Electric engineering departments, which had been combined in 1907. The heritage of Western Electric and Bell Labs is at the core of Lucent Technologies, which was created and became fully independent in 1996 as part of AT&T’s decision to split into three separate companies. Lucent Technologies employs over 140,000 people worldwide from various cultures. It operates in four regions globally: North America, Europe, the Middle East, and Africa; Caribbean and Latin America; and Asia Pacific (www.lucent.com). Lucent Technologies designs, builds, and delivers a wide range of public and private networks, communications systems and software, data networking systems, business

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telephone systems, and microelectronic components. Bell Laboratories, the innovation engine of Lucent Technologies, is its research and development arm. Lucent Technologies provides broadband access network solutions offering an advanced portfolio of solutions for copper, fiber, and wireless access to meet the growing demand for bandwidth capacity for a variety of services, including analogue voice, analogue data, integrated switching data network, data switching lines, and Internet protocol. Moreover, it offers data networking solutions, mobility network solutions, optical network and packet core solutions, worldwide services solutions, Web hosting, and content distribution solutions. Lucent Technologies existed in Egypt since 1981, with 20 years’ experience in building telecommunication systems with major accounts and projects including Telecom Egypt. Egypt’s branch had 350 employees including 20 expatriates. Based on the downsizing that occurred in 2000 in the Telecom industry and the declination in the branch results that was mainly impacted by the economic conditions in Egypt, the number went down to approximately 200 employees including five expatriates. Since 1999, Egypt’s branch has been a regional office serving North Africa, Jordan, Syria, and Lebanon. The core of Lucent Technologies’ culture is diversity in all operations as a reflection of its deeply held values and corporate responsibility. Diversity is an integral part of Lucent Technologies’ business environment because it believes that diversity provides a differential advantage and contributes significantly to customer satisfaction and business success. Lucent Technologies is a good example of multicultural-virtual teams being part of its culture; virtual communication is very common and quite intense in the corporation.

Lucent Technologies Survey Analysis More than 80% of the survey respondents agreed on the same orientations for eight cultural variables that make Lucent Technologies a good example of an organization with a strong corporate culture that, more or less, unifies employees under the same way of perceiving things. With respect to teamwork, all employees involved in the sample expressed a preference to working in teams and a belief in the added value that teamwork brings to the organization. This is despite the conflicts that 92% of them face with their team members and which could be the result of the difficulties the company is currently going through. With respect to multicultural team conflicts, despite the large percentage of team members facing conflict with their colleagues, only 42% indicated that these conflicts increase in multicultural teams, indicating that the majority of teams’ conflicts in Lucent Technologies is not caused by cultural differences. This suggests that multicultural team conflict might not be very significant because of the strong corporate culture. While 50% of the respondents acknowledged having faced an ethnocentric behavior from people from other cultures, nobody thought his or her cultural orientations might be blocking him/her from understanding the others or from performing well. Lucent Technologies is among the companies that encourage multicultural teams. “Americans, Egyptians or Dutch, our culture is that we depend on each other to be successful, what we need is team spirit and cooperation,” as indicated by Bermudez, Learning Consultant at Lucent Technologies. 58% of the respondents indicated that all the teams’ members followed the company’s “way of doing things,” which again reflects the influence of a strong corporate culture that groups diverse members under the same theme and has them doing things together with their team members coming from different cultural backgrounds. Moreover, 58% of the respondents expressed a preference to work with expatriates; this indicates that the corporate culture is not only

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The Role of Virtual Multicultural Teams 73

strong but also global, since it promotes diversity and openness for working with different people, instead of fear of working with people who would have different ways of seeing and doing things. With respect to team performance ratings, respondents rated performance of multicultural teams equal to that of the performance of teams from the same culture, with 58% indicating belief in diversity and change rather than in homogeneity. On the one hand, teams from the same culture are good if they stay together for a short time, only because, after that, there is a risk that they might become unable to add anything new to the team or the work done. On the other hand, multicultural teams face some conflict at the beginning, especially in the storming phase, which is the second phase in teams’ composition. After that, in the norming phase, they understand each other but keep their differences (especially if the culture is flexible) and their ability to innovate and use their differences to complement each other. With respect to cultural flexibility, 67% of the respondents proved to be more loyal to the company than to the team or the work, indicating once more a strong culture. However, 75% were not sure if it was their own culture that was blocking them when facing multicultural team conflicts. Although strong, the culture is quite flexible because it encourages employees to acknowledge and consider their cultural differences. As for the deployment of virtual teams and the possibility for conflicts, managers indicated that they are minimal because virtual teams are part of Lucent Technologies’ culture, which includes electronic mail, video conferencing, teletraining, and conference calls. As for the role of management in reducing the conflicts and spreading the corporate culture, managers acknowledged the differences between cultures and the conflicts they produce. “I found that people in Egypt are too embarrassed to express their opinions sometimes, it takes time to build confidence and trust,” according to Bermudez. Management of the company set the objectives together with team members, and then everyone takes responsibility for their actions. Moreover, performance appraisal is very important to keep teams on the right track and push them to be cooperative; it is the way managers control teams’ behaviors and performance. Managers interviewed acknowledged the importance of multicultural teams because they permit exposure to wider perspectives and learning from other cultures. At Lucent Technologies, managers encourage teamwork spirit, respect between team members, and the right to express opinions.

CASE #3 – PROCTER AND GAMBLE Established in 1837, Procter and Gamble7 began as a soap and candle company in Cincinnati, Ohio, USA. During the 1980s, as an important new player in health care and cosmetics and fragrances, Procter and Gamble became a global company. Sales reached 10 billion US dollars, and as it approached its 150th anniversary, the company was poised for the most dramatic period of growth in its history. The company that began as a small midwestern partnership had grown into one of America’s largest multi-national corporations. In 1993, the company sales exceeded 30 billion US dollars, whereas more than 50% of sales came from outside the United States (www.pg.com). Procter and Gamble manufactures and markets a broad range of consumer products in many countries throughout the world. The company’s products fall into five business segments: fabric and home care, paper, beauty care, health care, and food and beverage. The company has won many awards, and was placed fourth on the list of “100 Best Corporate Citizens” by Business Ethics Magazine. It was also ranked among the 10 great companies

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74 El Guindi & Kamel

to work for by Food Processing Magazine. Leveraging its new global strengths, the company established a worldwide research and development network, with research hubs in the United States, Europe, Japan, and Latin America, and achieved leadership positions for many brands like Pampers, Pantene, and Ariel, products that became truly world brands. Procter and Gamble’s Egypt Branch was established in 1986; today it has 1,030 employees of which 10 are expatriates. The office in Egypt has sent 40 qualified employees to work in company branches around the world. Procter and Gamble Egypt is owned by Procter and Gamble Switzerland, which is the European headquarters of the company, and its general manager reports to the president of the company in Central and Eastern Europe and the Middle East region. The company faces the challenge of managing a very large organization with an international presence. Through acquisitions, advances into new lines, and investment in research and development, the company has positioned itself in the market with a very solid company image and has gained customers’ loyalty for its brands. It is known for its strong global corporate culture reflecting the famous Procter and Gamble core values and code of ethics, which is the main reason behind choosing it to figure among the samples. Moreover, having a global presence, the company uses virtual teams to coordinate its activities while successfully operating through multicultural teams and through a global rotation system in which subsidiaries spread all around the world keep exporting Procter and Gamble experts to other subsidiaries whenever their expertise or specialization is needed, regardless of their nationalities or cultures.

Procter and Gamble Survey Analysis More than 80% of the survey respondents agreed on seven cultural variables indicating a strong corporate culture. With respect to teamwork, all respondents expressed a preference to work in teams, and 60% reported having conflicts within their teams. With respect to multicultural team conflicts, 50% of the respondents indicated that conflicts increase with team members from different cultural background, and 30% faced ethnocentric behaviors. Around 10% thought their cultural orientations were counterproductive. Procter and Gamble respondents appreciated the efficiency of multicultural teams; they all thought teams should be built from people from different cultural backgrounds due to the positive experiences it can bring to the company. 70% felt it was important to follow the corporate culture, and 50% of respondents preferred working with expatriates, denoting a strong influence of corporate culture where nationalities become irrelevant when it comes to working in teams. With respect to teams’ performance rating, respondents had a preference of 63% for teams from the same culture for short-term assignments and 50% for multicultural teams for long-term assignments. With respect to culture flexibility to solve multicultural team conflicts, 82% of team members believed that it was their own cultural orientation that was blocking them, which reflected a flexible culture promoting openness to diversity. 45% of the respondents’ loyalty went to the company, which is another indicator for a strong corporate culture. With respect to virtual teams, the company was employing various virtual tools allowing more flexibility but causing some problems. “Misunderstandings arise sometimes when people interpret words differently in an email, and it is not easy to clear them,” as indicated by Rhommana, a company brand manager. The company’s management believes that virtual teams add a lot to the organization by transcending the barriers of time and space; therefore, reliable communication tools are provided to teams members as soon as they start working with the company.

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The Role of Virtual Multicultural Teams 75

With respect to the management role, the company style reflects a strong corporate culture and a preference for multicultural teams. Management is very clear in supporting the corporate culture and in teaching the core values and principles to the newcomers, and company loyalty is built by adopting the policy of promoting employees from within the company and hiring at the entry levels only. The company emphasizes diversity, believing that multicultural teams can reach great levels of performance and add fresh ideas to the work process, and team members have to cooperate in order to reach the common targets.

CASE #4 – REGIONAL IT INSTITUTE The Regional IT Institute8 was established in 1992 in Egypt —a pioneer in providing ICT training and education to decision-makers, managers, and professionals in the Arab Region. The Institute’s mission is to close the technological gap between a developing country, Egypt, and the world by investing in people and keeping pace with the massive and continuous developments taking place worldwide (Kamel, 2000). The Regional IT Institute, located in Cairo, is a not-for-profit organization supported financially by the educational programs it provides. There are 18 employees working at the institute, two of whom are expatriates. Having formulated a number of strategic partnerships with a number of international organizations and institutions for the delivery of its programs, the Institute operates more as a virtual organization. The Institute delivers professional and educational development programs in the fields of information technology, management, and software development. Its objective is to introduce and diffuse information and communication technology into various types of organizations, both at the private and public levels, in order to help develop first-class managers, experts, practitioners, and trainers (www.riti.org). The Institute’s activities are delivered using different formats ranging from long-term academic development degrees and diplomas (six to 24 months), medium- and short-term professional programs (six to eight weeks), and short-term courses and workshops (one to two weeks]. These activities reflect the human development needs that are identified by the continuous assessments and market surveys. Through its international alliances and partnerships, the Regional IT Institute has at its disposal many channels helping it to develop its capacities by the provision of the highest quality, most up-to-date training programs, according to global standards. The Institute is dealing with challenges related to cultural issues: “It was never easy to transfer the MBA program and implement it successfully in the Egyptian market. The norms and values are different, and the focus of the program courses was also different” (Kamel, 2000). The Institute had to adapt the program to the Egyptian environment without altering its core focus, such including case studies from the Egyptian market. Dealing successfully with other cultures without being blocked by the differences and adjusting to them is one of the reasons why the Institute was chosen to serve as a case example. The Institute interacts with hundreds of students daily, as well as with professors from various countries, in the frame of a multitude of training programs. The Institute faced the challenge of building a global virtual team. “The global virtual team needed to include members representing a heterogeneous group with diversity in cultures and countries” (Kamel, 2000). To achieve that, the Institute had to enhance both internal communication and control. For the design and delivery of the programs and courses, the Institute relied on a wide roster of national and international experienced professors,

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76 El Guindi & Kamel

instructors, lecturers, academics, and professional trainers. In other words, the teams operating at the Institute were not only multicultural but also virtual, which was another reason behind choosing the Institute as part of the sample. “It is important to note that the modality of operation of the Regional IT Institute could be perceived as being virtual in a nonconventional way, which brought to Egypt for the first time in the education sector a form of a virtual organization operating through global virtual teams” (Kamel, 2000).

Regional IT Institute Survey Analysis It is indicated that 80% or more have agreed on seven cultural variables, showing a strong corporate culture. All respondents have a preference to work in teams and believe that teams have a good impact on performance, with only 33% admitting to having conflicts with their team members. Respondents’ answers reflected a positive experience with multicultural teams, with 33% indicating that conflicts increase with team members from other cultural background. 44% pointed that they have faced ethnocentric behaviors, and 33% think their own cultural orientations block them sometimes. 89% of the respondents believed that teams should be built from people from different cultural backgrounds, and all respondents indicated that they had positive experiences with multicultural teams. Over 56% favored multicultural teams because, in the long run, members complement each other denoting a preference for diversity, especially with 89% preferring to work with expatriates rather than with people from the same culture. The majority of the sample (89%) agreed that teams from the same culture would have a very good performance if they work together for a short time, which again denotes a preference for change. 67% agreed that a multicultural team can have an excellent performance once it crosses a certain stage. With respect to culture flexibility, to solve multicultural team conflicts, 73% of respondents felt that their culture could be the reason for conflict, denoting a flexible culture that preaches openness and acceptance of differences. As for virtual teams, the management indicated that the Institute had three different programs with three different universities within three different countries; in other words, the Institute operates more as a virtual organization—“we meet virtually everyday,” as indicated by Sherif Kamel9. Phone, facsimile, electronic mail, and Web posting reflect interactions. Communication depends heavily on trust between counterparts. However, misunderstandings occur sometimes because of language or change of the contact persons. With respect to the management role, the analysis of the interviews indicated that the Institute depended on a strong flexible and dynamic culture, which is the guiding factor for operations. “Our culture is very strong. The proof is that any employee who joins the Institute has to adapt to this culture and not the other way around,” as indicated by Khaled Wahba, the Institute’s academic programs manager. Rules and processes are agreed upon first, then teams can enjoy a degree of delegation and empowerment. “You can give your back to your staff and trust they will do the right thing,” according to Kamel. The corporate culture at the Institute reflects an appreciation for the advantages of multicultural teams. Management puts a lot of effort into selecting the right people who can fit inside a system that encourages diversity. Kamel says, “Teaming is very beneficial when it involves people from different cultures.” The management recognizes cultural differences but believes that cultural problems can be solved by understanding and mutual respect.

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The Role of Virtual Multicultural Teams 77

CASE #5 – SEAVIN Seavin is a joint-venture agreement between Day and Zimmermann Services (DZS) and Vinnell Corporation to provide personnel support services for the United States Air Force and Army training teams and selected contractor personnel at five separate locations in Egypt. Seavin program started in 1993 and employs around 800 people, 5% Americans and the rest are Egyptians. Vinnell Corporation is a TWR10 company. It is a recognized leader in facilities operation and maintenance, military training, educational and vocational training, and logistics support in the United States and overseas. Since its beginnings during the Great Depression, Vinnell has successfully completed projects in around 50 countries located in five continents for a variety of government and commercial customers. Day and Zimmermann Corporation was founded in 1901 and is headquartered in Philadelphia, with annual revenues of 1.5 billion US dollars, 26,000 employees in 150 locations worldwide and completed projects in over 75 countries. The corporation provides many services; among them are engineering, construction, and program management (www.dat&zimmermann.com). Seavin’s activities are mainly within the functional areas of operations, maintenance, and repair responsibilities. The company manages housing units at five locations, making assignments and terminations; conducting inspections; preparing and processing leases; and maintaining and operating family housing furnishings and equipment. In addition, Seavin furnishes all offices within the remote site complexes to include office equipment and machines and consumable office supplies. Seavin has been chosen to serve as a case example because of the interaction of multicultural teams composed of Americans and Egyptians in addition to the influence of corporate culture. The program was established on temporary basis and management did not meet to establish a specific corporate culture to suit the program environment. The two companies that made the joint ventures, Vinnell and Day and Zimmermann, have totally different cultures that are almost opposites as indicated by J. Peterson, the Program Operations Coordinator at Seavin.

Seavin Survey Analysis A majority of 80% has agreed on the same orientations for five cultural variables, indicating the existence of a corporate culture but does not really proving it is a strong one. With respect to teamwork, 91% of respondents expressed a preference to working in teams and its positive impact on organizational performance, with 55% admitting having conflicts with their team members. As for multicultural team conflicts, 64% denied having more conflicts with people from different cultural background. 64% have detected ethnocentric behaviors from their team members, and only 18% thought their cultural orientations might block them sometimes from performing well. 91% of the respondents have a preference for multicultural teams, and 100% prefer to work with expatriates. Most of the respondents had positive work experiences in multicultural teams, with 45% indicating that they usually follow the company’s way of doing things when working in multicultural teams, and 36% had more common ground than differences. These percentages show that, although team members were not influenced by a strong corporate culture, they got along together well and their performance was not heavily altered by cultural conflicts. With respect to teams’ performance rating, responses were very diversified, but 45% of the respondents preferred multicultural teams who have worked together for a long time. With respect to culture flexibility, 55% of the respondents referred to corporate culture, while

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78 El Guindi & Kamel

36% tried to examine their own cultural orientations, and 9% referred to their supervisor. 73% of the respondents were found to be more loyal to their work than to the teams or the company, denoting a weakness in the corporate culture but efficiency in completing the job. As for virtual teams, Seavin’s operations were scattered in five locations in Egypt and report directly to the United States, which necessitates a virtual mode of communication. One of the managers interviewed, Galal El-Massry, indicated that “it saves a lot of cost, not to mention the ability to reach hundreds of people at the same time and the speed of response.” However, the biggest disadvantage detected was that clearing a misunderstanding would take five minutes if the two parties are at the same place but might take days if they were communicating virtually, which matches the theory stating that communication is usually more difficult for virtual teams, especially in the absence of trust. With respect to the management role, culture influence was not very clear; Seavin is a joint venture between two companies and was established only five years ago. Moreover, the program was a temporary service provider serving a specific project that was ending soon, which did not motivate managers to put much effort into enforcing corporate culture and helping employees to absorb it. Instead, managers relied on a set of specific rules and a strong control. Management acknowledged the impact of cultural differences on multicultural teams’ performance, with an emphasis on the effort management puts into selecting employees.

CASE #6– TECHNIP GROUP Founded in 1958, Technip was a French engineering and construction company. Today, Technip Group has several engineering centers located in different places including Paris, Rome, The Hague, Dusseldorf, Los Angles, Houston, Caracas, Rio de Janeiro, Luanda, Abu Dhabi, Shanghai, New Delhi, and Kuala Lumpur. The company has a permanent staff of about 10,000 and annual revenues of nearly three billion Euros. Technip Group is one of the world’s five biggest full-service engineering and construction groups operating internationally in the field of hydrocarbon and petrochemical facilities. During 1999, Technip Group achieved strong growth contrary to most of its major competitors and despite an economic environment that remained difficult. Technip Group’s business is designing and building industrial and service facilities. It handles everything from preliminary studies to turnkey delivery for individual units, as well as fully integrated complexes in a wide range of sectors, covering both its core activity of hydrocarbons and petrochemicals as well as selected industries. Technip Group’s principal fields of activity have developed along four main lines: oil and gas production, oil refining, petrochemicals and fertilizers, and diversified industries and architectural engineering. For any project, Technip Group can provide the following services: engineering, procurement, construction, and project management services (www.technip.com). In 1997, Technip Group established its branch office in Cairo. The office is currently working on several projects. The most important is a turnkey project worth about one billion US dollars that is the engineering and construction of an oil refinery expected to produce 100,000 barrels/day (five million tons per year), converting heavy products into disulphurized distillates. The teams operating at the project site in Amereya (near Alexandria) can serve as a sample because they are very diverse and are formed from people coming from France, Italy, Egypt, the Philippines, Germany, England, Canada, South Africa, and Poland. Technip Group

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The Role of Virtual Multicultural Teams 79

Figure 1: Corporate Culture Influence

Corporate Culture 10 9 8 7 6 5 4 3 2 1 0 Lucent

P&G

RITI

Seavin

Technip

Daelim

has recently gone through many acquisitions, which added more collaborators to the organization’s teams, enriched their skills in all branches of engineering and construction, and enhanced their internationalization. Until 1996, more than 50% of the people working at Technip Group were French; today this proportion is no more than 30%, with more Europeans, Americans, Russians, Malaysians, and Indians. Multicultural teams are one tool Technip Group is using to take advantage of complementary skills and stay flexible. Having a global presence, Technip Group is using virtual communication intensely, which is another reason for choosing it among the sample (Technip Annual Report, 1999).

Technip Group Survey Analysis More than 80% of the respondents agreed on no more than two of the cultural variables, which reflects a very weak culture. All the respondents showed interest in working in teams

Figure 2: Culture Flexibility

Culture Flexibility 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Lucent

P&G

RITI

Seavin

Technip

Daelim

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80 El Guindi & Kamel

Figure 3: Team Conflicts Compared to Multicultural Team Conflicts 100%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

Multicultural conflicts Teams Conflicts

0%

0% RITI

Seavin

Lucent

P&G

Technip

Daelim

and were aware of the added value teamwork brings to the organization, though 59% claimed that they face team conflicts. With respect to multicultural team conflicts, 65% of the respondents had more conflicts with people from different cultural backgrounds, 53% faced ethnocentric behaviors, and only 29% thought their own cultural orientations could be counterproductive sometimes. 65% of the respondents thought teams should be built from people from different cultural backgrounds, and 53% had negative experiences with multicultural teams. Out of those who had a positive experience with multicultural teams, only 6% indicated that the way they dealt with team members was always linked to the corporate culture. Despite the problems that most of the respondents faced with multicultural teams, 94% thought teams should be built from people from different cultural backgrounds contradicting the fact that corporate culture is weak and that conflicts were intense. With respect to teams’ performance rating, 41% rated the performance as being excellent, indicating that Technip Group respondents had a preference for multicultural teams in long term assignments. Other ratings were so diversified that no significant trend could be detected. With respect to culture flexibility, 53% of the respondents tried to stick to the way things are usually done in the organization, and 53% were more loyal to the work that needed to be done. Technip Group is one of the samples that reflected a weak corporate culture. Team members acknowledged the importance of teamwork and the added value multicultural teams brought to the organization, with 94% answering that teams should be multicultural. However, they obviously faced a lot of difficulty adapting to each other’s methods and ways of working with most of them, with 53% suffering from bad experiences with multicultural teams. The problem with Technip Group’s culture is that the recent acquisitions left it with a number of different cultures that needed to be blended together. The company needed a more flexible culture that could suit the various cultures that had to interact together. With respect to virtual teams, due to the global scale of its operations, Technip Group uses virtual communications and many of its employees are members of several virtual teams. Managers acknowledged the importance and advantages brought by virtual teaming, and teams are provided with the reliable tools for fast communication. As for the management role, the company management acknowledged the effect of differences in cultures on

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The Role of Virtual Multicultural Teams 81

perspectives and attitudes. Therefore, management plans to use “cross-fertilization” where people from different cultures get to rotate in different subsidiaries to learn more about the way people think and act. To sum up, Figure 1 shows the influence of corporate culture in each of the six organizations examined, indicating that Lucent Technologies appear to have the strongest corporate culture and Daelim Group the weakest. With respect to cultural flexibility which is one of the key issues studied in the survey, Figure 2 shows that Procter and Gamble, the Regional IT Institute, and Lucent Technologies have more flexible cultures than the other organizations. Figure 3 shows how conflicts increase in companies with weak corporate cultures. Daelim Group having the weakest corporate culture appears to be suffering from a lot of multicultural team conflicts, followed by Technip Group. Although having a rather weak corporate culture, Seavin has less multicultural team conflicts than Procter and Gamble and Lucent Technologies who have stronger corporate cultures, because Seavin is a temporary project where people try to avoid conflict as much as possible and follow the rules of management. Such conflicts are due to the emphasis management puts on selection. Comparing the level of team conflicts in general to the level of multicultural team conflicts, it was found that the former is higher in companies with strong corporate cultures. In general, the survey percentages combined with the interview analysis proved the existence of a relationship between corporate cultures and multicultural team conflicts. This relationship became clearer in the previous integrative Figures 1, 2, and 3, where the six organizations are compared.

ANALYSIS OF SURVEY FINDINGS The analysis of corporate culture’s influence on multicultural team conflicts led to some conclusions and general findings. In general, the organizations that were found to have a strong corporate culture—Lucent Technologies, the Regional IT Institute and Procter and Gamble—have less conflict within multicultural teams than those with weaker corporate cultures—Technip Group, Daelim Group and Seavin, which confirms the theory of corporate culture’s influence on multicultural team conflicts. As mentioned in the literature review, people prefer to work in teams to satisfy functional and social aspects. Thus, the efficiency of teamwork is indisputable; all team members involved in the study expressed a preference to working in teams. However, when the study involved teaming with people from different cultural backgrounds, team members’ preferences took other dimensions, and only organizations armed with strong corporate cultures were capable of absorbing diverse people from different parts of the globe and grouping them under one umbrella. Table 2 represents conflicts faced by teams in general compared to conflicts faced by multicultural teams in each of the six organizations. With respect to Lucent Technologies, the Regional IT Institute, and Procter and Gamble, they operate in different environments having different types and sizes of businesses, different management styles, and varying objectives. These organizations’ corporate cultures must be different, each suiting specific conditions and needs. However, they all have some common values and aspects that help their teams to operate in a global environment with various cultures. The most important aspect in the three corporate cultures is flexibility. All three cultures preach openness to new ideas and creative work processes. They were successful in operating through multicultural teams having reached equilibrium

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82 El Guindi & Kamel

Table 2: Analysis Summary Organization

Corporate Culture

Willingness to work in teams

Conflicts vs. Readiness to work in multicultural teams

Preference for teams allocation Short term Long term

Strong vs. Flexible Culture

Same culture for S/T Multicultural for L/T Same culture for S/T Multicultural for L/T

67% loyal to company vs. 75% flexible about their culture 75% loyal to company vs. 25% flexible about their culture

Lucent Technologies

Very Strong [8/10]

100%

42% conflicts 67% ready

Daelim Group

Globally Weak [1/10]

100%

88% conflicts 25% ready

Regional IT Institute

Strong [7/10]

100%

33% conflicts 82% ready

Same culture for S/T Multicultural for L/T

45% loyal to company vs. 73% flexible about their culture

Seavin

Average [5/10]

100%

36% conflicts 91% ready

Multicultural for L/T

73% loyal to the work vs. 50% loyal to the company

Procter and Gamble

Strong [7/10]

100%

50% conflicts 100% ready

Same culture for S/T Multicultural for L/T

45% loyal to company vs. 82% flexible about their culture

Technip Group

Weak [2/10]

100%

65% conflicts 65% ready

Multicultural for L/T

53% Loyal to work 53% Flexible about their culture

General Comments

Efficient use of virtual teams. Management supports the culture. Not comfortable with virtual communication. Strong culture in head office not transmitted to branch. Weak management role in enforcing corporate culture. Strong management role in enforcing a flexible culture. Successful virtual organization. Acknowledgment of virtual communication. Corporate culture not very strong. Management role clear in rules enforcement. Successful virtual teams. Supportive management role in enforcing the corporate culture. Clear trend for diversity. Understanding of role of virtual communication and virtual teams. Corporate culture weak due to group transformation. Management considers building a more global culture.

between strength and flexibility in their corporate culture. Moreover, the management role in supporting the corporate culture was very important and regarding people as their main asset that led them to global success with managers acting like coaches and directly reflecting the corporate culture in their decisions and actions. As for Daelim Group, Technip Group, and Seavin, it was noticed that—except for Seavin- they had more conflicts in their multicultural teams, and their teams’ members were suffering from bad experiences working with people from other cultures. The reason for corporate culture weakness was different in each organization. Daelim Group had the problem of adhering to one culture that was the driving force of the organization since it was founded more than 60 years ago; having the problem of not being able to transmit the culture that managers considered to be strong in South Korea to its branch in Egypt; and management needed to be more aware of that fact. With respect to Technip Group, it was in a transition

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The Role of Virtual Multicultural Teams 83

period because it had enlarged the size of its business and operations to have a more diversified multinational identity. The management was aware of the change that had to take place, but the process was going to be lengthy. A new global corporate culture must be founded and transmitted to all subsidiaries; meanwhile, conflicts will keep disturbing teams’ performance. As for Seavin, being a joint venture between two companies with different cultures, its teams’ members did not follow the same culture, but they got along well because of management’s role. However, establishing a global corporate culture to suit a five-year project was not a practical idea. Managers led the teams by enforcing the rules and selecting the right people from the start, which proved to be an effective management style because the goal is to provide certain services according to certain rules; therefore, there is no room for creativity and innovation. One common factor among the six organizations was the use of virtual teams. It was found through the study that all organizations relied on virtual communication for certain operations and understood the advantages of using virtual teams in strengthening their global presence. Communication tools were provided and enhanced to support virtual teams. In general, teams indicated that once virtual teaming became part of the culture, misunderstandings were reduced and efficiency was increased. Table 3 provides a summary of the study findings demonstrating the relationships between the variables tested by the analysis. As part of the survey, a number of interviews were conducted with senior and executive managers, which provided some valuable recommendations that can be considered as a road map for global companies operating through multicultural teams. Some of the most important follow. Flexibility as part of corporate culture is vital to allow team members to express their points of view and encourage team members’ ideas, even if they are different from the way things have always been seen and done in the organization—as long as they can prove the outcomes will be consistent with the team goals. Create loyalty to help team members cooperate to reach organizational goals by treating them equally regardless of their culture or location, to help build trust between team members, and to convince them that sticking to the organization’s identity and culture will be profitable for both the organization and themselves, and by involving them in the decision-making process. Management role is vital in promoting corporate culture. Cross-fertilization is important in mixing people to work together from different countries. Language is crucial to facilitate communication among Table 3: Findings Summary Variables Strong corporate culture and multicultural team conflicts Teamwork Flexible culture Multicultural virtual teams

Management role

Findings A strong corporate culture reduces multicultural team conflicts. People tend to work in teams to satisfy functional and social aspects. A flexible corporate culture preaching openness to diversity reduces multicultural team conflicts. Virtual teams are efficient if virtual communication becomes part of the culture and reliable tools are provided. Management role in transmitting the culture and setting the example is vital for multicultural team efficiency; its absence reduces the influence of corporate culture on multicultural team conflicts.

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84 El Guindi & Kamel

members from different cultures. Resource allocation is necessary and important when considering multicultural teams since it can have critical implications on organizational growth and development. Team task is useful because, if the culture is efficient, multicultural teams can bring a lot to the work, especially in long-term assignments, because they have the time to understand each other and build the trust; in short-term assignments, multicultural teams usually stumble in conflicts generated by misunderstandings. This delays the work due to the fact that team members might not have the time to cross the storming stage (where conflict is quite intense) and make it to the norming stage (where they reach a common ground). Teams’ social life is a key issue in enhancing multicultural teams’ performance by trying to make them meet outside the working environment as much as possible.

CONCLUSION The business world is changing rapidly and organizations need to operate in a complex and competitive environment. In order to compete globally, they have to redefine their structures and their people as they seek the optimization of their resources across borders. This pursuit of profit, growth, and/or market share has to be done in the context of profound cultural differences through a flexible structure that permits a worldwide existence. In many cases, multicultural teams are the answer. Multicultural teams can provide the global organization with great success factors giving it better access to the world’s markets. They can enrich the work with innovation and bring a treasure of fresh ideas to the organization. Global companies should therefore provide the right environment for their teams to operate efficiently by reducing their cultural conflicts. The right corporate culture can be one of the ways to keep teams members working together in harmony yet each keeping his/her own special differences. The study of the six organizations proved that a strong and flexible corporate culture can help multicultural teams turn their differences into precious assets by reducing their cultural conflicts. It was also proved that the corporate culture must be supported by managers; teams might still lose their way and stumble into conflict if management is not aware of the benefits multicultural teams can bring to the organization, does not believe in the corporate culture, or does not exercise a strong role in transmitting this culture. Multicultural virtual teams were found to have less conflict when provided with reliable communication tools and when trust becomes part of the corporate culture. The study results indicated that to operate through multicultural teams, the corporate culture should preach openness to diversity and acceptance and respect of differences. Teams must believe that their power emerges from these differences. Building teams’ loyalty, cross-fertilization, teams’ allocation, teams’ social life, and the length of teams’ assignments are all issues to which global organizations operating through multicultural teams should pay attention. Moreover, team member selection is a very important point; the beauty of a multicultural team can only be seen when the right pieces are chosen and fit well together to show the final picture of the puzzle. In other words, team members must be chosen not only for their knowledge and expertise, but also on the basis of their differences and how well they complement each other to form the right combination needed for the team assignment.

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The Role of Virtual Multicultural Teams 85

ENDNOTES 1

2

3

4

5

6

7

8

9 10

The study objective was to examine the relationship between corporate culture and multicultural team conflicts and the role of management and a strong corporate culture in reducing multicultural team conflicts. Established in 1837, Procter and Gamble is a global company with more than 11,000 employees worldwide, more than 300 products, and more than five billion consumers in 140 countries. Established in 1908, General Motors is the world’s largest automotive corporation and full-line vehicle manufacturer employing 388,000 people, having operations in 50 countries, and a presence in 200 countries. Federal Express is a worldwide corporation with 215,000 employees and a 20 billion US dollars market leader in providing integrated transportation, information, and logistics. The term “weak” here refers to the fact that the culture of the organization is not strong enough to entice the staff in the organization to commit to it either because they are not convinced of it or it does not match their own attitude and behavior. Daelim Group’s corporate culture is very strong in South Korea, where employees are proud to wear the company’s uniforms in the office and never leave their desks without their famous notebook with Daelim Group logo. They are loyal, stick together, and reflect the company’s identity in every decision they make. The general manager in Egypt, Choi, indicated that this strong culture is the driving force in the company, but the problem in Egypt is that it has not been well transmitted to the employees. Today, Procter and Gamble employs more than 110,000 employees worldwide and markets more than 300 products to more than 50 million consumers in 140 countries (Procter and Gamble, 2000). The institute is truly a global organization, having served over 12,000 students and trainees from over 1,100 organizations from 90 countries from all parts of the world since 1992, pooling different students, professors, and staff from different nations and cultures using both traditional (in-class) and unconventional (virtual) methods. Sherif Kamel was the director of the Regional IT Institute during the period 1992-2001. TRW is a global technology manufacturing and services company working through 250 locations in 35 countries (www.vinnell.com).

REFERENCES Andrews, C. (1998). Factors that impact multi-cultural team performance. Center for the Study of Work Teams (CSWT), University of North Texas, Denton, TX. www.workteams.unt.edu/reports/andrews.html. Accessed May 2, 2001. Bhalla, R. K. (2000). The group processes of globally distributed work teams: A case study. www.amiltd.com/globalteas.html. Accessed April 20, 2001. Brake, T., Walker, D.M., & Walker, T. (1995). Doing Business Internationally, the Guide to Cross-Cultural Success. Richard D. Irwin, Inc. Bultje, R. & Van Wijk (1998). Taxonomy of virtual organizations. VoNet Newsletter, www.virtual–organization.net. Accessed March 2, 2001. Daelim Group. (1999). Annual Report.

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86 El Guindi & Kamel

Daelim Profile. www.daelim.com. Accessed April 10, 2001. Day & Zimmermann Profile. www.day&zimmermann.com. Accessed April 10, 2001. Elkington, J. (1999). Changing corporate culture. www.oneworld.org/patp/_8_3/ elikington.html. Accessed April 13, 2001. Fisher, K., Rayner, S., Belgard, W., & the Belgard-Fisher-Rayner Team (1995). Tips for Teams. R.R. Donnelley and Sons Company. Hellriegel, D., Slocum, J.W., & Woodman, R. (1998). Organizational Behavior. SouthWestern College Publishing. Kamel, S. (2000). Virtual learning networks in higher education: The case of Egypt’s Regional IT Institute. Journal of Global Information Management, Special Issue on Global Knowledge Management in e-Economy. Kennedy, M. (1998). Center for the Study of Work Teams (CSWT) Papers, University of North Texas, Denton, TX. www.workteams.unt.edu/reports/kennedy-m.html. Accessed March 30, 2001. Knoll, K. & Jarvenpaa, S.L. (1998). Learning to work in distributed global teams. Global Virtual Team Exercise. www.bus.utexas.edu/jarvenpaa/gvt98/hicss.html. Accessed April 20, 2001. Lewis, R. D. (1999). Building multicultural business teams in the Nordic-Baltic Area. A.C.Nielsen. www.acnielsen.fi/news&views/nor1/text2.htm. Accessed May 2, 2001. Lipnack, J. & Stamps, J. (1997). Virtual teams reaching across space, time, and organizations with technology. New York: John Wiley & Sons. Lucent Technologies. www.lucent.com. Accessed April 15, 2001. Neuhauser, P., Bender, R. & Stromberg, K. (2000). Culture.Com: Building corporate culture in the connected workplace. New York: John Wiley & Sons. O’Hara-Devereaux, M. & Johansen, R. (1994). Global work: Bridging distance, culture & time. San Francisco, CA: Jossey-Bass Publishers. Procter and Gamble (2000). Annual Report, 2000. Procter and Gamble. www.pg.com. Accessed April 19, 2001. Regional IT Institute. www.riti.org. Accessed April 20, 2001. Saphiere, D. & Hofner, M. (1996). Productive behaviors of global business teams. Nipporica Associates. www.nipporica.com/IJIR.htm. Accessed May 2, 2001. Stewart, G. L., Manz, C.C., & Sims, H.P. (1999). Team work and group dynamics. New York: John Wiley & Sons. Technip Group (1999). Annual Report, 1999. Technip Group. www.technip.com. Accessed April 12, 2001. Trompenars, F. & Hampden-Turner, C. (1998). Riding the waves of culture. New York: McGraw Hill. Vinnell Profile. www.Vinnell.com. Accessed April 15, 2001. Wagner-Johnson, D. (1999). Managing work team conflict: Assessment and preventative strategies. Center for the Study of Work Teams (CSWT), University of North Texas, Denton, TX. www.workteams.unt.edu/reports/wagner.html. Accessed April 15, 2001. Wederspahn, G. M. & Solow, L. A. (2000) - Multicultural Teams: From Chaos to Synergy, Intercultural Businesses Solutions Reading. Retrieved on March 15, 2001 from: www.omn.com/Wederspahn/readings.htm.

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Lines of Advance in Global Information Technology 87

Chapter VI

Lines of Advance in Global Information Technology Management: American/ West European Approach Ana R. del Águila University of Málaga, Spain Sebastián Bruque University of Jaén, Spain Antonio Padilla University of Málaga, Spain

ABSTRACT During the last decades, numerous theoretical frameworks have been developed in the field of general management. Each theoretical framework has proved useful to explain specific questions about the structure, processes, or performance of the modern firm. In this study we try to propose some connections between general management literature and IT literature. Some of the most important management theories, such as the Transaction Costs Economics, the Agency Theory, the Resource-Based View, and the Knowledge- Based View can be useful to explain specific IT issues. The final goal of this chapter is to propose several lines of advance in global IT using different theories or frameworks as the basis for future research.

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88 Águila, Bruque, & Padilla

INTRODUCTION Information technology (IT) has proved to be an engine for social and economic change in the last few decades (Castells, 1998). Organizations at the beginning of the 21st century have not only played a part in technological change but have constituted the principal agent of modernization and progress in society in general. Various researchers in management have studied the effects of IT on organizations, leading to a growing body of work in this area. Thus, among areas of research, the structural effects of IT have been studied (Orlikowski & Robey, 1991), the links between investment in IT and performance (Brynjolfsson, Malone, Gurbaxani, & Kambil, 1994), and the interrelations between the human element and IT (Ross, Beath, & Goodhue, 1996; among others). From a global perspective of business, the IT implementation and diffusion (Palvia, 1997) with emphasis in different cultures and countries (Davis, 1999; Enns & Huff, 1999; Palvia, Palvia, & Whitworth, 2002) have been analyzed. From the formal point of view, the new technologies have been analyzed from practically all approaches and aspects of Economic and Organizational Theory. However, despite the variety of work done, there has been little effort at integration to put forward a complete and global view of the knowledge accumulated during the past few decades. In this chapter we attempt to make up for this lack of research and give a synopsis of previous work in an attempt to advance our understanding. We propose a series of future lines of research, the majority of them previously unexplored. To do this, we have structured the work into a first part in which we analyze the specialized literature, pointing out the different theoretical perspectives from which the effects of IT on businesses have been studied. Second, we organize the proposed research according to various formal criteria and with regards to content. We end this chapter with an analysis and discussion of the proposed areas of research, and we draw some final conclusions.

APPROACHES IN THE STUDY OF IT IN MANAGEMENT IT has long ceased to be a specialized area restricted to qualified professionals of strictly technical backgrounds. Even as early as the 1960s, a number of studies appeared that attempted to analyze – although in a very speculative manner – the importance that IT might have in the future in aspects such as inter-organizational communications (Kaufman, 1966) or the generic impact in human communication and business (Licklider, 1960; Licklider & Taylor, 1968). Other authors were interested in problems concerning the management of information administration systems or more generally in general information systems (Ackoff, 1967; Dearden, 1966). Research began at that point which, from the point of view of management, tried to explain the behavior of the new technologies in the business system and the effect it might have on the different characteristics of the company, such as size, structure, processes and performance (Barney, 1986; Prahalad & Bettis, 1986). Specifically, the literature has been concerned with studying three questions related to the presence of IT in the company (see Table 1). First, there was the need to resolve questions arising from the introduction of the new technologies into the companies, from a purely descriptive point of view, based on innovative companies and normally on the direct experience of the author. The question being answered was what does this type of technology do, or what can it do in the company, paying attention to the different functions it carries

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Lines of Advance in Global Information Technology 89

out, its features, and how it develops within the company. They are highly explorative studies, whose principal objective is to instruct and inform the management about the business possibilities of the new tools, and they rarely use elaborate theoretical models that allow conclusive outcomes. We call this group of studies the Explorative Focus on IT in the company. We can distinguish two areas of research: description of successful cases and the use of the concept of the life cycle to explain the evolution of IT in the company (see Table 1). Second, there is the research area concerned with the impact that IT has on business structure. These are studies that analyze the forces that, upon application of technological solutions, modify or alter the conditions in which companies organize internally. This research draws on studies with a long tradition in fields related to the structure of organizations, such as organizational design, the management of change, workgroups, and intraorganizational communication, analyzing the effect that IT has on the various structural aspects. We shall call this area of research Structural Focus. This is one of the subjects most frequently related to IT, that is, the analysis of the relationship between this type of technologies and the structure of the organization (Hitt, 1999; Malone, 1997; Nault, 1998; Robey & Boudreau, 1999; Scott Morton, 1991); how investment in IT is related to variables measuring a company’s form, such as size, diversification, vertical integration and options of growth (Dewan, Michael, & Min, 1998); or the impact of IT on jobs (Barrett & Walsham, 1999; Martinko, Henry, & Zmud 1996). IT creates new options for organizational design, and the new organizational forms in turn provide new opportunities for the design of technology (Fulk & DeSanctis, 1995, 1999). Yates and Benjamin (1991) point out that IT has repeatedly played a role in the evolution of organizational structures and assert that innovations in IT have made new organizational forms possible, and vice versa. For their part, Galbraith and Lawler (1993) consider that IT can lead to the marketplace becoming more efficient than the hierarchy in the market-hierarchy relation for the coordination and making of economic decisions. Despite the limited level of consensus that exists in the field (Nault, 1998), it is interesting to review the different structural aspects that could be modified by the implantation and development of IT. Among these we could find the following effects, which we set out as areas of research within this approach (see Table 1): 1. the reduction in the number of hierarchical levels and flattening out of business structures; 2. the disappearance of routine jobs; 3. the integration of departments; 4. the formation of workgroups; 5. the reduction of distance between executives and subordinates; 6. the possible implantation of telecommuting; and 7. the relationship between IT architecture and organizational structure. Third, we will refer to work attempting to analyze the impact of IT on strategic management in the company, especially the relation between the implantation of IT, strategy, and performance. There are distinct approaches that respond to the different objectives of analysis of the strategic schools that have developed in the past decades: Industrial Organization, Organizational Economics, Resource-Based View, Population Ecology, Institutional Theory, Strategic Networks Perspective, etc. We shall use the generic term Strategic Focus to refer to the work done in this area.

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IT’s impact on Strategic Management

Strategic

Structural

Description Answer of what IT can or could do in the company IT’s impact on organizational structure

Focus Explorative

Organizational Economics and IT o Optimal size of organization o Influence of IT on government structures

Productivity paradox

Strategic Necessity Hypothesis Resource based view of the firm and IT o Joint behavior of resources and IT o Study of strategic resources complementary to IT

Others perspectives o The impact of IT on the diffusion and management of organizational knowledge (KBV) o Upper echelons and IT o The Dynamic Capabilities Framework and IT o Stakeholders and IT-value appropriation o Global Information Technology Management

-

-

-

-

-

Industrial Organization and IT o Industry Level o Company Level o Strategic Level Value Chain and IT

Relation between IT architecture and organizational structure

-

-

Less distance between managers and employees

Implementation of telecommuting

-

Cycle of life Downsizing and flattening of the businesses structure Loss of clerical work Integration of departments o IT based integration of departments o Training and management of workgroups

-

Lines Description of best practices

Table 1: Perspective in the IT Study

Karake (1995); Pinsonneault and Rivard (1998); Martins and Kambil (1999) Miller and Shamsie (1996); Makadok (2001) Amit and Zott (2001) Palvia (1997); Enns and Huff (1999); Davis (1999); Palvia, Palvia and Whitworkth (2002).

Junnarkar and Brown (1997); Gurteen (1998); Swan, Newell, Scarborough, and Hislop (1999); Carneiro (2000)

Powell and Dent-Micallef (1997); Ross, Beath and Goodhue (1996) Keen (1993); Benjamin and Levinson (1993); Kettinger et al. (1994); Mata, Fuerst and Barney (1995); Ross, Beath and Goodhue (1996); Henderson and Venkatraman (1993); Venkatraman (1994); Powell and DentMicaleff (1997)

Cash and Konsynsky (1985); Clemons and Kimbrough (1986); Clemons and Row (1991)

Solow (1987); Alpar and Kim (1991); Harris and Katz (1991); Weill (1992); Brynjolfsson (1993); Krueger (1993); Brynjolfsson and Hitt (1995); Hitt and Brynjolfsson (1995, 1996); Strassmann (1990, 1997, 1998); Mukhopadahyay, Rajiv and Srinivasan (1997); Pinsonneault and Rivard (1998); Brynjolfsson, Hitt and Yang (2000); Brynjolfsson and Hitt (2001)

Brynjolfsson and Malone (1994) Malone and Smith (1988); Karake (1995); Malone, Yates and Benjamin (1987, 1989) Marchewka and Towell (2000); Brynjolfsson and Hitt (2001); Brynjolfsson and Malone (1994); Malone, Yates and Benjamin (1987); Gurbaxani and Whang (1991); Clemons and Row (1991); Kraut et al. (1999)

Parsons (1983); Levitt (1983) Parsons (1983); Porter (1980) Porter and Millar (1986); Cash and Konsynski (1986); McFarlan, McKenney and Pyburn (1983) Porter and Millar (1986); Laudon and Laudon (1996); Levy, Powell and Galliers, (1999)

Pratt (1984); Blanc (1988); Korte, Robinson and Steinle (1988); Jankanish (1990); Burch (1991); Stanworth and Stanworth (1991); Haddon (1994); Ommeren (1998); Kurland and Egan (1999) Markus and Robey (1988); Allen and Boynton (1991); Mirvis, Sales and Hackett (1991); Lucas and Baroudi (1994); Orlikowski and Robey (1991); Hitt (1999)

Kielser (1987)

Rockart and Short (1989) Walton and Susman (1987); Rockart and Short (1989); Handy (1995); Armstrong and Hagel (1996); Jarvenpaa and Leidner (1998); Cothrel and Williams (1999); Shani, Sena and Stebbins (2000)

Authors, publications Licklider (1960); Kaufman (1966); Licklider and Taylor (1968); Bell (1981); Simon and Davenport (1989); Bock and Applegate (1995) Gibson and Nolan (1974); Nolan (1981) Rockart and Short (1989); Brynjolfsson and Malone (1994)

90 Águila, Bruque, & Padilla

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Lines of Advance in Global Information Technology 91

The analysis of the relation between IT, organizational strategy, and the gaining of competitive advantage began to reach maturity in the early 1980s with the work of McLean and Soden (1977), Parsons (1983), McFarlan, McKenney and Pyburn (1983), McFarlan (1984), Benjamin, Rockart, Scott Morton, and Wyman (1984), Rackoff, Wiseman and Ullrich (1985), Cash and Konsynski (1985), Bakos and Treacy (1986), Culnan and Markus (1987), and, especially, Porter and Millar (1985). This work could all be considered under the technical framework of Industrial Organization, after the fundamental work of Porter (1980, 1981, 1985) and his theory of competitive advantage. Subsequently, the different paradigms would have influence on the researchers that were trying to explain the relation between IT and Strategic Management. Thus we can consider the following research areas as coming within this strategic approach: Industrial Organization and IT (at the industrial, company, and strategic levels); Organizational Economics and IT (efficient size of organization, influence of IT on structures, IT and organizational size); Productivity Paradox; Strategic Necessity Hypothesis, and the Resource-Based View and IT. In the last case, we consider the joint behavior of resources and IT, the analysis of strategic resources complementary to IT, and the impact of IT on the diffusion and management of organizational knowledge. As other perspectives, we highlight the Upper Echelon Focus and IT, the Dynamic Capabilities Framework and IT, and the Perspective of the Stakeholders and IT (see Table 1). Also highlighted is the focus on Global Information Technology Management that analyzes the IT implementation and adoption differences among different cultures and countries (Palvia, Palvia, & Whitworth, 2002).

The Internet as Part of the New Paradigm In the past few years, there has been a growing interest among researchers in Business Management in the impact that the appearance of TCP/IP (Transmission Control/Internet Protocol) technologies is having on companies at the beginning of the 21st century, since the Internet has meant a fundamental change in the way organizations are managed and structured (Rayport & Sviokla, 1995). For companies, the Internet is an international network of computers providing the possibility of interchanging information internally or communicating with other organizations (Águila & Padilla, 2000). The technological revolution that the Internet has brought about has resulted in the appearance of a high number of expressions that, more or less accurately, refer to the impact of the Internet on the organization. Among them we could cite e-business, e-commerce, e-tail, e-shift, e-procurement, e-government, erecruiting, e-fulfillment, e-branding, e-logistics, virtual organization, etc. (Águila & Padilla, 2001). With the aim of clarifying the terminological question, we shall try to define and delimit the most important concept mentioned: e-business. The term e-business can be defined as the way in which companies and individuals gain value through the use of the Internet and related technologies. Therefore, e-business consists of redefining the processes of the company by interconnecting these processes with the members of the company, with the clients, and with the suppliers (Hackbarth & Kettinger, 2000). That means reorganizing the company so that it has the ability to interchange goods, services, money, and knowledge digitally, that is, by using Internet-based IT. The use of the term e-business, as well as the practical application of it, has grown considerably with the development of business applications on the Internet and especially on the World Wide Web. In this context, the following might be considered to be covered by the term e-business (Riggins & Mitra, 2001); Intranet applications (business-to-employee); business-to-business applications (extranet);

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92 Águila, Bruque, & Padilla

electronic mail for the interchange of information and knowledge between companies; business-to-consumer (Internet): online orders of products and services, interchange of information about the product, joint development of products, customer services, etc. Other similar ideas refer to the specific use of the Internet (WWW) that affects a specific field of business management. Electronic commerce or e-commerce is the electronic interchange of data and information corresponding to an electronic transaction, which fundamentally covers commercial activities realizable on the Internet: 1. the establishment of contacts between clients and suppliers; 2. the interchange of goods and services; 3. the interchange of commercial information; 4. the online provision of digital products, like music, or books; 5. the electronic payment; and 6. the provision of services online. Despite the huge number of studies carried out on the Internet and its role in the company, few of them have dealt with the problem from a formal approach within management. One of the pioneering and most relevant studies among those carried out recently has been done by Rayport and Sviokla (1995). These authors institutionalized the terms virtual value chain and marketspace, asserting that current businesses are competing in two “different worlds or environments,” one being the physical world of resources that executives can see and touch – the marketplace – and the other, a virtual world or marketspace arising from the almost exclusive use of IT and data transmission tools. It is also their view that the Internet will affect the elements of the virtual value chain, and that it might make more flexible both support activities and primary activities. By way of example, the Internet may modify the organizational structure of the company and eliminate intermediate hierarchical levels. With respect to primary activity, e-logistics, e-fulfillment, and e-procurement are terms denoting means by which the traditional value chain may be affected by the Internet. Subsequent to the work of Rayport and Sviokla, numerous studies in this field have appeared, which we summarize in Table 2. By way of synthesis, we might say that the area of research—theoretical as well as practical—on the impact of the Internet on the company is still in its infancy. Many of the studies are of an extremely speculative nature with confusing terminology; they are directed at the professional public with the principal aim of expounding the potential advantages of using TCP/IP technologies. Nevertheless, there is an emerging area of research aiming to identify the circumstances in which the new technologies exercise a positive impact on the company. It is connected to the school that explains the behavior of IT in function of its combined action with a series of complementary resources, of a human or business nature (Bharadwaj, 2000; Powell & Dent-Micallef, 1997).

DISCUSSION AND FUTURE AREAS OF RESEARCH Bearing in mind the above considerations, we aim to identify in this section the new theoretical and empirical research lines. For this we have brought together the theoretical approaches that may prove significant in explaining the organizational impact of IT in Figure

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Haley, Carte and Watson (1996); Lawrence and Hudson (1996); Bloch, Pigneur and Segev (1996); Ho (1997); Watson, Akselsen and Pitt (1998); Dutta and Segev (1999); Jarvenpaa and Tiller (1999); Venkatraman (2000); Gual and Ricart (2001) Malhotra (1993); Fulk and DeSanctis (1995, 1999); Orlikowski (2000). Bakos (1991); Kling (1994); Lederer, Mirchandani and Sims (1997); Peterson, Balasubramanian and Bronnenberg (1997); McWilliam (2000); Bakos and Brynjolfsson (1999); Dewan, Freimer and Seidmann (2000) Quelch and Klein (1996); Bento and Bento (1996); Koh and Balthazard (1997); Hoffman, Novak and Chatterjee (1997); Sarkar, Butler and Steinfield (1997); Timmers (1998); Rayport (1999); Rappa (2000); Amit and Zott, (2001); Dai and Kauffman (2001); Figueiredo (2001); Eisenmann (2002). Carley (1999); Kling and Lamb (1999); Orlikowski (1999); Zimmerman and Koerner (1999); Brynjolfsson and Kahin (2000); Haltiwanger and Jarmin (2000); David (2000); Smith, Bailey and Brynjolfsson (2000); Zimmerman (2000); Orlikowski and Iacono (2000).

Author Poon and Swatman (1995); Poon and Strom (1997); Schwarzkopf (1997); Ba, Whinston and Zhang (2000); Lerner (2000); Chan and Chung (2002) Benjamin and Wigand (1995, 1997); Rayport and Sviokla (1995); Nouwens and Bohwman (1997); Stenfield, Kraut and Plummer (1997), Grover and Ramanlal (1999); Adelaar (2000); Stenfield, Chang and Kraut (2000); Amit and Zott (2001)

Description and most important contributions Use of Internet as a tool of collaboration with other companies, with less cost of communication; as an instrument of direct marketing, with better access to the company for potential clients, and improving image of the company. Impact of Internet on coordination mechanisms, organization and market, with electronic organizations and markets, with inter-organizational information systems that link the companies. In the relation between providers and clients: reduction of distance between both and of the profit margin of the provider; increasing switching costs as a consequence of the approaching between client and provider by electronic tools.

Analyses the impact of Internet on the organizational structures from the results of the studies about IT and organizational strategy field. All the authors agree about the impact but not about its results. Explains how Internet improves the performance of marketing strategies of distribution and promotion.

Develop classifications of business models of companies with Internet presence. There are two basic approaches: transactional or operational focus and informational focus.

Describes the characteristics of the new economy, or digital economy, with technological interaction among the agents.

Impact of Internet on the structure of organizations Internet Based Marketing

Business Models

Digital Economy

Impact of Internet on coordination mechanisms, organization and market, electronic organizations and markets Internet presence and its strategic planning Point out the advantages of organizations moving into the virtual space and strategies for developing strategic planning.

Research Line Impact of Internet on small and medium-sized companies

Table 2: Research on Internet and Management

Lines of Advance in Global Information Technology 93

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94 Águila, Bruque, & Padilla

1. In the interest of providing a more orderly vision of the problem, we have placed the problems of future research in each one of the approaches analyzed in this chapter. These approaches have been classified according to two criteria. In the left part of the graph, we point out the origin of each approach, whether it is Economic Theory or Organizational Theory. In the right part of the graph, each approach is analyzed in relation to its implications, whether strategic, structural, or of explorative character. Additionally, we have differentiated that research that has more to do with e-business than the rest. Finally, and as a result of the discussion of the theoretical schools that we have undertaken in this work, we propose 21 areas of research. The Economic Theory is the origin of the following approaches: Population Ecology, Resource Dependence Theory, Industrial Organization, and Agency Theory. Most of these approaches, except the ecological, pose implications for strategic management of IT. Population Ecology (Aldrich, 1979; Baum, 1999; Brittain & Freeman, 1980; Freeman & Boeker, 1984; Hannan & Freeman, 1977; McKelvey & Aldrich, 1983; Soo, Oliga, & Puxty, 1980) may provide progress in explaining the impact of the processes of technological discontinuity on organizational survival or the substitution of some technologies for others over a period of time. According to the precepts of Ecological Theory, the introduction of new IT may favor the survival of some organizations in a sector as opposed to others, especially in cases where the management of information has a significant effect on the value chain. These effects have been analyzed in relation to other technologies related to the productive system, although we cannot find any study that analyses the impact of IT. From the perspective of the Resource Dependence Theory (Aldrich & Pfeffer, 1976; Pfeffer, 1982; Pfeffer & Salancick, 1978), it is possible to analyze the function of IT as a scarce resource of the environment and its influence on the strategic pre-eminence of some organizations against others. This view claims that the possession or control of certain key resources by an organization can result in the dependence of the rest of the organizations on the first organization (Inkpen & Beamish, 1997). Additionally, it asserts that there are three critical factors in determining the dependence of one organization on another, and therefore its relative power (Medcof, 2001): 1. the importance of the resource, such that the more relevant the factor is, the stronger will be the dependency relations of the organizations that lack it; 2. the existence of alternatives, such that the power of the company that possesses the key resource decreases with an increase in the possibility of choice that dependent organizations enjoy; and 3. the unlimited ability to make decisions that affect the resource, such that the company with greater capability for decision will enjoy a privileged position. In a broad sense, the idea that underlies the Resource Dependence Theory is related to the concept of scarcity and value in the Resource-Based View, which explains why they have recently been used jointly. It is precisely from the relationship stated in point three that it becomes possible to apply the Resource Dependence Theory to the field of strategic use of IT. Following the framework of this theory, power relationships can be constructed between the organizations that possess a key resource. If it is empirically demonstrated that this resource corresponds to a specific IT resource, it follows that this technological tool is generating value for the organization. If, additionally, it complies with the conditions of scarcity and inimitability, it will lead to a sustainable competitive advantage.

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Organizational and Social Theories Contributions

Economic Theory Contributions

Freeman (1979)

Organizational Networks Perspective

Wernerfelt (1984)

Resource Based View of the Firm

Selznick (1957)

Institutional Theory

Williamson (1975)

Transaction Cost Economics

Jensen and Meckling (1976)

Agency Theory

Robinson (1933)

Industrial Organization

Human Relations

Knowledge Management Dynamic Capabilities Framework Upper Echelon Organizational Stakeholders

Social Systems Focus Socio-technical Systems Focus

Pfeffer and Salanzick (1978)

Resource Dependence Theory

Hannan and Freeman (1977)

Population Ecology

Figure 1: IT Management. Perspectives Integration and New Research Lines

e-business 21. Description of new Internet business models

Proposed research lines: 20. Description of the impact on the firm of new IT 21. International differences in adoption adn development of Information Technology. Global Information Technology Management

Proposed research lines: 15. Information Systems structure and Institutional legitimation (Institional Theory) 16. IT as a generating factor of Strategic Networks. IT and structural features of the network (Inter-organizational Networks Focus) 17. Social Systems and IT interaction (Social Systems and Socio-technical Systems) e-business 18. Internet impact on the organizational structure 19. Internet impat on co-ordination, market and organization mechanisms

e-business 13. Strategic business models based on TCP/IP technologies 14. Design of Internet strategies

Descriptive Focus

Structural Focus

Strategic Focus

Proposed research lines: 1. Technological discontinuity as an explicative factor o organizational survival (Population Ecology) 2. IT as an environmental resource and its influence on interorganizational dependence (Resource Dependence Theory) 3. IT as the foundation of differentiation and focus strategies (Competitive Theory) 4. IT influence on the industry structure and on the Inter organizational performance (Industrial Organization) 5. Business Models efficiency based on IT (Transaction Cost Economics) 6. Institutional Environment influence on the implementation and development of new IT (Institutional Theory) 7. Strategic Networks features and IT value generation (Interorganizational Networks) 8. IT, complementary resources and sustainable competitive advatange (Resource Based View of the Firm) 9. Personal, cultural and professional features of top management on the implementation and development of new IT (Upper Echelon) 10. Link between IT and knowledge management (Knowledge Management) 11. IT value appropriation by organizational stakeholders (Organizational Stakeholders) 12. IT as a generating factor of new dynamic capabilities (Dynamic Capabilities Framework)

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96 Águila, Bruque, & Padilla

Of the approaches we propose, Porter’s Competitive Strategy and Industrial Organization (Porter, 1980, 1981, 1985, 1991) have been the ones that have left the widest impression in the IT area (Ward, Griffiths, & Whitmore, 1990), which is why the model has been said to have lost relevance in recent times (Amit & Zott, 2001, p. 205; Duhan, Levy, & Powell, 2001). Nevertheless, there is research open that is revising the theoretical framework with the aim of explaining the effect of IT on the value chain in companies that are IT intensive (Earl, 1989). We might suggest as unexplored areas of research to explain the influence that variables of the industry external to the company might have on the implantation, development, and competitive performance of IT (Bruque, 2001). In this sense, it would be interesting to find out if factors like number of competitors, the intensity of competitive rivalry, the level of innovation, or the fluidity in the circulation of information within the industry determine the real competitive capability of IT. Agency Theory (Eisenhardt, 1989; Jensen & Meckling, 1976) has been used very little up till now in research relating to IT, so it is necessary to learn more about the organizational behavior of IT that may be explained thanks to this theoretical paradigm. It would be possible to analyze the relationships existing between the capital structure of the company, the level of technology, and the technological performance (Karake, 1995). Research could be done on the link between the level of commitment of the executives towards the company – shown in their investment of capital in the company stock – and the use of IT, especially those IT tools that have most impact on performance. It would be likely in this case that those executives most committed to the company would show more explicit support for the introduction and development of IT and telecommunications tools, in an attempt to achieve two aims: increase control over their management on the one hand, and increase the profitability of the processes that involve intensive use of IT, on the other. Also, from the perspective of Agency Theory, it would be possible to study the influence of the composition of the Board of Directors on the level of technology of the company and on its technological performance. From the Agency perspective, the Boards can be used as tools of control by the owners, which might affect the technology policy of the company, increasing, for example, the computing systems of management control. An empirical justification for the proposition requires, however, a deeper analysis, because the few research studies that have been carried out have not found conclusive results. As we pointed out before, work has been done that is concerned with savings in transactions resulting from the introduction of IT in the value chain of the company. The theoretical framework of Transaction Cost Economics (Williamson, 1975, 1979, 1985) can be especially effective in predicting the success of IT systems aimed at reducing costs in the value chain (Powell & Dent-Micallef, 1997) by creating economies of time or resources in the links that are intensive in information. The system of Computer-Aided Design and ComputerAided Manufacturing – CAD and CAM – are clear examples of the increase in efficiency in production processes by using IT. But IT can also reduce transaction costs with clients, because it may reduce uncertainty in making a commercial decision. IT can also decrease the complexity of such a decision and the asymmetry of information that the client faces. Besides, IT could avoid disadvantages provoked by the loss of bargaining power under a situation of “small numbers” (Williamson, 1975). IT may also reduce the indirect costs of transaction, such as the cost of adverse selection or of moral risk (Amit & Zott, 2001). In the field of relationships between companies, Clemons and Row (1991) undertook an analysis of the circumstances in which IT could reduce transaction costs. Inter-company collaboration (Dyer, 1997) may be one of the principal means by which IT reduces transaction

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costs between companies, especially after the introduction of TCP/IP technology (Amit & Zott, 2001). It would also be of interest to analyze how transaction costs behave in the long term, bearing in mind that it has been shown that certain IT tools only lead to benefits in the medium to long term (Brynjolfsson & Hitt, 2001). Although various authors have suggested the importance of studying the creation of value by IT by means of a reduction in transaction costs (Powell & Dent-Micallef, 1997), empirical evidence for this is still scarce, and the area of research is still open. We analyze, in the second group, the approaches originating in the Organizational Theory, among which Institutional Theory, Resource-Based View and its most recent derivations, and the Inter-Organizational Networks Framework. First, according to the Institutional Approach (Selznick, 1957), companies act in a social environment that imposes norms, values, and behavior patterns that indicate what is acceptable and what is not from the point of view of social behavior (Oliver, 1997). Thus, the reasons for human behavior and, therefore, for that of organizations, go beyond the limits optimal from an economic point of view, and can, in some cases, be explained in terms of social justification. The process by which companies adopt standard behaviors, ignoring the question of whether it is economically optimal, is known as legitimation (Scott, 1987) and can give rise to decisions that are ill thought out, the result of the determinism of the environment. This theoretical framework may have strong research implications concerning IT, since, in our opinion, it may explain the phenomena of the automatic adoption by a company of certain new technologies whose potential to create value is doubtful, to say the least. This approach would be useful to throw light on some recent problems like the massive introduction and lack of success of a large number of models of businesses based on the Internet. The Institutional Approach can also provide a complementary explanation in the cases where, as we shall detail later, the ResourceBased View proves to be inadequate in explaining the success or relative failure of the technological modernization of a company. The Approach Based on Resources, or the Resource-Based View (RBV) (Barney, 1986, 1991, 1995, 1996; Grant, 1991; Peteraf, 1993; Rumelt, 1987; Wernerfelt, 1984, 1995) has been the dominant view in the development of the strategic approach in recent times (Hoskisson, Hitt, Wan, & Yiu, 1999), so that it has been used to explain various aspects regarding business administration (Pettus, 2001; Vicente-Lorente, 2001). As we have already pointed out in this chapter, a large number of analyses have related the creation of value by means of IT with the gaining and maintaining of competitive advantage (Bharadwaj, 2000; Byrd & Douglas, 2001; Duhan, Levy, & Powell, 2001; Powell & Dent-Micallef, 1997; Ross, Beath, & Goddgue, 1996). The options for further research in this area consist of the identification of new resources complementary to IT and the description of the conditions under which IT behaves as a valuable resource. With regards to this last point, we believe that the Resource-Based View is insufficient, because it does not provide a definitive explanation for the effect by which some companies introduce technology but then do not create value, or when they do create value, they do not take advantage of it. It would be useful to supplement the RBV with other approaches, such as the above-mentioned Institutional Theory (Selznick, 1957), or that of the appropriation of value by stakeholders (Coff, 1999). Despite this weakness, the RBV Theory, complemented with the Dynamic Capabilities Framework (Makadok, 2001; Teece & Pisano, 1994; Teece, Pisano, & Shuen, 1997), can serve as a basis from which to explain the competitive impact of IT over a time period, an area with little empirical evidence so far. The Resource-Based View has a number of issues in common with other theoretical frameworks, like the Upper Echelon (Hambrick & Mason, 1984), Knowledge Management

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98 Águila, Bruque, & Padilla

(KBV) (Bohn, 1994; Grant, 1996; Hansen, Nohria, & Tierney, 1999; Hedlund, 1994; Kogut & Zander, 1992, 1996; Nonaka, 1991, 1994; Nonaka & Takeuchi, 1995; Spender, 1996) or the Organizational Stakeholders Approach (Coff, 1999). According to the KBV (Eisenhardt & Santos, 2001) IT utilization may potentiate the positive effects of internal and external knowledge transfer. Knowledge is considered socially constructed, and the creation of meaning occurs in ongoing social interactions grounded in working practices and in collaborative mechanisms. Those social interactions can be encouraged by IT utilization. Various studies have pointed out the relevance of IT utilization as a key element in the diffusion of organizational knowledge (Carneiro, 2000; Swan, Newell, Scarborough, & Hislop, 1999). Apart from KBV, the Upper Echelon and the Stakeholders can be further developed in the future. The first (Pinsonneault & Kraemer, 1997; Pinsonneault &Rivard, 1998) may be able to explain the interrelation between the characteristics of management, age, previous experience, technological knowledge, international experience, and the effective introduction of the new technologies. It should be noted that there is a strong complementarity between this approach and the Resource-Based View because the personal and career characteristics of the executives can be resources that are valuable, scarce, and difficult to imitate, and, in combination with IT, they may have a positive and lasting effect on competitive advantage. The second may be able to explain the situations in which IT generates value, although the organization cannot take advantage of it in the form of income, benefits, or, in general, increase in competitive advantage. In these cases, it is certain powerful groups in the organization (stakeholders) that absorb the resource’s capacity for creation of value. Strategic Networks (Freeman, 1979) are stable inter-organizational links that are strategically important for the participating companies. They can take the form of strategic alliances, joint ventures, long-term associations between suppliers and customers, etc. (Gulati, Nohria, & Zaheer, 2000). There are some analyses that discuss the impact of IT on the structure and effectiveness of strategic networks (Fulk & Desanctis, 1995; Sproull & Kiesler, 1986), regarding IT as a enabler element on the network and a promoter reduced transaction costs between elements in the network, which, in turn, lead to the advantages attributed to this type of structure. Among these advantages are, for example, gaining the effects of learning, economies of scale and scope, cost cutting via a distribution of risks and subcontracting parts of the value chain, and certain company functions (Gulati, 1999; Anand & Khana, 2000). Little empirical work has been done, however, that analyzes the influence of IT on the structural variables of the network, such as centrality, size, and network density. If, as is likely, IT has an effect on these variables (Gulati, Noria, & Zaheer, 2000), it will affect the learning capability of company members of the network, and also the blocking and unblocking of new alliances— lock in and lock out. In this way, the new technologies may provide new opportunities for global alliances, for example, with companies geographically far apart, and, at the same time, may create problems for existing alliances. Thus, for example, the introduction of new telecommunications tools may leave companies that do not use the new technology outside of the network. The same effect occurred after the decline in UNIX as a standard operating system, leading to the dismemberment of various strategic networks designed to lead the operating systems market (Gomes-Casseres, 1994). Finally, there are various approaches within the field of Business Administration that may add new ideas to the problem of the behavior of IT in organizations. We are referring to the Human Relations Framework (Mayo, 1945) and the Social Systems Focus and Sociotechnical Systems Focus (Emery & Trist, 1965; Trist & Bamforth, 1951). These approaches

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Lines of Advance in Global Information Technology 99

attempt to explain the combined effects of technologies and the human element within organizations. In the case of IT itself, the Socio-technical Focus has been used to underline the necessity to adequately fit together the company culture, employee training, and the motivation to adopt new technologies, for a satisfactory final performance of the technological tools (Davenport, 1999). As can be seen, this idea has been extended and structured in later approaches that adopt the complementarity between the human and technological elements, especially the Resource-Based View, which we have already outlined.

CONCLUSION As we have shown in this work, the analysis of IT as an active element within the company constitutes an interesting and multifaceted area of research. We have structured these areas of proposed research, leaving aside the work of an explorative nature, into two parts: those approaches that refer to the impact on the structure of the company, and those that analyze the interactions of the technology on the company’s strategy and performance. In the last group, we have been especially interested in those approaches that might throw some light onto the problem of the conversion of the implantation and development of computing and telecommunications technologies into performance or sustainable competitive advantage. This precisely has been the area that has been studied most in recent years. In the strategic as well as the structural issues, we have reviewed the most significant approaches in the literature. In each of them, we have identified the criteria for when they are useful for the problem of the company management of IT, underlining the research that we consider to be still unexplored and that may provide material of interest for future research. As a result of the process, and taking into account the limitations in terms of theoretical work, we can conclude that each one of the approaches studied can provide useful explanations, in academic research as much as in management. We should also stress that the area of analysis is a complex field in which studies may be especially useful that use in a combined form a number of the approaches that we have proposed. Finally, the irruption of the Internet and the so-called Digital Economy has revived the interest in the areas of research of this work in all its forms. The latest studies in particular are trying to find causes that explain the conversion of Internet technologies into competitive advantages, and at the same time, find the solution to the reverse problem, i.e., why do these technologies not always lead to better performance? Empirical research, the integration of the proposed approaches in this chapter, and new ideas from Social Psychology or Marketing may provide solutions to this problem.

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112 Hunter & Carr

Chapter VII

Alternative Delivery Mechanisms in Distance Education M. Gordon Hunter The University of Lethbridge, Canada Peter Carr Athabasca University, Canada

ABSTRACT Technology is providing a positive impact on delivery mechanisms employed in distance education at the university level. Some institutions are incorporating distance education as a way to extend the classroom. Other institutions are investigating new delivery mechanisms that support a revised perspective on education. These latter institutions are revising their processes for interacting with students and taking a more “learner-centered” approach to the delivery of education. This chapter discusses the impact of technology on the delivery mechanisms employed in distance education. A framework is proposed here that presents a description of alternative modes of generic delivery mechanisms. It is suggested that those institutions that adopt a delivery mechanism employing an asynchronous mode can gain the most benefit from technology. This approach seems to represent the only truly innovative use of technology in distance education. The approach creates a student-oriented environment while maintaining high levels of interaction, both of which are factors that contribute to student satisfaction with their overall educational experience.

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INTRODUCTION Universities are in the information dissemination business, and computers are changing the way they work. Accordingly, “… while IT can offer new experiences and a diminished dependence on rigid University structures, the social aspect of learning remains a vital component of successful education” (Forer, Goldstone, & Tan, 1999). While technology has changed the nature of non-classroom-based education by allowing physical separation, it has also facilitated interaction, which is considered by some researchers to be the basis for successful education. In many countries, universities are increasingly employing distance education. For instance, in 1996 the Australian government issued a policy statement about higher education, with the impact of technology rated as one of the most important issues (DEET, 1996). As a consequence of the entire policy statement, Australian universities were encouraged to rethink their approach to organization structures, delivery mechanisms, and the use of technology to support these processes. The UK’s Open University, established in 1968, has led the world in distance education. It now has over 100,000 distance students in Britain and in many countries around the world. The Open University has been successful at establishing a strong, credible reputation for distance education. Elsewhere in the UK, distance education has appeared in some niche markets, particularly business education with Heriott Watt and Warwick Universities offering postgraduate business degrees. More recently, the US government has announced major funding ($10 million) for collaborative projects between universities and the private sector to develop online education. There is evidence, however, of some retrenchment of the ambitious plans to expand distance education into the Internet age. The British Open University cancelled its creation of the United States Open University, having struggled to gain acceptance for its distance education programs. Various privately funded distance education institutions, for example, Fathom (a consortium including Columbia University) and UNEXT, have curtailed their operations and are facing uncertain financial futures. The increase in interest and investment in online learning, combined with the struggles of many key players in this new market, suggests that there is an urgent need to improve understanding of the issues involved in making distance education an effective delivery mechanism. The essence of distance education is the physical separation of teacher and learner (Sauve, 1993). Some institutions are incorporating distance education as a way to extend the classroom by employing delivery mechanisms that replicate the presentation of material in a manner similar to face-to-face communication. Other institutions are investigating new delivery mechanisms that support a revised perspective on education. These latter institutions are revising their processes for interacting with students and taking a more “learnercentered” approach to the delivery of education. There are many options available to universities when deciding how to employ technology to support delivery of distance education. Technology can both support and enhance distance education. Indeed, technology can be employed to change the way in which distance education is delivered. The purpose of this investigation was to document the various modes of delivery mechanisms currently employed in distance education. It was anticipated that this documentation process would help to determine an understanding of the alternative mechanisms. It was also anticipated that an outline of all approaches, with an indication of the more innovative ones, could serve to provide guidance to institutions regarding the adoption of technology to support delivery mechanisms in distance education and to individuals researching the area. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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It is important to differentiate between the terms “educational technology” and “distance education.” Educational technology relates to the use of technology for teaching in general, such as the use of PowerPoint presentation graphics or a word processor. While it is acknowledged that this type of technology can certainly contribute positively to the traditional education process, it is not the intention of this chapter to include a discussion of the aspects of “educational technology.” Further, this chapter is not about the traditional approach to distance education, which is also known as correspondence and is usually printbased. Rather, we present a discussion about the growing importance of the use of technology in support of distance education. The research method employed consisted mainly of reviewing secondary sources of currently published descriptions of the use of technology to support delivery mechanisms in distance education. Sufficient references were explored to identify and describe all the varieties of delivery mechanisms. Further, primary sources were included that represent the authors’ experiences with distance education. While one author is involved in the administration of a distance education program, the other author’s involvement includes direct interaction with various delivery mechanisms (interactive and asynchronous), both as a student and as an instructor and mentor. This chapter discusses the impact of technology on the delivery mechanisms employed in distance education. To begin, the next section reviews appropriately related research in distance education. A proposed framework is then presented that outlines alternative delivery mechanisms for various levels of employing technology to support distance education. The discussion of the framework is supported by examples of distance education in a sample from various countries. The proposed framework provides an overview of the relationship between technology-based delivery mechanisms and the extent to which the innovative use of technology can affect distance education. Finally, conclusions are presented that outline the more innovative uses of technology in distance education, and a call to action is issued for other researchers interested in investigating this subject area.

BACKGROUND This section presents some background material in order to provide the context for subsequent discussion. The debate has commenced on the validity and quality of distance education, and there is little agreement. For a thorough discussion of this debate, see the following: Black (1997), Clarke (1999), Goldberg (1997), Knowles (1998), Noble (1998), Wisher and Priest (1998), and Young (1999). This chapter will not address this debate. Instead, the discussion presented here will take as its starting point the environment of distance education and then will expound upon a framework for innovative use of alternative delivery mechanisms that employ various aspects of technology. Learning Theory may be employed to explain how individuals learn, and thus, how subject material should be delivered to the student in order to obtain maximum knowledge acquisition. Learning Theory is composed of two major classifications— Objectivist and Constructivist. Objectivist Learning Theory suggests that knowledge exists independent of the observer. Thus, learning environments should be established that enable the instructor to transmit knowledge to the learner. Alternatively, Constructivist Learning Theory suggests that knowledge does not exist as an objective reality but is constructed by each learner. So,

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learner-centered environments are created in order to enable learners to discover knowledge for themselves. The remainder of this chapter adopts the Constructivist approach when discussing and analyzing delivery mechanisms employed in distance education. Keegan (1993) describes five types of distance education institutions in his framework, included here in Figure 1, and groups them into (A) autonomous distance education institutions, and (B) distance subsections of conventional institutions. Conventional institutions (Category B) seem to be viewing newer technologies as a way to extend the classroom. This drive is simply to reach more students for less cost per student. This approach seems to have been the result of significant government under-funding of education and the consequent over-crowding of post-secondary institutions. However, many institutions are failing to exploit the characteristics of technology to support innovative delivery mechanisms (Bates, 1993). Category A institutions seem to be in the best position to positively employ the advantages inherent in current technology. First, they are autonomous and therefore do not need to address the legacy of traditional educational delivery processes. Also, these institutions tend to be newer and able to more easily adopt a learner-centered approach. Duning, Ven Kekerix, and Zaborowski (1993) have summarized the evolution of modes of communication in support of distance education. This five-phase summary, shown in Figure 2, represents a continuum in the application of technology to the support of distance education. The emphasis of this discussion relates to Phase 5 in Duning et al., which represents a blend of the most currently available technologies. It is important to note that Wilson and Meadows (1999) state, “There appears to be quite a scarcity of research concerning the use of blended technologies (i.e., Duning’s [et al.] fifth phase).” Figure 1: Categories of Distance Education Institutions CATEGORY A: Autonomous Distance Education Institutions Group 1: Private and Public Correspondence Schools Group 2: Distance Teaching Universities

CATEGORY B: Distance Subsections of Conventional Institutions Group 3: Independent Study Divisions Group 4: European Model Regular seminars or consultations supplement the student’s workplace study. Group 5: New England Model The student may take courses either on- or off-campus. The courses are considered equivalent and result in the same degree. There is usually a compulsory on-campus period.

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Figure 2: Modes of Communication in Distance Education Phase 1: Print (correspondence) Phase 2: Print and audio (radio, audio-conference, and cassette) Phase 3: Print, audio, video (television, satellite, and videoconference) Phase 4: Print, audio, video, and computer (computer-assisted instruction, electronic mail) Phase 5: Blend of technologies (audio-video-graphics, compressed video)

While technology has changed the nature of non-classroom-based education by allowing physical separation, it has also enabled interaction, which is considered by some researchers to be the basis for successful education. These researchers have concluded that learning environments with high levels of interaction contribute to increased student satisfaction and superior learning achievement. Universities are in the information business. Computers and the Internet are changing the way they work. “Perhaps the most fundamental technology, and the most powerful, is digital technology, which is revolutionizing the way people produce, store, retrieve, and use information” (Brandt, 1995). Although educators are cautiously adopting technology and change is being seen in the classroom, the transformation is slow. As computers and the Internet are becoming a universal fact of life, the instructional use of information technology remains the exception and not the rule (Cuban, 1993).

CURRENT DISTANCE EDUCATION RESEARCH As the use of technology to support distance education increases, so does research into various aspects involved in the relationship between technology and the various forms of delivery of course material. Table 1 presents examples of current research projects. Papp (1999) investigated the use of technology to support the traditional classroombased delivery of material. He employed the Internet and the university computer network to create an electronic, paperless classroom. Based upon the results of employing the technology in his own courses, Papp concluded that teaching in this environment would be more productive and hence rewarding. Further, he suggests that students, who are becoming familiar with the technology, appreciate the flexibility of the process and the experience of interacting with a state-of-the-art method of course delivery. Lou, Van Slyke, and Luo (1999) investigated students’ responses to a specific, distributed, online learning technology. They suggest that students’ perceived satisfaction and interpretation of the learning process would be the same for both face-to-face delivery and technology-mediated delivery. This suggestion supports previous research conducted by Alavi, Wheeler, and Valacich (1995), which employed a different learning technology but arrived at the same conclusion. Whalen and Wright (1998) describe distance education as technology-based delivery of course material where faculty and students are separated spatially and temporally. Thus,

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Table 1: Summary of Distance Education Research Author(s)

Year

Papp

1999

Lou et al.

1999

Whalen and Wright

1999

Darbyshire and Burgess

1999

Aggarwal and Kemery

1999

Reif and Kruck

1999

Motiwala and Duggal

1998

Haggerty et al.

2001

Findings Teaching using the Internet is more productive and hence rewarding. Students becoming familiar with the technology appreciate the flexibility of the process and the experience of interacting with a stateof-the-art method of delivery. Students responding to a specific distributed, on-line learning technology, perceived satisfaction and interpretation of the learning process would be the same for both face-to-face delivery and technology-mediated delivery. Suggest that migrating from the traditional classroom to distance education is facilitated by technology and results in the separation of time and place. While there was general satisfaction with the process of employing the Internet to deliver education material and to facilitate course administration in a multi-campus environment, all stakeholders reported they felt they were proceeding up a learning curve. It was anticipated that subsequent uses would prove more beneficial for everyone involved. The most important student profile for a web-based teaching environment would be a non-traditional, self-motivated, mature individual who requires schedule flexibility because of other life commitments. The majority of off-campus courses, that employ technology as a delivery mechanism do so to increase the course enrolment base and to respond to student flexibility requirements. A significant number (86.6%) of Master of Public Administration students were satisfied with the media of delivery in an Internet-based computer concepts course. The students liked the self-paced flexibility of the asynchronous discussion threads. Administered a survey to students in a high quality classroom MBA and those in an online asynchronous MBA. The results suggest that those students in the online asynchronous delivery mode felt that their peerto-peer interaction contributed more to their cognitive and explanatory learning than those in the classroom.

delivery of course material does not have to take place at the same time or location. The separation of these two aspects of education is made possible through the use of current technology. Whalen and Wright further posit the following reasons for migrating from the traditional classroom towards their defined distance education: 1. convenient location for students; 2. location-independent access to expertise; 3. technology-based interaction adds pedagogical value; 4. cost reduction to student/sponsor; and 5. increased student access. Darbyshire and Burgess (1999) reported the results of a case study on the use of the Internet to deliver educational material and to facilitate course administration in a multi-

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campus environment. They concluded that while there was general satisfaction with the process, all stakeholders involved in the initial offering reported in the case study seemed to be proceeding up a learning curve. It was anticipated then, that subsequent offerings would prove more beneficial for everyone involved. Aggarwal and Kemery (1999) investigated a web-based teaching environment in universities. They recommend that universities should consider the adoption of current technology for course delivery. They also concluded that the most appropriate student profile for this type of course delivery would be a non-traditional, self-motivated, mature individual who requires schedule flexibility because of other life commitments. Reif and Kruck (1999) suggest the use of technology for off-campus education. They investigated US-based universities’ use of synchronous (video conferencing) and asynchronous (Internet, self-paced email) learning technology. They determined that the majority of these types of courses were used to supplement traditional delivery methods. The technology was employed to increase the course enrollment base and to respond to student flexibility requirements. Motiwala and Duggal (1998) investigated Master of Public Administration (MPA) students’ satisfaction with an Internet-based computer concepts course. They found that a significant percentage (86.6%) of the research participants were satisfied with the media of delivery of the course. It is interesting to note that the students liked the self-paced flexibility of the asynchronous discussion threads. This conclusion adds support for the use of an asynchronous mode of delivery in distance education. Thus, learning can be independent of both time and place. Haggerty, Schneberger, and Carr (2001) studied communications among individuals in three media environments (asynchronous online, synchronous videoconference, and faceto-face) and explored individual perceptions of media and outcomes through individual cognitive communication processes. Results suggest that asynchronous media allow time for pause and reflection during learning, playing an important role in determining an individual’s perceptions of media and learning outcomes. They surveyed MBA students in three media environments and found that those in the asynchronous online environment perceived that their peer-to-peer interaction contributed more to their cognitive and explanatory learning than the other two environments. The above discussion of research suggests two major themes are emerging. First, it is incumbent upon institutions to consider students more like customers. This means that student demographics should be studied when considering modifications to delivery mechanisms. As Aggarwal and Kemery (1999) suggest, a specific type of individual is more inclined to satisfactorily perform academically in a distance education situation. Second, the adoption of an asynchronous mode of delivery, found to be satisfactory in some research situations presented above, represents an innovative use of technology. This, in turn, leads to the use of a delivery mechanism that supports learning and is independent of both time and place. This issue is discussed further in the following section.

ALTERNATIVE DELIVERY MECHANISMS: A PROPOSED FRAMEWORK This section presents examples of how technology is being employed to support various approaches to delivery mechanisms in distance education. The examples are meant

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to be just that, and thus do not represent a comprehensive compendium of all distance education programs. Indeed, the pervasiveness of these programs would make their documentation a very onerous task. The discussion in this section will relate specifically to institutions in the various countries that may be attributed to Keegan’s (1993) category of “Autonomous Distance Education Institutions,” as presented here in Figure 1. Figure 3 presents a description of alternative modes of generic delivery mechanisms. Place and Time are employed here as the major variables to differentiate the modes. Place concerns the location for the delivery of educational material. Time relates to the relationship between presentation and receipt of the message. Both Time and Place may be categorized as “same” or “different.” This means both instructor and student may be situated relative to each other as the same or different for either place or time. Therefore, the traditional lecture mode of delivery will be present when the student and instructor are at the same place at the same time. This is represented as the bottom left quadrant in Figure 3. While technology may be employed to enhance the delivery of material, in this case it is not considered to represent a form of delivery mode for distance education. The use of technology in this lecture mode of delivery is representative of the term “educational technology.” For instance, according to Sheridan (1999), Massey, Otago, and Victoria universities in New Zealand all have experimented to some degree with courses that incorporate web-based technology. The Management Science and Information Systems (MSIS) Department of the School of Business at the University of Auckland has developed an Internet-based computer supported learning (CSL) system that:

Figure 3: Delivery Mechanisms in Education Innovative use of Technology

Place Specificity

Different

Interactive

Asynchronous

Same

Lecture

Library

PLACE

Same

Different

TIME

Time Specificity

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… provides both the school and the student with a comprehensive structure for the organization of the curriculum and the provision of individual learning programs, online access to learning materials, electronic mail, resource booking, on/off line assessment, while providing the instructor and administration with audit trails and competency records. (Sheridan, 1999, p. 232) CSL has been employed by the MSIS Department to administer, grade, and provide feedback to students. Currently, this system is not used for distance education. It is employed with success as a support for on-campus delivery of education. The bottom right quadrant is characteristic of a library. Thus, material in the form of a manuscript developed by an instructor is made available for students to read. The Place is the same, the library, but the Time may be different. This mode of delivery allows the student to choose when the delivery will be incurred. This generic delivery system does allow studentdriven access. Further, there may be some technology incorporated in the form of CD-ROMs or other electronic versions of manuscripts. However, in this mode there is no interaction between the instructor (author) and the student (reader). The top half of Figure 3 represents modes of delivery that incorporate technology and have the ability to change the perspective of education. These modes also support the concepts underlying distance education. The top left quadrant represents an interactive delivery mode. Material may be delivered at the same time, but the student and instructor may be in different places. Technology supports this form of delivery through telecommunications. Both audio and video communication may be used in this delivery mode. It is thus possible to have interaction between student and instructor in a synchronous mode. This delivery mode is representative of videoconferencing programs. Universities such as UPM in Malaysia and Queens in Canada employ this delivery mode. Malaysian universities have offered computer science programs since the 1970s. In response to market demand, IT courses were introduced in the late 1980s. According to Gan (1998), sustained economic growth in Malaysia since the mid-1980s has supported the expansion of the use of information technology. However, in the field of education there remains “… a high degree of confusion and apprehension about the future potential of IT” (Tengku, 1991). The Internet became available on university campuses in 1995, and in December 1995, Universiti Putra Malaysia (UPM) began to offer distance education programs. This was in response to the government’s request for universities to meet the demand for tertiary education. UPM was the first university in the region to offer a degree program, Bachelor of Computer Science, via the Internet. UPM employs online distance education for Malaysian working adults. Self-instruction modules are delivered via the Web. The Web is also used to support discussion groups of instructors and students. It is envisaged that IT will be used to further support the learning experience both on- and off-campus. In Canada, the Richard Ivey School of Business at the University of Western Ontario delivers programs in both a classroom environment and via videoconference, as does Queen’s University. A conventional classroom environment is maintained with classes provided synchronously. The top right quadrant also employs technology but in an asynchronous mode. The material to be delivered is made available by the instructor through technology, and the

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students are able to access the material based upon their own schedule. The Centre for Innovative Management (CIM) at Athabasca University in Canada employs this delivery mechanism. Athabasca University is Canada’s leading distance university, with over 40,000 students. Courses are provided in a wide variety of distance formats. CIM provides the world’s first and largest online Executive MBA, with over 1,100 students participating online in asynchronous learning. This program has roughly 25% of the Canadian Executive MBA market and is ranked among the top three MBA programs in Canada by Canadian Business Magazine. The “bricks and mortar” for CIM are in St. Albert, just north of Edmonton, Alberta, but this location is of little consequence, as the students and instructors may be located anywhere they can access the Internet. This also means that students and instructors can be very mobile, attending to other work commitments during the delivery of a course.

CONCLUSIONS “The impact of IT in our society, undeniably, presents us with significant pressure to re-evaluate and rethink education” (Wilson & Meadows, 1999). However, “… if technology is used simply to automate traditional models of teaching and learning, then it’ll have very little impact” (O’Neil, 1995). These comments suggest the most benefit from technology can be gained by those institutions that adopt a delivery mechanism for distance education more related to the top right quadrant in Figure 1. This approach represents the only true innovative use of technology in education. In effect, the other three delivery mechanisms employ technology in various forms to improve the efficiency of the presentation of educational material. There is little change in the learning environment or knowledge acquisition process. However, the asynchronous mode of delivery represents an opportunity to modify the environment and the process in order to be more effective. Further, this approach to education has some major positive impacts from a global perspective. First, as noted above, the technology supports temporal and spatial separation. These two aspects represent the major inhibiting factors to the effective expansion of traditional delivery mechanisms. Thus, with the proposed technology-based approach, it becomes possible for learner and instructor (through the course material) to interact asynchronously, although separated both temporally and spatially. The underlying concepts of a learner-centered, self-paced educational experience relate to time and place. Thus, learners will be better served through temporal and spatial separation of the delivery/learning process. Second, it will be possible then to have a multi-cultural-based cohort. This environment (students with varied backgrounds) may be employed to contribute to an enriched experience by incorporating student interaction into the learning process. Researchers interested in studying the application of technology to distance education will find this a rich subject for investigation. Wilson and Meadows (1999) have suggested that there is a scarcity of research in the area. The adoption of the concepts surrounding learner-centered education is currently considered novel. It would be interesting to investigate student satisfaction in such an environment. Another aspect to investigate here relates to instructors’ attitudes toward change and how they attempt to adapt to the learnercentered environment. Another area of investigation relates to temporal and spatial separation. Of interest here would be a determination of how student satisfaction and performance are affected by the

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introduction of technology into distance education. Further, because the use of technology in distance education facilitates temporal and spatial separation, it is possible to organize a multi-cultural cohort. Investigation questions could relate to the group dynamics of and individual responses to a cross-cultural distance education experience. Finally, according to Wilson and Meadows (1999), university “… services will become based on the conveniences of the ‘customer’ rather than that of the institutions. The expectation, or ideal, is that truly learner-centered education, individualized, will be delivered directly to the individual at a time and in a place determined by the learner.” This approach will be facilitated by the adoption of technology to support the delivery of asynchronous distance education.

REFERENCES Aggarwal, A. K. & Kemery, E.R. (1999). Web-based teaching: Is it for real? In M. KhosrowPour (Ed.), Proceedings of 1999 Information Resources Management Association International Conference, (pp. 1-4) Hershey, PA: Idea Group Publishing. Alavi, M., Wheeler, B., & Valacich, J. (1995). Using IT to reengineer business education: An exploratory investigation of collaborative telelearning. MIS Quarterly, 19(3): 293-312. Bates, A. (1993). Theory and practice in the use of technology in distance education. In D. Keegan, (Ed.), Theoretical principles of distance education, (pp. 213-233) London: Routledge. Black, J. (1997) On-line Students Fare Better. Accessed on January 13, 2002. Brandt, R. (1995). Overview: Future shock is here. Educational Leadership, 53(2):5. Chick, J. (1992). The New England model in theory and practice. In I. Mugridge (Ed.), Perspectives on distance education: Distance education in single and dual mode universities, (pp. 33-48) Vancouver, Canada: The Commonwealth of Learning. Clarke, D. (1999). Getting results with distance education. Unpublished, University of California at Santa Cruz. Cuban, L. (1993). Computers meet classroom: Classroom wins. Teachers College Record, 95(2): 185-210. Darbyshire, P. & Burgess, S. (1999). Using the Internet to assist with subject delivery: A case study. In M. Khosrow-Pour (Ed.), Proceedings of 1999 Information Resources Management Association International Conference, (pp. 234-240) Hershey, PA: Idea Group Publishing. DEET (Department of Employment, Education and Training) (1996). Higher Education Budget Statement - August 9, 1996. www.deet.gov.au/hed/budget_statement/ default.htm#1. Accessed on January 13, 2002. Duning, B. S., Ven Kekerix, M.J., & Zaborowski, L.M. (1993). Reaching learners through telecommunications. San Francisco, CA: Jossey-Bass. Forer, P.C., Goldstone, M., & Tan, F.B. (1999). Implementing flexible learning in GIS ducation: Experiments at the University of Auckland, a spatial analysis facility. In F.B. Tan, P. S. Corbett, & Y.W. Yuk Yong Wong (Eds.), Information Technology Diffusion in the Asia Pacific: Perspectives on Policy, Electronic Commerce and Education, (Chap. 20) Hershey, PA: Idea Group Publishing. Gan, S. L. (1998). An overview of information technology and education in Malaysia. Journal of Global Information Management, 6(1):27-32.

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Goldberg, M. W. (1997). CALOS: First results from an experiment in computer-aided learning. In Proceedings of the ACM’s 28th SIGCSE Technical Symposium on Computer Science Education, (February), San Jose, CA, 11. Haggarty, N., Schneberger, S., & Carr, P. (2001). Exploring media influences on individual learning: Implications for organizational learning. The International Conference on Information Systems, (December 16-19), New Orleans, LA. Keegan, D. (1993). A typology of distance teaching systems. In K.M. Harry, M. John, & D. Keegan (Eds.), Distance Education: New Perspectives, (pp. 62-76) London: Routledge. Knowles, E. (1998). Milestone report for the project: Curriculum design, production, and delivery of MEA200 as a World-Wide Web course. Unpublished. North Carolina State University. Lou, H., Van Slyke, C., & Luo, W. (1999). Asynchronous collaborative learning: The mitigating influence of Learning Space™ In M. Khosrow-Pour (Ed.), Proceedings of 1999 Information Resources Management Association International Conference, (pp. 874-875) Hershey, PA: Idea Group Publishing. Motiwala, L. & Duggal, J.S. (1998). Distance learning on the Internet: A virtual classroom framework. In M. Khosrow-Pour (Ed.), Proceedings of the 1998 Information Resources Management Association International Conference, (pp. 787-791) Hershey, PA: Idea Group Publishing. Noble, D. F. (1998). Digital diploma mills, Part II: The coming battle over online instruction. CAUT Bulletin, March. O’Neil, J. (1995). On technology and schools: A conversation with Chris Dede. Educational Leadership, 53(2):6-12. Papp, R. (1999). The road to the electronic classroom: Overcoming roadblocks & avoiding speed bumps. In M. Khosrow-Pour (Ed.), Proceedings of 1999 Information Resources Management Association International Conference, (pp. 939-942) Hershey, PA: Idea Group Publishing. Reif, H. L. & Kruck, S.E. (1999). Towards an understanding of online degree programs. In M. Khosrow-Pour (Ed.), Proceedings of 1999 Information Resources Management Association International Conference, (pp. 847-848) Hershey, PA: Idea Group Publishing. Sauve, L. (1993). What’s behind the development of a course on the concept of distance education? In D. Keegan (Ed.), Theoretical Principles of Distance Education. London: Routledge. Sheridan, D. P. (1999). Computer supported learning in New Zealand. In F.B .Tan, P. S. Corbett, & Y.W. Yuk (Eds.), Information Technology Diffusion in the Asia Pacific: Perspectives on Policy, Electronic Commerce and Education, (Chap. 15) Hershey, PA: Idea Group Publishing. Tengku, M.A.S. (1991). Information technology and education – The emerging Malaysian scenario. In Proceedings of Educomp ’91, National Symposium on Educational Computing, (pp. 2-12) Kuala Lumpur, Malaysia: MCCE. Whalen, T. &. Wright, D. (1998). Distance training in the virtual workplace. In I. Magid, & M. Tan (Eds.), The Virtual Workplace. Hershey, PA: Idea Group Publishing. Wilson, R. E. & Meadows, C.J. (1999). Tele-Teaching: Australia’s competitive questions. In F.B.Tan, P. S. Corbett, & Y.W. Yuk (Eds.), Information Technology Diffusion in the Asia Pacific: Perspectives on Policy, Electronic Commerce and Education, (Chap. 19) Hershey, PA: Idea Group Publishing.

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Wisher, R. A. & Priest, A.N. (1998). Cost effectiveness of audio teletraining for the US Army National Guard. The American Journal of Distance Education, 12(1):38-51. Young, J. R. (1999). A debate over ownership of on-line course erupts at Drexel. Chronicle of Higher Education, April 1.

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New Challenges in Privacy Protection 125

Chapter VIII

New Challenges in Privacy Protection Lech J. Janczewski University of Auckland, New Zealand

ABSTRACT The protection of privacy is a function of many variables: culture, politics, and point of view. Practically all countries have introduced laws regulating these problems. Terrorist attacks culminating with the destruction of the World Trade Center in New York and the Pentagon in Washington indicated a need to change these regulations. Therefore, this chapter defines the notion of privacy and cites typical regulations related to the protection of privacy and the interception of private communications and documents. This discussion terminates with a presentation of a worldwide prognosis in this field.

INTRODUCTION The attack against major US businesses and military facilities on September 11, 2001 had and still has a major effect on the way the entire civilized world functions. During the writing of this text, it is impossible to predict the final outcome of military actions launched against the people responsible for the attack or those who sheltered them. However, without a doubt, we witness a major shift in the attitude towards protection of the interests of individuals. In the past, the focus of the law was aimed at protecting the privacy of individuals by setting up standards related to spreading the information concerning individuals and/or the interception of mail. Growing utilization of the Internet, and more generally, computer systems and networks made most of these regulations non-functional, as significant parts of the data are transported or stored in the electronic form.

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In the case of traditional documents, the process of privacy protection continues to be well regulated. A majority of countries have introduced laws detailing rules on how to preserve the privacy of individuals while still allowing law enforcement agencies to carry out their duties. Of course, the range of the activities carried out by these agencies varies from country to country, however, in the case of democratic countries, the differences are rather secondary. This balanced process was disturbed in the last decade by two factors: • the mass implementation of computers and Internet technology; and • the development of worldwide terrorist networks and other outlawed organizations. In the past, privacy protection of the communication processes was based on trust in the postal organizations not allowing unauthorized individuals or organizations to intercept and read the messages. On the other hand, the technologies of reading the sealed letters were trivial. All of us know that steam coming from a kettle is an excellent way to open letters! Progress in electronic communications dramatically changed this. More independent organizations are involved in the process of message transportation. From this point of view, interception of messages is much easier. But there is the other side of the coin—it is easier to limit unauthorized access to information through use of encryption or the use of steganography techniques. Steganography technique is a procedure for hiding given information within the other data. Wolf (2001) gave an example of such a process, where hiding almost 2K of data in a picture file would not change the appearance of the picture at all. The best illustration of this process is the information related to the operation of Osama bin Laden’s al-Qaeda network. French police in Paris intercepted a scribbled notebook belonging to a suspected master bomber. FBI and French computer experts studied the Arabic script and are convinced that terrorist cells have been using codes to disguise their electronic mail and to hide maps and instruction in sports chat rooms, pornographic websites, and photographs sent over the Internet. Hence, intelligence agencies are certain that al-Qaeda uses electronic camouflage to keep in touch with its network of agents (Zalewski, 2001). On the one hand we have witnessed the growing utilization of computer networks for conducting fraud operations, and on the other hand, we have the growing concern of society, as it becomes aware its privacy could be the first casualty of the “War on Terror.” All indicators show that computer fraud and illegal access to information are on the rise. This trend is clearly seen in the “CSI/FBI Annual Security Report” prepared jointly by the Computer Security Institute and the Federal Bureau of Investigation (CSI/FBI, 2002). According to this report, for the last five years the financial losses resulting from computer/ network abuse are on the increase. In this chapter, it is not our intention to present an opinion about the required level of individuals’ privacy protection, for instance, whether it is moral or not to read somebody’s private correspondence. Rather, the objective of this chapter is to present: • the mechanisms that currently exist around the world in this field, with focus on the law related to privacy protection; • the public perception of these mechanisms; • the demonstrated tendencies; and • what they could mean for the world community.

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Figure 1: Illustration of Privacy Position Society privacy needs

Individual privacy needs

Effective privacy

DEFINITION OF PRIVACY Almost every author on this subject introduces his or her own definition of privacy or “information privacy.” For instance, Gunasekara (2000) defines it as “an ability to control information about oneself.” Gellman (1998) stated: “Privacy is cited to include everything from control over personal information to personal reproductive rights to limit on government intrusion into the home.” Obviously, the right to privacy needs to be balanced against competing social and individual rights. This is illustrated in Figure 1, where privacy is a point on a line between individual and society needs. There is no general answer as to where this point should be located. This depends on the customs, political regime, or the nature of the information. It is obvious that more autocratic governments try to push the privacy point closer to the society (i.e., to give more protection to society at the individual’s cost), contrary to the more democratic type of government. Individuals, a society at large, or a group of individuals (like law and lawenforcement agencies) may have dramatically different opinions where to position this point.

COMPONENTS OF THE PRIVACY CONTROL The law regulating privacy control varies from country to country, but some similarities exist in most of the developed countries. The foundations of privacy are listed next. Note, that the presentation is done from the electronic record point of view.

Privacy Law These are acts of the local parliaments regulating the distribution of information related to individuals. Usually, individuals have rights to verify information about them and to set up limitations related to the spreading this information. Typically, privacy acts allow information disclosure in the case of “important social reasons.”

Illegal Access to Computer Records This law is usually labelled as an “anti-hacking law.” These acts introduce penalties for individuals attempting unauthorized access to computer-stored information. Usually the law differentiates the penalties on the basis of the level of damage caused by an illegal activity. This could range from unauthorized attempts to access a resource to more serious acts, such as changes to or destruction of records.

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Telecommunication Law These are the rules of running telecommunication networks. Among these laws are clauses related to the rights of organizations managing networks to control of the content of transmitted messages. In most countries, the telecom organization has rights only to collect information related to the payment for its services. In some countries, it is obligated to cooperate with the law enforcement authorities by allowing them to install and run tapping operations.

Crime Acts In some countries, there is no separate law for regulating access to computer networks, and parts of the “anti-hacking law” are incorporated into this type of legislation.

Investigation Agencies Law The majority of countries have introduced laws regulating the operational principles of agencies like the FBI, Scotland Yard, Securité, etc. Obviously, the laws vary from country to country, but the final conclusions are usually the same; i.e., if they suspect that an individual may be engaged in criminal activity, tapping of that person’s contacts (either electronic or traditional) can be authorized. The law decides as to which agency can be authorized to do the tap, technical arrangements of doing so, and who would be responsible for launching such activities. The last point is especially sensitive, and the general trend is that authorities outside of the investigating agency should make the decision. It is worth noting that to enhance the cross-border cooperation of law enforcement agencies, a considerable effort is currently being undertaken to standardize the above regulations on a worldwide scale. The countries currently participating in this process are the European Union, USA, Canada, Australia, and New Zealand.

Other Components of the Privacy Control The previous text listed protection mechanisms provided by the law. Of course, privacy protection could be enhanced by specific security technologies. Information security is defined through providing information (Gollmann, 1999): • confidentiality (prevention of unauthorized disclosure of information); • integrity (prevention of unauthorized modification of information); and • availability (prevention of unauthorized withholding of information or resources). Therefore anything that increases information security, especially its confidentiality, would work towards increased privacy of records. Encryption of data is often considered as the best way to boost up this confidentiality. However, Schneier (2000) wrote in his book that treating cryptography as a solution to the security problems is an error. We must take into consideration the system and social aspect of the problem. In this chapter, we will concentrate on the law rather than the technical aspects of the problem. Nevertheless, it is worth commenting on the technical side of privacy protection issues. Almost every aspect of our lives could be a subject of privacy violation. Our civilization is already saturated with electronics devices. All of them emit electromagnetic waves and, as a consequence, allow third parties to monitor our habits, location, or simply messages exchanged. For example:

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•

•

•

Mobile phones Operators of the mobile networks have enough technology to locate movements of any particular client, as long as his/her unit is not switched off. Recently, there was a case of a man in New Zealand charged with murdering his wife and daughter (Bingham, 2002). The murderer travelled around the country and the tracing of his movements, identification, and conviction was achieved through, among the other things, analysis of his mobile phone log (location and time of calls). Books on security quote a simple system for collecting cell phone signatures by installing boxes acting as mobile phone transponders on overpasses above motorways. All passing cars with active mobile phones would automatically try to log to these boxes, leaving their identifiers behind (Anderson, 2001). All this leads to the simple conclusion that using any transmitting devices could easily lead to invasion of privacy. Cars identifiers The boxes mentioned above could be used for another purpose as well, i.e., to collect particulars of transmissions for remote opening of garages, house doors, or even cars. Wireless LANs Recently an experiment was carried out on a major street of Auckland, the business capital of New Zealand. A trip through a five kilometer long street with a laptop equipped with a wireless LAN receiver allowed undisturbed access and reading of data on wireless LANs belonging to 20 offices on that street (Brislen, 2001). Wireless LAN technology has capabilities making such taps very difficult, but evidently these features were switched off. It is clear that this new technology could be a vehicle for increased breaches of privacy. It is important to note that the technology itself, if used properly, offers adequate protection mechanisms, but the owners/operators failed to introduce them properly. This further supports Bruce Schneier’s comments about the importance of the social aspects of the IT.

Besides these examples, one must also mention the simple fact of the rapid growth of networked computers, now currently numbering more than 100 million, means that it is easier to exchange information and much more difficult to protect it.

Medical Information Systems Domain Special attention needs to be given to the privacy of medical records. Basically, all the protection mechanisms mentioned before could provide adequate privacy of medical records. However, due to the nature of the medical records, a different approach to the problem is required. • Ownership of medical records There is significant disparity in approach to this issue. In the majority of the British Commonwealth countries, the patient owns his/her medical record. Releasing medical files to another person/organization requires, at least theoretically, approval of the patient or patients mentioned in the file. In the USA, the medical facility or health care provider that generated the medical record owns it. As a result, the facility or provider could “trade” its records, endangering privacy protection of the patients (Anderson, 2001). • Value of health records Patient and medical staffs are obviously interested in the content of the patient’s medical records. However, there is also a considerable group of researchers who need Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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to have access to these records for quite legitimate reasons, even without direct approval of the owner of the record. Such a situation does not exist in the other sectors, for instance, in banking. A bank may release general figures related to all clients’ accounts, such as total number of accounts held in the bank or total amount of funds available, but individual financial profiles are well-guarded secrets. Of course, there are many individuals or agencies very interested in specific individual accounts, but banks must guard this information against disclosures. Distribution of medical records Knowledge about a bank customer is usually located in one branch office. The cases of individuals having accounts spread over a number of branch offices are fairly limited. Of course, there are many individuals using services of more than one bank, but this is a different matter. On the contrary, by definition, medical records of one patient could be widely spread, including his/her family doctor, specialists, diagnostic labs, hospitals, etc. Maintenance of uniform security policies between all these parties could be very difficult indeed.

For these reasons there are various attempts to standardize the format of patients records like the Good Electronic Health Record (GEHR) Project (http://www.gehr.org). Discussion of security issues related to the security of medical records, including the privacy protection issues, can be found in Janczewski (2000).

REVIEW OF PRIVACY LEGISLATION New Zealand is a country with well-developed privacy legislation. The principle act governing privacy is the Privacy Act (http://www.knowledge-basket.co.nz/privacy/ slegisf.html.) introduced in 1993. The 12 Privacy Principles listed below form the essence of the Act: 1. Personal information is only to be collected for a lawful purpose, which should be connected with a function or activity of the agency. 2. Information should be collected directly from the individual concerned. 3. The individual concerned should be aware that information is being collected and should know: • the purpose for which the information is being collected; • who are the intended recipients of the information; • the consequences for the individual if the information is not provided; and • the rights of access to and correction of personal information provided. 4. Personal information shall not be collected by unlawful, or unfair, or intrusive means. 5. Information is protected by security safeguards against loss, unauthorized access, use, disclosure, or modification. 6. The individual concerned shall be entitled to obtain confirmation that information is held and access to information is available. 7. The individual concerned shall be entitled to request correction, or a statement that such a change request has been made, to information held. 8. The holder of personal information must check its accuracy before use.

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9. 10. 11. 12.

The holder of personal information may not keep the information for longer than necessary. Information may only be used for the purpose for which it was originally intended. The holder of personal information may not disclose the information to any other person or agency. The holder of personal information may not assign a unique identity (key) unless it is necessary to carry out its function, nor should that identifier be one already used by another holder.

It is interesting to notice how perception of these privacy principles has been changed with time. The changes are functions of both technology and social perception. The authors of the New Zealand Privacy Act were aware of society’s demands to handle properly the “Big Brother Syndrome,” making record matching difficult. Therefore, the Privacy Act gave highest priority protection of the privacy of individual. This is seen through the introduction of the Act’s 12th Privacy Principle. The meaning of the point made is that a key developed for a specific task cannot be used for another database, e.g., Inland Revenue Department Identifier (or equivalent) cannot be used for issuing driving licenses. From the security technology point of view, the most important point from the above list is number five. The meaning of that point is that an agency storing personal information must take appropriate measures to protect the data against unauthorized changes and disclosures. Of course, in the text of the Act, there are numerous notes explaining that in certain specific situations the custodian of the information could release the information about an individual. The development in information technology changed that. Database technology is capable of performing a quite efficient matching search without having common keys and the 12th principle is not important any more. On the other hand, upholding the privacy law would be much more difficult in the light of the “War on Terror.” The Privacy Act of 1993 was followed the next year by the Health Information Privacy Code of 1994, (commenced on July 30, 1994), which related clauses of the Privacy Act with the health sector (http://www.knowledge-basket.co.nz/privacy/shealthf.html.). Almost every country of the world developed similar legislation. USA (http:// www.usdoj.gov/foia/privstat.htm) and Canada (http://lois.justice.gc.ca/en/P-21/Privacy Act) were among the first to introduce this type of law. Recently, in 1998, Poland introduced a similar law (http://isip.sejm.gov.pl/PRAWO.nsf?Open Database). Interesting about this law is that it specifies that all singular elements that allow identification of a person should be under the protection of the law.

REVIEW OF THE ANTI-HACKING LAW Privacy law deals with protection of information about individuals. The law, however, becomes inadequate when we start dealing with unauthorized access to computer resources. Clauses of most Crime Acts are unable to handle such deeds properly. It is based on the fact that, since Roman times, the law dealt with “tangible” things. You can be prosecuted if you steal (real) money, but if you change the balance of your bank account, you may escape prosecution. Such an incredible incident happened a few years ago in New Zealand: without

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authority, a man managed to transfer money from one account to another. The court acquitted him on the basis that there was no written record of the account balance [Case R v. Wilkinson] (Patterson, 2000). It clearly indicates a need for a law dealing with unauthorized access to computer resources. Regulations governing penalties related to the unauthorized access to computer records are set up differently across the world. There are countries where such an act is a crime, such as the USA, under so-called “1986 Computer Fraud and Abuse Act” (Graham, 2001), unlike, for instance, New Zealand, where there is no direct parliamentary act punishing hacking or similar activities. The IT community of New Zealand has been warning the government for a long time about the consequences relating to such an omission. Finally, during November 2000, a “Crime Amendment Bill No. 6 with Supplementary Order Paper No. 85” was finally tabled in the New Zealand Parliament (SOP no. 85, 2000). Despite the urgency of fixing this legislation gap, up until January of 2003, the act has not been voted by the Parliament. Unauthorized access to computer systems could have many forms: • accessing a system without authority, and system is not protected by any protection mechanisms; • accessing a system without authority, but there is a visible warning presented to the potential viewer; • accessing a system through use of a password obtained without authority; or • accessing a system by compromising access control functions.

• • •

After gaining unauthorized access the perpetrator could: just browse; delete, create or change some records; or plant unauthorized software.

A review of the methods of gaining unauthorized access to computer records shows that there are significant differences in the level of possible criminal charges resulting from such activities. Under some laws, only unauthorized changes could be the subject of prosecution, while unauthorized access without introducing any changes is not punishable. These differences make coordination of tracking the international hackers very difficult. The best way to illustrate this would be the case of the Philippine student who developed and spread the famous Love Bug Virus. This virus caused multimillion-dollar damages across the whole world. The author of this text received over 100 “I love you” letters alone. As it was reported on BBC (Prime, 2000), the Philippines authorities arrested the culprit but released him quickly, as there was no law there to imprison him. An example of the possible way of dealing with the issue could be the proposals of the law, as cited before in Crime Amendment Bill (SOP no. 6, 2000) in New Zealand. In the proposals, unauthorized access would result in two years imprisonment, while unauthorized access with unauthorized changes up to seven years. For those interested, below is the list of the related law in some countries: • Computer Fraud and Abuse Act (US Fed) 1984, • Canadian Criminal Law Amendment Act 1985, • Crimes (Computer and Forgery Amendment Act (Australia, NSW) 1989, • Computer Misuse Act (UK) 1990, • The Computer Misuse Act (Singapore) 1993, and • Computer Crime Bill (Malaysia) 1997.

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REVIEW OF THE INVESTIGATION AGENCY LAW As a result of the September 11, 2001, terrorist attacks, legislation related to the powers of agencies investigating crime is undergoing rapid changes. In this review, we are not discussing such cases as in the People’s Republic of China or Russia, where all the Internet traffic is read by the investigating agencies. Up to January 2003 the situation could be summarised as follows: Perhaps the most stringent law has been introduced in the United Kingdom through the “Regulation of Investigatory Powers Act” of 2000 called the RIP Act (RIP, 2000). The RIP Act regulates (among many other issues) the procedure of obtaining, by the police, the rights to intercept and read private messages, both in the traditional and in the electronic form. The first part of the document introduced the concept of the unauthorised and authorized interception and states that interception of private mail without a warrant is a serious crime. A warrant signed by the Secretary of the State or in an urgent case by a senior official (explicitly authorised by the Secretary) is necessary to launch the interception procedures. Each warrant is limited to a specific case and person. Under the RIP Act the authorities may demand the release of the encryption key of the messages being subject to the interception. The RIP Act also regulates the financial issues related to the execution of the interception warrants, especially between the local ISPs and MI5 (UK Government Agency designated to managed the interception procedures). In the USA, a different approach has been adopted. The foundation of the interception activities is a diagnostic tool developed by the FBI to intercept private electronic communication, popularly called the “Carnivore Box.” Basically, it is a sniffer tool that can read addresses or addresses and contents of Internet messages (Carnivore, 2001). The tool is in the form of hardware and associated software unit owned and run by the FBI, installed at an ISP site. There are detailed procedures of obtaining a permit to use the box. The FBI claims that the tool was used around 25 times prior to August 2000 (Graham, 2001). In New Zealand, the law regulating procedure of legal interception is under revision. It is anticipated that a law similar to the RIP Act will be introduced, but it would not contain a clause about demanding release of the encryption keys.

CHANGES AFTER SEPTEMBER 11, 2001 Events starting with the September 11, 2001 attacks showed to the world the vulnerability of Western society to the activities of a limited number of financially independent terrorists groups. These groups had enjoyed relatively wide freedom of action despite not hiding their objectives. The initial successes of these groups were based on the fundamentally nonexistent security measures related to public life, such as transport, telecommunication, and business activities. In this situation, the choice was clear—maintain a high level of personal freedom of individuals with a high risk of terrorist attacks or, in the interest of the safety of society, introduce some significant limitation to it. Generally, the second alternative seems to have been adopted. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Another important aspect of the problem was pointed out by Time magazine (Calabresi & Ratnesar, 2002). It revealed that a number of terrorists who were on board the planes that crashed into the World Trade Center and the Pentagon were actually on the FBI’s wanted list. But despite the existence of this list, these individuals were able to freely buy their tickets and board the planes. Also, it was reported that various members of that group spent a considerable number of hours at Internet cafes. Furthermore, rivalry between internal security organizations— the FBI and CIA, did not help to establish a coordinated environment for detecting and controlling terrorist movements. Ronald Reagan called Russia and other associated countries an “emporium of evil.” One may therefore expect that the collapse of the Soviet Union and its eastern European allies during and after 1989 would have made the world more secure. It raised hopes that there would be fewer wars, less terror, and more peace. Unfortunately, it did not happen. The reasoning that explains these phenomena is rather simple. Before 1989, the world was practically controlled by the two superpowers. Both blocks had been doing it in quite an efficient and effective manner. Most symptoms of resistance against superpowers were quickly squashed, e.g., the revolts in Czechoslovakia, Hungary, Chile, and the Dominican Republic. However, both superpowers skillfully avoided direct conflict between them. During all the wars, such as Vietnam, Afghanistan, Korea, etc., there were no direct military activities between superpowers (i.e., there was no regular military units of the Soviet Union and USA facing each other). Collapse of the communist government in Russia and its allies created a political vacuum. The only remaining superpower, the USA, was not willing to extend the “protection umbrella” in order to cover the whole world. This means that an opportunity has been set up for the creation of intensive local wars or the rise of various terrorist organizations that have grudges against specific targets. Being the remaining, viable, and sole superpower, the USA found itself the principal target of many of these terrorist groups. The above analysis indicates that in the near future, we can expect a rapid rise in the number and intensity of local conflicts in addition to the emergence or expansion of various terrorist groups. Due to the constraints that have been presented, the most probable target would be any people, organizations or physical structures related to the USA or its allies. This could happen if adequate measures are not introduced. Building effective protective mechanisms could be very difficult due to the following reasons: • Advances in IT technology allows planning of effective attacks by means of structures spread all over the world, as in the case of Osama bin Laden network. Establishment of such networks was predicted in the late 1990s, (Molander, Riddle, & Wilson, 1996), (CSIS, 1998). • Some attacks against IT installations could be launched from the opposite side of the globe, such as the recent waves of distributed denial of service attacks (Janczewski, 2001). Downing of an American spy plane during 2000 was a pretext to launch a US v. People’s Republic of China “Internet” war, during which both sides tried to penetrate and damage the other’s systems connected to Internet. • Effective deterrence and barriers would work only if coordinated on the international scale. This would be almost impossible to accomplish in a short time. As it was indicated before, most terrorist organizations are focused on the USA’s interests. Many of these interests occur in countries that are not the USA’s allies. These countries are on a lower dependency of Internet (or IT in generally), and therefore their vulnerability to an “electronic attack” is significantly lower than the USA and other Western countries. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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•

The law regulates many protection mechanisms. Development of new laws or the introduction of changes to existing laws before September 11, 2001, was a notoriously slow process.

The immediate consequences of the September 11 attacks were obvious. Many countries have revised their security policies, which in turn affect the rights of individuals related to the privacy of their telecommunications. For instance, Germany introduced two sets of proposals on December 8, 2001 and on December 14, 2001. The first set includes (among other things) plans to increase spending by $1.4 billion on security and to crack down on some extremist religious groups. Under the second, the German Office of the Protection of the Constitutions and the Federal Intelligence Service would be able to request information on suspects from banks, airlines, and other organizations. On both the national and state level, the Office would be able to request information about political opponents from outside the country (Parliament backs new security bill, 2001). These new powers, without a doubt, would decrease protection of individual communications from government tapping. Similar legislation under the name of the Patriot Act was introduced in October 2001 in the USA (http://www.epic.org/privacy/terrorism/hr3162.html). It addresses, among others, such issues as: • enhancing domestic security against terrorism; • enhanced surveillance procedures; • bank secrecy; • increased information sharing for critical infrastructure protection; and • improved intelligence. As a result, one may expect better coordination of efforts aimed at collecting intelligence about terrorist activities. Also, a number of actions have been launched such as a more detailed and widespread set of security checks at airports, freezing accounts of people or organizations suspected of supporting the terrorist movements, and international cooperation between intelligence agencies. Some of these actions (e.g., confiscation of nail clippers at airports) are clearly intended as a deterrent rather than a pragmatic application of applied security measures. The reaction of the public to these new security measures is fairly restrained. Apart from a few demonstrations organized by civil libertarians, the public has accepted the new policies. The author of this document still remembers the fierce discussion rolling through the USA in the 1950s against the use of safety belts in cars. The main argument was that compulsory use of seatbelts violated the rights of individuals. This time, however, the public appears ready to accept the necessity of introducing restrictive measures. For instance, popular magazines are informing the public as to how to deal with these new policies (Frisking becomes invasive, 2001) and which airport is handling the security checks in the best way. According to TIME magazine, Denver Colorado is on top of that list (Zoglin, 2002).

PROGNOSIS Having presented the background of the problem, let us now formulate a prognosis of possible changes of privacy protection. This prognosis will be divided into three parts related to:

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• • •

Technology Law Social

The Technology •

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Mass introduction of IT coined the phrase “paperless society.” Despite that, there is still a significant amount of information stored in paper form, such as records in the medical sector. We may expect with the further developments of IT, an increase in the proportion of information will be stored in the electronic form. This means that it will be more and more difficult to protect it. Rapid growth of electronic commerce would make the effort to control even more complicated. Reference monitor based on subject or object grouping controls is, at present, a dominant access control mechanism. This mechanism is not efficient for huge, frequently changing databases. The same applies to mandatory access control mechanisms. Hence, there is a need to develop a new philosophy of access control mechanisms suitable for attaining necessary confidentiality (or privacy) of records. Mass implementation of mobile communication of various forms (mobile phones, remote controllers of various types, wireless LANs) increases the amount of easily intercepted communication. This works against privacy protection principles. On a more philosophical note, we need to say that progress in technology increases society dependence on the machines. This would apply to privacy protection as well. Bruce Schneier (2000) wrote that use of cryptography could secure the information (and therefore the privacy), but cryptography is only a part of a far more complicated system and, therefore, even the best cipher would not be effective in a complex system.

The Law •

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Ireland and the United States (http://rechten.kub.nl/simone/ds-lawsu.htm) were the first countries (in 2000) to recognize digital signatures. One of the last (among the OECD countries) was New Zealand, which introduced a similar law during the fall of 2002. Digital signature law paves the way for introducing a law defining the validity of documents generated and stored in electronic form. This should lead to the situation where soft documents would attain the same level of recognition as hard copy documents. That would speed up the processes mentioned in the previous bullet point. We may expect that validity of electronic signatures will soon be recognized all over the world. To be successful, the effective recognition of soft documents requires intensive coordination effort on international scale. A number of issues need to be resolved very quickly, such as the country of origin or date of a contract. For instance, Europe is separated from New Zealand by a 12-hour gap. When a contract is signed between two parties residing on the opposite sides of the globe, each signature could have different signing dates. Also, the issue of where the contract was signed and under which country’s jurisdiction will need to be resolved. Restriction regarding the export/import of strong cryptography has not worked in the past, and one may expect further removal of these limitations. On the other hand, the investigating authorities must have access to the encrypted records and, in the opinion of this author, the introduction of a law stipulating the release of the cryptographic key

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•

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in specific situations is inevitable. The United Kingdom has already set up such a law (the RIP Act), but similar attempts elsewhere have not been successful. When the RIP Act was enacted, it was met with strong criticism from many. Several years ago, the USA tried unsuccessfully to launch the Clipper Project for the same reasons. In view of the present situation, the opposition would be much milder. In conclusion, despite using stronger encryption technologies, protection of privacy of correspondence would become weaker and weaker. All known privacy acts contain clauses stating that specific data about individuals could be released if it is in the benefit of society. In the opinion of this author, no significant changes to this law would be anticipated, but we may expect that after the experience of 9/11, these clauses will be applied more often and more liberally. The Patriot Act (USA) and Federal Republic of Germany’s antiterrorism law are prime examples of laws aimed directly at fighting terrorism. These laws clearly have significant influence on privacy protection, i.e., shifting it towards the interest of the society rather than the individual (towards right on Figure 1). We may expect similar laws to be introduced in other western countries. At present, only the USA and UK have clearly regulated contacts between Internet Service Provider (ISP) organizations and law enforcement agencies related to the interception of Internet traffic. One may expect that in the near future many other countries will introduce a similar law. An unclear situation exists related to filtering Internet traffic. Some countries do provide such filtering, such as the People’s Republic of China. A limited number of its population is hooked into the Internet there, and a limited number of ISPs do it in an effective way. However, the rate of growth of networked computers in China is very high. Chinese authorities tried to control that. Recent police raids against illegal Internet-cafes exemplify this, as Time magazine reported in July 2002. Filtering of the whole traffic in Europe, USA, and Japan would not be possible for technical reasons. On the other hand, one may expect widespread deployment of packet sniffers or similar tools implemented by the law enforcement agencies or the ISPs alone. Growing computer crime combined with the tools available to control the IT would speed up growth of the divisions of the law enforcement agencies specially equipped to handle “computer crime.” The first police electronic crime lab appeared in mid 1990s. Today all Western World police forces have such facilities. The number of cases they are handling is on a permanent rise (Robinson, 2002).

Social Trends •

Twentieth-century civilization has happily embraced IT. The number of networked computers grows exponentially, and in many countries the majority of the population is hooked into the Internet. However, the advantages of using computer networks are not followed by the awareness of the dangers associated with the implementation of the technology. This assists in creating distrust in the use of IT. For instance, computer-supported VISA transactions are quite often considered less secure than manual banking transactions. Some spectacular computer abuses have not helped to reverse this trend. Nevertheless, the increased use of IT implementations allows the society to become more used to computer technology, have more trust in it, and therefore believe that it protects its interests, and individual privacy in particular.

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•

•

Simultaneously, information about the widespread investigative tools in use by law enforcement agencies would limit the “free-for-all” attitude of distributing private data on the net. In the last two years, a new trend has been observed; i.e., use of computers by terrorist groups or for terrorist objectives. Whether we like it or not, terrorists are part of the society, and they are using the same tools as the rest of the society. Increased use of computers may be illustrated by the statistics (Robinson, 2002): Electronic Crime Lab of the New Zealand Police handled 3,303 exhibits related to IT in 1998. The number has grown to 7,900 during 2001. Use of IT by the primary world terrorist organization alQaeda was mentioned at the beginning of the chapter. The society’s answer was predictable: grant more power to the law enforcement agencies and force them to cooperate effectively and efficiently, both in the domestic as well as the international arena.

All that leads to a predictable outcome— in the near future, we can expect a significant curb on the level of privacy of individuals and increased dominance or influence of lawenforcement agencies on the life of individuals.

REFERENCES Anderson, R. (2001). Security engineering. New York: Wiley. Bingham, E. (2002). Caught out by cellphone’s secret message. NZ Herald, Technology Section, 3 March. Found at http://www.nzherald.co.nz/ storydisplay.cfm?thesection=technology&thesubsection=&storyID=1291271. Brislen, P. (2001). Wireless LANs appear to breach crimes bill. Computerworld, No. 708. Calabresi, M. & Ratnesar, R. (2002) Can we stop the next attack? Time, March 11, 2002. CSI/FBI (2002). CSI/FBI computer security crime and security survey. Found at http:// www.gocsi.com/press/2002407/html. CSIS (1998). Cybercrime, cyberterrorism, cyberwarfare: Averting electronic Waterloo. Center for Strategic and International Studies Task Force Report (CSIS), Washington, DC, 1998. Frisking becomes invasive. (2001). USA Today, editorial, 14-16 December. Gellman, R. (1998). Does the law work? In P. Agre & M. Rotenberg (Eds.), Technology and privacy: The new landscape (p. 193) Cambridge, MA: MIT Press. Gollmann, D. (1999). Computer security. New York: John Wiley & Sons. Graham, R. (2001). Carnivore FAQ. Found in 2001 and 2002 at: http:// www.robertgraham.com.pubs/carnivore-faq.html.. Gunasekara, G. (2000). Protecting personal privacy in cyberspace: The limitations of thirdgeneration data protection laws such as the New Zealand Privacy Act 1993. In L. Janczewski (Ed.), Internet & Intranet Security Management: Risks and Solutions (pp. 271-295) Hershey, PA: Idea Group Publishing. Janczewski, L. (2000). Information security framework for health information systems. In A. Armoni (Ed.), Healthcare information systems: Challenges of the new millennium (pp. 50-79) Hershey, PA: Idea Group Publishing. Janczewski, L., Reamer, D., & Brendel, J. (2001). Handling distributed denial-of-service attacks. Information Security Technical Report, 6(3):37-44.

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Molander, R., Riddle, A., & Wilson, P. (1996). Strategic information warfare. RAND National Defense Research Institute (pp. xi - xxiii) Santa Monica, CA. Parliament backs new security bill (2001). Frankfurter Allgemeine, editorial, No. 292, December 15, 2001. Paterson, C. (2000). How much protection does the law currently offer? Notes for the Information Security lectures. The University of Auckland, New Zealand. RIP. (2000). Regulation of Investigatory Powers Act, http://www.legislation.hmso.gov.uk/ acts/en/2000en23.htm. Robinson, R. (2002). Electronic crime: The New Zealand police experience. In Proceedings of the NetSafe: Society, Safety and the Internet Symposium, (13 February), Auckland, NZ. Found at: http://www.police.govt.nz/news/release.php?shownews=1&ID=401. Schneier, B. (2000). Secrets and lies: Digital security in a networked world. New York: John Wiley & Sons. SOP No. 6 (2000). Crimes amendment bill No. 6, SOP Number 85, Publication of the House of Representatives, New Zealand Parliament, 7 November. Wolf, H. (2001). Forensic Informing Systems. In Proceedings of 2001 Informing Science Conference, (June 19-22, 2001, p. 131) Krakow, Poland. Zalewski, T. (2001). Front wewnetrzny (Internal front). Polityka, No. 41. Found at: http:// polityka.onet.pl/162,1066481,1,0,2319-2001-41,artykul.html. Zoglin, R., Donnelly, S. (2002). The Nation’s Best Run Airport and Why It’s Still Not Good Enough. Time, 9, July.

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Section II: Regional Perspectives

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Chapter IX

Transfer of Information Technology to the Arab World: A Test of Cultural Influence Modeling Detmar W. Straub Georgia State University, USA Karen D. Loch Georgia State University, USA Carole E. Hill Georgia State University, USA

ABSTRACT The complex societal beliefs and values of the Arab world provide a rich setting to examine the hypothesized influence of culture on information technology transfer (ITT). Two research questions arise in this context: (1) Do cultural beliefs and values affect the transference of information technology in the Arab world? and (2) Does contact with technologically advanced societies impact ITT and systems outcomes? The present study addresses these research questions by conceptualizing and testing a cultural influence model of ITT. In this model, cultural beliefs and values are one major construct while a counterbalancing variable is the external influence of technologically advanced societies. These constructs along with the variable “national IT development” form the conceptual basis for the model. This study is the second part of a program of research investigating ITT. The setting of the study was Arab society, which allowed us to test our “cultural

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influence” model in, perhaps, one of the more complex cultural and social systems in the world. The program of research took place in several phases. In the early phases, ArabAmerican businessmen and women as well as Arabs studying in American universities were studied. In the latter phases, the cross-disciplinary research team gathered primary data in the Arab cultures of Jordan, Egypt, Saudi Arabia, Lebanon, and the Sudan. Both quantitative and qualitative techniques were used to explore the phenomenon of ITT. This paper reports quantitative findings from the latter phase. Findings suggest that the model has explanatory power. Arab cultural beliefs were a very strong predictor of resistance to systems and thus ITT; technological culturation was also a factor. These results have implications for future theory-testing and for technology policy-setting by responsible Arab leaders. Additionally, there are implications for transnational firms and managers charged with introducing IT in foreign ports, subsidiaries, offices, and plants.

INTRODUCTION “Transfer means more than just technology....All too often, new technologies fail in the marketplace because of flawed assumptions about considerations totally unrelated to technical merit.” -Allan Kuchinsky (1996) Organizations throughout the world experience difficulty and even failure in information technology transfer (ITT), defined as the movement of information technology from creators to users (Cunningham & Srayrah, 1994). This transference of systems, whether they are developed internally or purchased in the commercial software/ hardware marketplace, is plagued with problems (Kwon & Zmud, 1987). The ITT problem is even more acute in developing countries, such as the emerging economies in the Arab world (Antonelli, 1986; Goodman, 1991b; Knight, 1993; La Rovere & Goodman, 1992). Although developing countries are eager to adopt new technologies, the process of adoption has been slow and the current utilization of IT is far below that achieved in industrialized countries (Antonelli, 1986). This disparity in IT use between industrialized and developing countries can be explained in part by the high cost of building and implementing IT, but this explanation is not entirely satisfactory. Substantial anecdotal and descriptive evidence exists for failure in cases where financial hurdles have been overcome (Mahmood, Gemoets, & Gosler, 1995). While finances were not a problem for the affluent countries of Saudi Arabia and Kuwait, they have historically used far less than their available computing capacity (Atiyyah, 1989; Ibrahim, 1985; Yavas, Luqmani, & Quraeshi, 1992). With some notable exceptions (Al-Shanbari & Meadows, 1995; Kamel, 1995; Siddiqui, 1992), sporadic implementation and use are endemic throughout the Arab world (Cunningham & Srayrah, 1994; El-Sayed Noor, 1981; Goodman & Green, 1992; Odedra, Lawrie, Bennett, & Goodman, 1993). Why is ITT so problematic in developing countries like those in the Arab world? Anthropological studies suggest that much of the technology designed and produced in developed countries is ethnocentric, that is, culturally-biased in favor of their own social and cultural systems. Consequently, developing countries encounter cultural and social obstacles when attempting to transfer technology, created abroad, into practice at home (Yavas et al., 1992).

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There is a counterbalance, however, to cultural beliefs and values predisposing users to resist innovations. In anthropological studies, the assimilation of characteristics of another culture is known as “acculturation.” Extending the concept to IT, it can be argued that many individuals who have experience with technically advanced societies become technologically culturated and, thus, more accepting of IT. In the IT arena, this exposure occurs when people become informed or educated about computer systems and application software that are not widely diffused within their own culture. These experiences can be formal education experiences such as seminars and courses (Arbose & Bickerstaffe, 1982) or informal experiences such as traveling for business or pleasure. What are the effects of these two very different types of cultural variables on ITT? These constructs along with the variable “national IT development” form the conceptual basis for the cultural influence model. This study is the second part of a long-standing program of research investigating ITT. The setting of the study was Arab society, which allowed us to test the cultural influence model in, perhaps, one of the more complex cultural and social systems in the world. While both quantitative and qualitative methods were used to validate and test the model, data analysis in the present study was based primarily on an Arabic-English questionnaire utilizing scenarios (N = 274). Findings suggest that the model has good explanatory power. Arab cultural beliefs were a strong predictor of ITT. Technological culturation offered reasonable explanatory power. These results have implications for future theory-testing and for technology policy-setting by responsible Arab leaders, as shown by Khaled (1992). Additionally, there are implications for transnational firms and managers charged with introducing IT in foreign offices and plants. As globalization of markets and corporate multinationalism evolve, it is becoming clearer that more cross-cultural research is needed to assist managers (Burn, Saxena, Ma, & Cheung, 1993; Cash, McFarlan, McKenney, & Applegate, 1992). In a large survey of information systems executives, more than half of the respondents felt that success in global IT was key to their firms’ future (Ives & Jarvenpaa, 1991). When increasing operations in the international arena, firms must be able to exploit the power of information technology (IT) to communicate among widespread locations and coordinate activities both within and across countries. Hence, it is important for the managers of these firms to learn as much as they can about the cross-cultural adoption and use of IT (Couger, 1986; Kumar & Bjorn-Andersen, 1990).

RESEARCH BACKGROUND AND THEORETICAL FRAMEWORK Although there is a substantial literature documenting U.S. experiences with ITT (Brancheau & Wetherbe, 1990; Cooper, 1994; Leonard-Barton & Deschamps, 1988; Moore & Benbasat, 1991; Prescott & Conger, 1995; Zmud, 1982), relatively few attempts have been made to delineate cultural and social variables that foster or impede the adoption of new information technology across national boundaries. Groundbreaking descriptive work by Goodman and colleagues (Ariav & Goodman, 1994; Danowitz, Nassef, & Goodman, 1995; Dedrick, Goodman, & Kraemer, 1995; Goodman, 1991a, 1991b, 1994; Goodman & Green, 1992;

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Goodman & McHenry, 1991; La Rovere & Goodman, 1992; Mesher, Goodman, Snyder, Briggs, & Press, 1992; Nidumolu & Goodman, 1993; Odedra et al., 1993; Wolcott & Goodman, 1993) has shown how IT diffusion differs significantly around the world, but these studies have not developed or tested scientific hypotheses that advance theory on the phenomenon of ITT. Moreover, only a few studies have empirically tested cross-cultural impacts on the adoption and diffusion of new information technologies (Gefen & Straub, 1997; Hill, Loch, Straub, & El-Sheshai, 1998; Ho, Raman, & Watson, 1989; Raman & Wei, 1992; Straub, 1994). While limited in number and scope, this work suggests strongly that links between culture and IT are not mere artifacts. In studying the effect of culture on the use of e-mail and fax in Japan, for example, Straub (1994) found significant differences in beliefs about IT between Japanese and U.S. knowledge workers in both perception and use of IT. Straub, Keil, and Brenner (1997) found these same effects in a three country study including Japan as did Gefen and Straub (1997). Ho et al. (1989) and Raman and Wei (1992) concluded that culture had a marked impact on how electronic meeting systems were perceived, used, and adapted. Thus, there is evidence to support that culture may be a barrier to ITT. What, then, is the nature of these cultural obstacles to ITT?

Culture and Information Technology First, it must be recognized that transferring technology developed in one culture to another culture involves more than merely providing instruction about technical aspects of using the equipment. Given that cultural beliefs and values are a “collective programming of the mind which distinguishes one human group from another” (Hofstede, 1980, p. 25), the intricate relationship between people and machines in ITT means that culture impacts both how systems are designed and how they are received. Obstacles arise because people bring to the workplace what can be regarded as cultural baggage; that is, they come to their jobs with specific cultural biases about how the world functions, how their job works, and how employees and employers are supposed to conduct themselves. The computer systems they interact with can be built, and are often built, under a different set of cultural assumptions. Therefore, successful technology transfer involves communication and cooperation with the receiving country and understanding about the forms that resist the transference (Redmond, 1981; TEP [The Technology/Economy Programme], 1991). We propose several ways by which cultural factors may interact with information technology. Cultural factors are likely to be powerful explanations for why those from technically advanced societies who attempt to implement technology transfer are often challenged in terms of their own ideas, beliefs, and values about how technology “should be” utilized in developing countries. Cultural factors also explain why persons, situated in the upper strata of the society who either work for international companies or who have spent time in industrialized countries (such as the U.S., Western Europe, or Japan), bring with them from abroad significant cultural biases when implementing systems at home. These experiences “culturate” them to the value of the technology. At home they experience cultural conflicts with mid-level managers and workers who, unlike the owners, directors, and top administrators in institutions and businesses, are not widely traveled and ultimately have the responsibility for daily use of technology (Danowitz et al., 1995). Cultural factors also likely explain why transference of IT to developing countries is fraught with problems. The transfer of information technology from industrialized to developing countries generally involves a process of injecting the technology of the Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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industrialized world and its associated methodologies into a developing nation host. That technology, designed and produced in developed countries, is likely culturally-biased in favor of industrialized socio-cultural systems, and meets cultural resistance during the technology transfer process. Finally, cultural sensitivities of host environments are often ignored (Khalil & Elkordy, 1997). This is especially true in the workplace since the adoption decision is often negotiated by upper-level managers who either work for international companies or who have spent time in the industrialized countries. Yet it is the lower-level managers and workers who, without the diverse cultural experiences, have the responsibility of the daily use of the new technology, and ultimately accept or do not accept the new technology. The contributing discipline of anthropology provides additional insight as well as support for focusing on the relationship between cultural and information technology. Anthropologists like Bertolotti (1984) point out that the culture of a country or region greatly affects the acceptance of technology through its beliefs and values about modernization and technological development. Thus, ignoring the cultural context can result in delays, or, at worse, failures in the IIT process (Matta & Boutros, 1989). A brief review of the cultural anthropological literature is warranted.

Theoretical Development of Cultural Influence Theme in Cultural Anthropology The study of the relationship between culture and technology has taken several directions in cultural anthropology. Earlier studies of technological “acculturation” assumed that the more “developed” countries unilaterally “gave” new technology to lesser developed countries (Ingold, 1996). The flow in information and practical knowledge was in one direction. Once the people and institutions in these countries adopted the technology, that country would “develop.” More recent studies have rejected this model of development in favor of a closer look at the “practice” of technological culturation (Ingold, 1996). The acquisition of new technical knowledge is personal–the technical skill of a practitioner is embedded in the particularities of experiences and social identities of individuals within particular cultural contexts. Within the context of the world system, tools and knowledge are appropriated from more technologically sophisticated countries. The adoption and use of the new technological knowledge, however, varies according to local social and cultural contexts. Consequently, it is differentially adopted by people in a particular culture (or country). The research approach utilized here looks at how culture influences the adoption of new technology and the constraints placed on such adoption. Technological systems placed within the context of culture and social relations are heterogeneous constructs that stem from the successful modification of social and nonsocial factors, i.e., of the actions and choices of individuals (Pfaffenberger, 1992). Schaniel (1988) has stressed that the adoption of new tools does not necessarily imply the adoption of the system of logic that produces the technology. He states: “...the process of technological adaptation is one where the introduced technology is adopted to the social processes of the adopting society, and not vice-versa” (p. 498). Thus, culturation is likely a two-way process of change. Any study of technological culturation must then consider the meaning of sociotechnical activities in which the appropriating culture engages as it reinterprets the new tools (Kedia & Bhagat, 1988).

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Cultural Influence Modeling We term these high level constructs and linkages “cultural influence modeling.” This modeling attempts to show how cultural, social, and technology variables can predict and influence the outcomes of the ITT process in culturally diverse settings. As originally presented in Hill, Straub, Loch, Cotterman, and El-Sheshai (1994) and studied qualitatively in Hill, Loch, Straub, and El-Sheshai (1998), the model assumes that national IT development initiatives are important in predicting the success or failure of the adoption process, but that cultural beliefs and technological culturation are also key independent variables (see Figure 1). The model integrates understanding of specific users’ notions about technology with more general knowledge regarding the social correlates of technology use. It also reflects the cultural context of public and private policy-making processes that affect ITT.

Components of the Model in the Context of the Arab World Cultural influence modeling assumes an interdependency between IT and the culture of people using the systems. Technology is determined by and, at the same time, becomes a determining factor of networks of interacting human, organizational, and artifactual entities or actors (Hakken, 1991). Culture, more properly termed culture-specific beliefs (CB), is defined as specific patterns of thinking that are reflected in the meanings people attach to their behavior (Hofstede, 1980). In our model, it refers to those specific beliefs, values and meanings that are thought to have a downstream effect on the use of information systems. Cultural influence modeling takes the approach that we can best understand the effect of ethnic culture in the context of specific cultural beliefs. To ensure that there is no ambiguity about which aspect of culture we are talking about, let us stress that while Arab culture represents a huge set of beliefs, we are focusing on only a small subset of cultural beliefs that are influential in IT settings (i.e., the dependent variable, IT outcomes). Even more specifically, in the present study we are focusing on those beliefs and values having to do with the Arab sense of time. The model tries to make this clear by calling the construct Figure 1: A Cultural Influence Model of Information Technology Transfer Domain of Present Study Culture-Specific Beliefs & Values (CB)

ITT/ System Outcomes

Technological Culturation (TC)

National IT Policies & Technological Infrastructure (DEV)

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“culture-specific beliefs and values,” not simply “culture.” The addition of the hyphenated word “-specific” conveys the sense that we are examining one cultural value at a time in the model, not a generic construct of “Culture.” Moreover, the cultural beliefs being referred to are beliefs, pervasive in the culture, and not those restricted to a particular setting, such as organizational cultural beliefs or IT cultural beliefs. While the latter two cultural beliefs can be extremely important in how people respond to computer systems, they are exogenous to this work. Technological culturation (TC) refers to influential experiences that individuals have had with technologically advanced cultures. In anthropological studies, this concept typically refers to the assimilation by members of a sub-culture of the values and beliefs of a preexisting culture or by the adoption of some of their cultural characteristics (Mendoza & Martinez, 1981). Berry (1980) suggests that contact with a new culture results in adaptation in such areas as cognitive style, attitudes, and stress. In the present research, it simply designates beliefs and behavior that originated outside traditional Arab culture and society and have been incorporated or not incorporated into the belief sets of Arabs. The assumption is that the cultural and social lives of our respondents influence their attitudes toward and use of technology. The theoretical framework assumes that Arabs continually negotiate their technological world within the context of their social and cultural world and that the contact between these worlds are transforming in nature. In the IT arena, culturation occurs when people become informed or educated about computer systems and application software that are not presently diffused within their own culture. These experiences range from formal experiences such as long term studying in a technically advanced society or informal experiences such as travel abroad. National IT Development (DEV) refers to specific technology policies that guide the development of information systems in a specific country together with the existing structure of computing and communication capabilities and the ability of the population to operate and utilize these capabilities. The overall construct reflects the level of support for technological development within a given nation. For this reason and the fact that there is a lively discussion centering around this link with ITT (Gurbaxani et al., 1990a; Gurbuxani et al., 1990b; Kamel, 1995, 1997; King et al., 1994; King & Kraemer, 1995; Kraemer, Gurbaxani, & King, 1992), DEV is modeled as predicting ITT/system outcomes in a specific country. As shown in Figure 1, DEV is not being examined in the present study, although it does remain an important element in the model. ITT/System Outcomes refers to the actual use or intention to use new technology within specific institutions/organizations of a country as well as to the success or failure of the diffusion of new technologies (Cunningham & Srayrah, 1994; Hassan, 1994; Kedia & Bhagat, 1988). It can also refer to the outcomes of a system development methodology or process during which systems are specified, designed, and implemented. As shown in Figure 1, the model formulates relationships between cultural beliefs and values (CB), national IT development (DEV), and ITT. It further proposes that technological culturation (TC) is a key driver of systems outcomes. Two key research questions emerge from the theoretical discussion and the testing of the proposed cultural influence model in the Arab world: Research Question 1. Do cultural beliefs influence the transference of information technology in the Arab world?

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Research Question 2. Does contact with technologically advanced cultures impact ITT and systems outcomes? This study adopts a critical approach to the relationship between the industrialized world and Arab culture, and information technology transfer. The Arab world is knit together culturally by trade, religion, and a history that precede European imperialism by millennia (Eickelman, 1981). Although few of its inhabitants identify themselves with a culture in regional or national terms, there are recognizable continuities from Morocco to the Indus, such as urban life, translocal networks, and social/moral traditions (Anderson, 1996). This fact about the Arab world leads us to conceptualize not a series of national or separate ethnic cultures but one ethnic Arab culture that transcends national boundaries. ITT is placed in the context of selective diffusion from technologically advanced societies. The transfer of technology does not transform Arabs into technophiles. On the contrary, ITT is fitted to Arab culture in a way that allows Arabs to remain independent and self-determining. Through their decision-making about the transfer of technology, a people chooses its own history. Using the critical approach as its conceptual framework, this program of research attempts to factor out variables that enhance or obstruct the transfer of technology in Arab countries.

Arab Culture and Technology Mismatch Given this theoretical background, what are the issues and conflicts involved in information technology transfer (ITT) peculiar to developing countries, with a particular emphasis on Arab countries? Al-Sulimani (1994), Bukhari and Meadows (1992), and Atiyyah (1988) and (1989) have found that ITT is often hampered by technical, organizational, and human problems in Arab cultures. Cultural conflicts between the organization and management style of western and Arab institutional leaders and workers have impacted the system development process and produced unsuccessful approaches to computer use and policy (Ali, 1990; Atiyyah, 1989; Goodman & Green, 1992). Moreover, there appears to be wide variation in the Arab use of IT. Egypt, for example, with the largest and most internationally oriented computer system in the area (Goodman & Green, 1992), has continued to use IT in most, if not all governmental agencies and nongovernmental organizations (Meskell, 1997). Jordan, while having used computers in public and private domains, also utilized them to maintain extensive archaeological inventories and other forms of cultural heritage (Goodman & Green, 1992). Although the institutional leaders in oil-rich Saudi Arabia viewed computers as symbols of modernity and progress, many of their systems were incompatible which led to a “lack of consistency among hardware and applications in use in pubic organizations, and even within the same agency” (Atiyyah, 1989). Diffusion in Saudi Arabia still remained low in the early 1990s (Yavas et al., 1992), which according to Atiyyah (1989), reflects a general slowness in diffusion of advanced technology. Even by 1997, computers in particular industries such as the construction industry were still being characterized by phrases like “under-utilization” and [in] “limited” use (Shash & AlAmir, 1997, p. 195).

Arab Cultural Values and ITT Which Arab cultural values would lead managers and office workers to resist ITT? Several stand out. Preference in Arab culture for face-to-face dealings, for instance, mitigates

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against certain technology interfaces like email and groupware as does the cultural tendency to build consensus and create family-like environments within organizations (Ali, 1990; Matta & Boutros, 1989). Moreover, technologies and computer systems which demand a change in workers’ perceptions of time also encounter resistance. It is this latter characteristic that is the focus of this study. The Arab attitude toward time is complex. Some cultures view time as a static phenomenon, where events simply transpire, without necessarily being tightly coupled to antecedents (Hall, 1973). Hall terms this cultural characteristic as polychronic and argues that certain cultures such as Arab culture see time as a complex unfolding of events which occur in parallel. In that “polychronic cultures tend to view problems in a more holistic fashion and …work on all components simultaneously” (Hall, 1966, p. 173), they tend not to plan for any single event. Nydell (1987) reinforces the assessment that Arabs are polychronic by observing that: …among Arabs, time is not as fixed and rigidly segmented as it tends to be among Westerners. It flows from past to present to future, and Arabs flow with it. Social occasions and even appointments need not have fixed beginning or endings. Arabs are thus much more relaxed about the timing of events than they are about other aspects of their lives. These attitudes are beginning to change as they respond to the demands of economic and technological development. If a task is not done when promised, it is assumed that delays are expected (p. 27). There are other reasons why we focused on time as the first culture-specific belief to test using the cultural-influence modeling approach. Based on reading of the literature having to do with Arab cultural values, perception of time was most frequently mentioned as a major differentiating factor between the Arab world and the developed world (Feghali, 1997; Mackey, 1987). As the present work is presenting the theory and initial testing of the model, we felt it wise to begin with a single, clearly important cultural belief. Time, then, provides a reference point for the Arab culture where the need for planning is viewed very differently (Safadi & Valentine, 1990). Mackey claims that “the importance of maintaining pride and face is related to …problems associated with long range planning” (Mackey, 1987, p. 129, emphasis added). As a result of the experience of time being so radically different for Arabs, the need for long range planning and forecasting is valued less than it is by Western cultures, for instance. Systems that support long range planning, thus, should be of correspondingly lesser importance to Arabs who have not had prior exposure to the persuasiveness of these systems throughout technologically advanced cultures.

Considering Rival Hypotheses There are two rival hypotheses that need to be discussed in this context. The first of these we term “traditional” implementation factors in that they commonly arise when assessing IT effects (Nidumolu, Goodman, Vogel, & Danowitz, 1996; Swanson, 1988). The second is differential effects of national culture.

Traditional Implementation Factors Traditional implementation factors are expected to explain many outcomes in systems work. Three factors were selected to represent rival hypotheses to our cultural influence Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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model constructs. These were: (a) the attractiveness of the pricing of the system, (b) top management support for the project, and (c) the amount of staff time required to learn and operate the system. These key elements are derived from the literature (Culnan, 1986; Lucas, 1978; Nidumolu et al., 1996; Robey & Zeller, 1978) and chosen for our selective study of IT in the Arab world. There is little reason to elaborate on why and how these variables are thought to interact with systems outcomes and the IVs in our cultural influence model. The reason for including them in the study is to test rival hypotheses (internal validity) and not to argue for or against their place in the model.

National Culture (Birthplace or Sample Site) A second viable rival hypothesis to our model is that national culture interacts with or confounds the effect of cultural beliefs on ITT. In this case, there could be subcultural or sample country-by-country differences which affect how strongly Arab cultural beliefs are held by individual respondents and by how they evaluated the possible systems outcomes of the scenarios. In other words, there could be systematic effects from a subcultural belief that differs substantially from that of other Arabs. Or this systematic bias could derive from country characteristics of where the sample was drawn. As a result of working with Arab-Americans, Arab students, and native Arabs and reading the literature on Arab culture, the research team came to believe that in this part of the world, a distinct set of cultural beliefs has emerged from a common linguistic, historical, and religious background. At the same time, we also saw the merit in not relying on this evidence alone. So this rival hypotheses needs to be counterposed against cultural beliefs and technological culturation variables.

RESEARCH METHODS AND DESCRIPTIVE STATISTICS To investigate these managerially and theoretically important questions, a program of research involving a team of interdisciplinary researchers has been underway for more than five years now. Among the team members were researchers with expertise in anthropology, Arabic languages and cultures, and qualitative and quantitative research methods. Because the study of IT and cultural artifacts calls for a diversity of approaches (Escobar, 1995; Hakken, 1990), various methods, including techniques favored in anthropological research, were used to develop and test the cultural influence model. These included: systematic observation, interviews, focus groups, and a structured research instrument consisting of a series of open- and close-ended questions and scenarios describing the development and implementation of different types of information systems and technologies in a range of organizational settings. Early Phases: The project used several techniques in the early phases. After immersion in the literature for this area of inquiry, formulating the conceptual basis for the study, and identifying key constructs, we convened three focus groups of Arab students. An evolving set of open-ended questions were posed to each group and the ensuing conversations recorded and transcribed. Our goal was to ascertain beliefs, values, and attitudes about ITT. Because these individuals had not lived in the U.S. for very long, they served as surrogates for the views and values of Arabs who are still in residence in the Arab world. Transcripts

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of focus groups were content analyzed for themes, constructs, and relationships, and also used as the basis for development of a questionnaire instrument and interview questions. The structured portion of an evolving quantitative research instrument consisted of a series of open-ended and close-ended questions. Additionally, scenarios were incorporated for participant response. Each scenario, which described the development and implementation of different information systems in varying organizational settings, had embedded within it cultural beliefs and values. Questions about the scenario tried to determine which of these beliefs were considered to be salient by the participants. In a pilot study of several dozen Arab-American business persons, participants were asked to read scenarios and respond to a series of questions regarding their cultural beliefs and norms and their assessment of the likely success or failure of the information system described in the scenarios. Much thought was given to this, especially in the areas of language and instrument administration. English, for instance, was the language of choice for the pilot studies in Atlanta. Since the respondents in this phase were all native Arabic speakers with a high level of competency in the English language, this choice seemed to be reasonable. Language fluency questions verified our suppositions in this regard. Two versions of the instrument– one in Arabic and one in English– were used for administration of the instrument in Arab countries. Later phases: A mailed survey methodology has the advantage of gathering a relatively large sample, but it is important that the survey be pretested (Straub, 1989). Validation of the instrument with the Arab-American pilot group allowed us to prepare an English and Arabic form of the questionnaire. The Arabic version incorporated dialectical differences for each country in which the data were to be collected, and then back-translated for accuracy. Five Arab countries including Jordan, Egypt, Saudi Arabia, Lebanon, and the Sudan were selected for data gathering. In Jordan, researchers administered many of the surveys in person and also gathered ethnographic and other qualitative data. In Egypt, Saudi Arabia, Lebanon, and the Sudan, survey administration was handled by colleagues. In studying culture and its impacts, anthropologists have historically preferred ethnographic techniques, and, for this reason, much of the foundation work and data gathering in Jordan were qualitative. To empirically test the cultural influence model, however, we felt the need for a sample size of several hundred individuals. This is most efficiently achieved through a questionnaire. Importantly, we feel that the use of multiple methods and samples allowed us to better triangulate on the phenomenon of culture and IT. The structured research instrument consisted of a series of close- and open-ended questions. The portion of the instrument relevant to variables contained in our research model is shown in Appendix A.

Scenario Creation Technique and Embedded Cultural Beliefs In the “scenario creation” technique, researchers use short scenarios to give respondents real world settings to which they can react. In this case, a planning scenario embedded a clear dimension of time to which the respondents react. Prior work utilizing the technique indicates that the stimulus is sufficient to invoke participant reactions. Given that one of the objectives of the study was to assess Arab cultural values and attitudes about computer technology in a real world situation, scenario creation provided a good methodological option.

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152 Straub, Loch, & Hill

The scenario created described the possible adoption and implementation of a planning information system. Participants were asked to read the scenario and respond to a series of questions regarding their reaction to the causal factors embedded in the scenario and their assessment of the likely success or failure of the information system described in the scenario. Since cultural beliefs and values are a “collective programming of the mind” (Hofstede, 1980, p. 25), cultural beliefs intended to elicit a response to the Arab sense of time were not made obvious except through the basic nature of the planning system described in the scenario (Nydell, 1987; see Appendix A for the wording in the English version of this scenario). Asking participants outright if they felt that a particular element like sense of time represented a cultural attribute would not collect useful data since culture is latent, or, as Hofstede puts it, “unconscious.” Following the stimulus, respondents were asked if certain factors were important in the final acceptance or rejection of the systems. We reasoned that individuals whose sense of time was polychronic would see less value in a system that called for planning and a belief that time was linear, with causes and effects. To ensure that respondents would not simply select planning factors because they were the only choices, economic factors such as price and staff time involved were also included (Davidson & McFetridge, 1985) as were Arab cultural values that would be more salient in other contexts, such as prior consultation with titular heads of the organization. Hypothetical scenarios (or scenario creation) offer the advantage of large sample sizes by having subjects evaluate real world situations. It stimulates the respondents to react to the independent variables through the wording of the scenarios (see Webster and Trevino, 1995, for a critique of the advantages of the approach). The technique has been previously used in IS research in studies by Daft et al. (1987), Zmud et al. (1990), Webster and Trevino (1995), and Straub and Karahanna (1998). Scenarios have also been used to measure decisions and choices of knowledge workers in the administrative sciences of marketing (Batsell & Lodish, 1981), finance (Slovic, 1972), human resources (Fedor, Eder, & Buckley, 1989), and strategy (Hitt & Tyler, 1991).

Sampling The quantitative sample for the study reported here was drawn from 274 knowledge workers in Jordan, Egypt, Saudi Arabia, Lebanon, and the Sudan. This was composed of 121 in Jordan; 45 in Egypt; 28 in Saudi Arabia; 35 in Lebanon; and 45 in the Sudan. From a macro perspective, IT penetration varies across these nations with Egypt and Saudi Arabia at the high end and the Sudan at the low end. In order to maximize the variance in both the endogenous and exogenous variables, samples were drawn from countries, organizations, and individuals across the spectrum of IT penetration. Our sampling strategy in Jordan gives some sense for how the goals of the research program were met in one particular situation. Here, contact was made with a top Jordanian government official who arranged for the research team to interview and survey managers and professionals in the public and health care sectors. Arrangements were also made to include a sizable group of private sector employees in the study. IT use was widespread in one of the private firms and in the public organization. One of the health care organizations had low rates of diffusion while a private firm and a second health care organization fell somewhere in the middle.

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The sample was composed of a relatively homogeneous group of organizational knowledge workers in urban areas across these countries. Users of computer systems are typically highly educated in many Arab countries (Danowitz et al., 1995) so this was a representative sample of the population of interest, as shown in Table 1. This educated group, moreover, would be least likely to show the effects of culture on IT, less so than a rural sample, for instance. Thus, gathering data from this sample permits a robust test of cultural influence modeling. Finally, we wanted to sample from a wide variety of Arab countries to draw on a broad base of experience with Arab culture. We wanted to see if this group, regardless of widely different economic and social circumstances, would show similar patterns of cultural acceptance of and resistance to information system. Table 2 shows that the sample did draw from persons who were born in a variety of Arab countries.

Other Relevant Descriptive Statistics The data gathering was representative in several other respects. When we examine the amount of time the sampled group had lived in other Arab countries, it is clear that the sample was drawn from a professional, mobile workforce. A large percentage of those responding to the instrument in Saudi Arabia, for example, were Egyptians, Sudanese, or Kuwaitis. This accurately reflects the large expatriate contingent working in Saudi Arabia. Likewise, in Lebanon, several respondents were Syrians whereas the Jordanian sample showed a sizable number of Palestinians, both sampling statistics reflecting historical events. Finally, the time Arabs in the sample spent abroad in non-Arab countries was highly correlated with work on higher degrees. Although the overall average time abroad for the entire dataset was not high at 1.15 years, the more years of education individuals had, the more likely they were to have spent time in non-Arab countries (r = .238, p-value < .01).

Validation of Technological Culturation Scale While technological culturation, per se, has not been previously measured, culturation measures have been validated in the context of Hispanic studies. Padilla (1980) created an Ethnic Loyalty Scale, which was based on factors of language knowledge, cultural affiliation, and social behavior orientation. Along a similar line, Olmedo, Martinez, and Martinez (1978) measured culturation through items on nationality and language, socioeconomic status, and semantic potency. Finally, Cuellar, Harris, and Jasso (1980) devised an Acculturation Rating Scale composed of language familiarity, usage, and preferences; ethnic identification and generation; language of reading and writing; and ethnic interaction. Their recent revised version of this scale still employs the same basic components (Cuellar, Arnold, & Maldonado, 1995). As with previous scales, our technological culturation scale stressed linguistic skills and ethnic background and interactions, but it also added dimensions that attempt to measure sources of contact with technically advanced societies. Participants supplied information about their educational degrees, for instance, but also about the country in which these degrees were earned. The not unreasonable assumption was made that degrees received in a technologically-advanced culture would result in a higher level of TC. Work affiliations were other possible sources of influence, that being if an individual worked for a “technology” firm for many years or for a firm headquartered in a technically-advanced nation. Less formal measures of culturation were also included in the scale. Readings in foreign technology journals or other information sources were, again, thought to be possible

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154 Straub, Loch, & Hill

components of TC as were travel abroad, for business or pleasure. Contacts with family abroad was another, more personal element that was included.

Questionnaire Instrument Validation The research instrument was tested for content validity, reliability, and construct validity, in accordance with the suggestions of Straub (1989). During the focus groups and interviews with Arab-American business persons, an attempt was made to qualitatively assess the content of the instrument by ensuring that the scenarios drew representatively from the cultural experiences of the participants. Focus group participants were asked, for example, to discuss in depth why IT was not always accepted in Arab countries. Interpretation of these transcribed responses was useful in validating the cultural beliefs that were embedded in the scenarios. A similar assessment of content validity was made during the pilot study with Arab-American business persons.

Construct Validity and Reliability Construct validity was tested through principal components factor analysis. Considering only loadings greater than .40, cultural beliefs, two technological culturation variables, and ITT or system outcomes loaded separately from each other (Varimax rotation). Reliabilities and factor loadings for the final set of endogenous and exogenous variables are shown in Table 3. In all cases, these exceed Nunnally’s rule of thumb heuristic (1967) for Cronbach as in exploratory research. One TC factor stressed informal contacts such as travel and contacts with family abroad. The other factor emphasized formal educational and work experiences. Neither language skills nor reading loaded at the minimum .40 level, however.

Table 1: Educational Demographics of Study Participants (Based on Hill et al., 1998) Location Degree Conferred

Degrees High School Diploma Undergraduate Masters Doctorate

Arab Country Developed Country

10.4% (28) 69.3% (187) 13.3% (36) 7.0% (19)

81.0% (218) 19.6% (51)

Table 2: Respondent Countries of Birth No. Algeria Bahrain Egypt Iraq Jordan Kuwait Lebanon

79 78 7 35

No. Libya Mauritania Morocco Oman Palestine Qatar Saudi Arabia

10

No. Sudan Syria Tunisia United Arab Emirates West Bank Yemen

44 3

7

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Table 3: Variable Reliabilities and Factor Loadings Construct

Items

ITT/ Systems Outcomes

Strength of belief that the scenario system will be successfully implemented Belief that this system will be successful

Cultural Beliefs and Values

Focus on long range planning is factor in final outcome The fact that the system supports long range planning is important

Technological Culturation: Informal Culturation

Technological Culturation: Formal Culturation

Extent of travel for business Extent of travel for pleasure Extent of contact with family members Reading in foreign technology journals residing abroad Total attendance at conferences on computer technology Conferences on computer technology in technically advanced countries Number of years of educational degrees taken in technically advanced cultures Employment by computerrelated firm or foreign-owned firm Speaking and writing

#

Factor 1 Loadings

II.2 II.3c

.8396 .8161

Factor 2 Loadings

Factor 3 Loadings

Factor 4 Loadings

.720

II.1c

.8507

II.3a

.8392

.652

I.12a I.12b

.8988 .8956

I.14b

.4729

I.15

__

.644

I.16

.9398

I.16

.9201

I.8

.4730

I.10 & I.11

.4609

.723

It is not surprising that technological culturation did not load on a single factor. Several sub-scales make up the culturation construct in anthropological research, and these subscales are not highly interrelated; they are reflective rather than formative (Gerbing & Anderson, 1988), just as in our dataset. It may be that participants are more cognizant of formal contacts because they are so tangible, such as conferences and formal education. By the same token, informal contacts are subtler and have more in common with each other than with formal contacts. Thus, within the items that were created to represent technological culturation, there was a clear distinction between variables that related to impersonal/formal processes of culturation versus personal/informal processes. Since it was not clear as to exactly why respondents separated these items as they did, we examined the two factors in separate LISREL runs to see if and how they related to systems outcomes.

DATA ANALYSIS Several types of data collected in this initial study of Arabs and Arab-Americans in Atlanta triangulated, indicating that our model covers the key variables that could predict Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

156 Straub, Loch, & Hill

success or failure for ITT. Findings from each set of data provide indications that knowledge about the cultural and social context of ITT is critical for the success or failure of ITT (See Appendix C for descriptive statistics). LInear Structural RELations modeling (LISREL) was used to investigate measurement characteristics and the simultaneous effects of CB and TC on ITT in the survey of Arab knowledge workers. Use of structural equation modeling analysis provides researchers with a comprehensive means of assessing and modifying theoretical models and, therefore, it offers a great potential for furthering theory development (Anderson & Gerbing, 1988). Structural equation modeling facilitates testing of a theoretical model as a whole as well as comparisons among competing theories (Bagozzi, 1980). In the case of the present dataset, it also allowed constructs with multiple indicator variables to be statistically manipulated without resorting to procedures for averaging across variable sets, creating indices, or transforming/adding incompatible values.

Preliminary Model Analysis An initial LISREL model was run to determine the relative effect of the two technological culturation variables (for fitted covariance matrix, see Appendix B). The results, presented in Figure 2, show that the informal technological culturation factor had a significant impact on system outcomes whereas the formal factor did not. The overall model fit is relatively good and the squared multiple correlation indicates that 44% of the variance is explained. Thus the model is worthy of further consideration. Given these preliminary results, the theoretical model is specified with informal TC and CB as the exogenous latent variables and ITT as the endogenous latent variable, as shown in Figure 2.

Nested Model Analysis Anderson and Gerbing (1988) recommend assessing a theoretical model of interest through estimation of five nested models, each representing a plausible alternative specification. Model M2 is said to be nested within a model M1 if its set of freely estimated parameters Figure 2: Results of Testing LISREL Preliminary Model with Technological Culturation (1) = Personal/Informal Factor and Technological Culturation (2) = Impersonal/Formal Factor (* p < .05; T-values are in parentheses)

Culture-Specific Beliefs & Values

.91* (6.20) .11* (1.97)

ITT/ System Outcomes

Technological Culturation (1)

.13 (.80) Technological Culturation (2)

2

= 53.62* df = 29 GFI = .96 AGFI = .93 RMR = .045 SMC = .44

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Figure 3: Results of Testing LISREL Nested Models with Technological Culturation (1) = Personal/Informal Factor (* p < .05) Theoretical Model

2

Culture-Specific Beliefs & Values

.58* .14*

Technological Culturation (1)

Unconstrained Model

Culture-Specific Beliefs & Values

.01 Technological Culturation (1)

Constrained Model

.14*

= 54.26* df = 12 GFI = .95 AGFI = .88 SMC = .50

ITT/ System Outcomes

2

= 54.27* df = 11 GFI = .95 AGFI = .88 SMC = .50 .58* ITT/ System Outcomes

2

Culture-Specific Beliefs & Values

.59* Technological Culturation (1)

= 56.92* df = 13 GFI = .95 AGFI = .88 SMC = .48

ITT/ System Outcomes

are a subset of those estimated in M1. The denotation is M2 < M1. In LISREL, this is achieved by setting the constrained parameters in M2 to zero. The five nested models suggested by Anderson and Gerbing (1988) are: (1) the saturated model (Ms) which links all constructs to one; (2) the null model Mn which posits no linkages; (3) the theoretical model Mt, which is the theoretical model to be tested; (4) the constrained model Mc which constrains one of the theoretically defensible paths in Mt; and (5) the unconstrained model Mu which, based on theory, frees one or more parameters constrained in Mt. The five structural models are represented in the following nested sequence: Mn < Mc < Mt < Mu < Ms. Since differences between the null and saturated models and the other models have no basis in theory, a more parsimonious comparison procedure of the models can be adopted (Anderson & Gerbing, 1988). Testing these alternative models involves a set of sequential C2 difference tests (SCDT). These tests are asymptotically independent (Steiger, Shapiro, & Browne, 1985), each testing a null hypothesis of no difference between two nested structural models. With degrees of freedom equal to differences between the degrees of freedom for the two models, the difference between the C2s for two nested models is itself asymptotically distributed as C2 (Anderson & Gerbing, 1988). Because the value of the SCDTs depends on sample size, significant C2s can result when there are only trivial differences between the two nested models (Anderson & Gerbing, 1988) and (Bentler & Bonett, 1980). A statistic that deals with this issue and yields an indicator of practical significance is the normed fit index–d (Bentler & Bonett, 1980). Bentler and Bonnet (1980) propose that any

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158 Straub, Loch, & Hill

Table 4: Nested Model Comparisons Model Comparison M c -M t Mu -Mt M c -M u

2

(1) -

2

(2)

56.92-54.26 54.27-54.26 56.92-54.27

2

df

2.66 .01 2.65

1 1 2

.04673 1 .04655

candidate model Mi can be compared to a base model M0 by means of a goodness of fit index, d, which is calculated as: = ((C2 M0 )- (C2 Mi ))/( C2 M0 ) where M0 = the base model Mi = one of several alternative candidate models The index indicates how practically significant the difference in C2s is (Bentler & Bonett, 1980). Ranging from 0 to 1, this index represents the increment in fit obtained in evaluating two hierarchical step-up models. Even if the SCDT between the theoretical model and the unconstrained model is statistically significant, the theoretical model should be preferred if dtu is practically insignificant. That is, from a practical point of view, the more parsimonious model is superior because it provides an adequate explanation for the data (Anderson & Gerbing, 1988). The theoretical model of interest, Mt , has already been presented in Figure 1. Based on previous research on culture and IT, the constrained model, Mc , was specified by removing the path from the TC latent construct to systems outcomes. For the unconstrained model, Mu , an additional plausible path has been postulated. As shown in Figure 3, the path between TC and CB has been added based on the argument in anthropology that culturation challenges established cultural beliefs and knowledge, social structures, and technologies (Bertolotti, 1984). LISREL8 (Hayduk, 1987; Jöreskog & Sörbom, 1993) was used to analyze the data. Through structural equations, LISREL generates causal coefficients that maximize the likelihood of the fit between constructs. Results are presented in Figure 3, which also shows the C2 and fit indices–Goodness of Fit (GFI) and Adjusted Goodness of Fit (AGFI)– for the theoretical, unconstrained, and constrained models. Figure 3 shows that the paths between CB and ITT as well as TC and ITT are significant (p < .05) in both the theoretical and the unconstrained models. The path between CB and ITT is also significant in the constrained model. The best fit to the data was the theoretical model. As presented in Table 4, none of the C2s comparing the constrained (Mc), the theoretical (Mt), and the unconstrained (Mu) models are significant. Moreover, in that the d statistics are not particularly high, we can conclude that none of the improvements in fit between the constrained and theoretical model and the constrained and unconstrained models is practically significant. As a result, the most parsimonious model that fits the data, i.e., the theoretical specification, is preferred. The theoretical model fits the covariance in the data well, as demonstrated by a GFI of .95 and an AGFI of .88, where 1.00 is a perfect fit. Moreover, the modification indices do not indicate any means by which to improve the model fit. Finally, the squared multiple correlation

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Table 5: Constructs and Measures for Rival Hypothesis #1 Construct Attractiveness of Pricing

Top Management Support

Staff Time Req'd

Items

#

Focus on moderate price is factor in final outcome The fact that the system has a moderate price is important

II.1a

Focus on lack of top management support is factor in final outcome The fact that the system was not presented to top management is important

Focus on staff time required for implementation is factor in final outcome The fact that the system will require staff time is important

.850

II.3d

II.1b

.901

II.3b

II.1d

.780

II.3e

for the structural equations was .50 for IIT. This may be interpreted to mean that 50% of the variance in ITT is explained by the theoretical model. It is important to note that the coefficient for the linkage between cultural beliefs and ITT is nearly four times as large as that of the coefficient between technological culturation and ITT. These statistics suggest that the former of these relationships (CB ITT) offers more explanatory and predictive power than does the latter (TC ITT). While noteworthy, this of course, may be an artifact of the measurement itself.

Testing Rival Hypotheses Two rival hypotheses need to be accounted for before concluding that culture clearly has an impact on systems outcomes. Of the traditional implementation factors, three factors were tested against culture-specific beliefs. These were: (a) the attractiveness of the pricing of the system, (b) top management support for the project, and (c) the amount of staff time required to learn and operate the system. Measures of these constructs along with Cronbach are shown in Table 5.

Traditional Implementation Factors What is valuable to determine with respect to the traditional implementation rival hypotheses is whether partialing out the effects of these factors will severely diminish the impact of cultural beliefs on systems outcomes. To test this possibility, a LISREL model was run which posed CB against these traditional factors. The results are shown in Figure 4. What is compelling in this analysis is that CB remains highly significant even when pitted against traditional factors, two of the three of which are significant in the analysis. Our interpretation of this pattern of significance is that systems outcomes depend on a series of factors, some of which are culturally-neutral, such as relative pricing of hardware and software and internal support of innovations by opinion leaders like top managers (Rogers, 1995). Culture-specific beliefs, however, will exert a powerful influence on perceptions, even when compared against such traditional factors. The size of the path coefficients in the LISREL run indicates that CB is the largest standardized value of the three significant values, offering

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160 Straub, Loch, & Hill

Figure 4: Results of Testing LISREL Model Comparing Traditional Implementation Factors Against Culture-Specific Beliefs (* p < .05)

Culture-Specific Beliefs & Values

.82* (4.84) Attractiveness of Pricing

.69* (3.07) ITT/ System Outcomes

-.40* (-2.97) Top Mgmt Support

Staff time Requirements

-.19 (-.73)

2

= 57.02* df = 25 GFI = .96 AGFI = .91 RMR = .054 SMC = .55

twice as much explanatory power with respect to systems outcomes as top management support.

National Culture Tests We also examined a rival hypothesis that subcultural or country-by-country differences could influence the major constructs in our model. As can be seen from Table 6, Comparison of Birthplace and Sample Site, there were only 34 respondents of the 270+ from whom data was collected who were not residents of the country of their origin. For the most part, people were still living where they were born and, presumably, have become fully integrated into their dominant national culture. But there is a legitimate concern that if the 34 individuals are part of a subculture that is national in origin, then these 34 participants could conceivably create a systematic bias in the data that would diminish the strength of the tests that look at sample site. The 34 respondents who were not living where they were born (or at the sample site) are easily explained by current conditions in the Middle East, which gives us some comfort that the data are truly representative. For instance, seven Palestinians are living in Jordan, and, with exception of the sixty-two year old, have lived there their entire lives (for all intents and purposes). This is an accurate reflection of the large Palestinian population in Jordan. Moreover, there are many Egyptians working in Saudi Arabia, and even some Sudanese. This also is a good description of the present working conditions and immigrant worker flows that have characterized this region for a long time. To look at these issues statistically, the five Arab countries in our sample – Egypt, Saudi Arabia, Lebanon, Jordan, and the Sudan–were treated as nominal, fixed factors independently affecting the variables that compose our research constructs. Country of birth was also included as a fixed factor in that subcultures derive, to a large extent, from childhood experiences, which are most likely to be associated with culture of birth. MANOVA findings are shown in Table 7. In this table, it is clear that neither overall F test was significant at the .05 a protection level. Moreover, there were no univariate country-by-country significant differences for

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Table 6: Comparison of Birthplace and Sample Site Sample #

1 2 3 4 3 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

Sample Site

Jordan

Birthplace

Age

Palestine (7)

49 28 35 33 36 62 33 47 30 27 25 24 29 31 31 23 40 19 33 22 31 34 40 31 27 37 47 42 40 52 33 48 45 43 27

Kuwait (4)

Lebanon

Egypt Syria Lybia Germany Syria Kuwait (2)

Saudi Arabia

Syria Egypt (11)

Sudan (3)

Sudan

Egypt

Years Living Years Living in in Other Arab Non-Arab Countries Countries

47 28 35 33 33 34 33 43 0 3 3 4 4 16 0 23 12 17 7 22 20 22 12 18 3 7 10 3 2 6 9 7 8 8 0

2 0 0 0 3 3 0 4 5 0 0 8 0 4 2 1.50 0 0 0 0 0 0 0 0 0 0 1 2 0 8 0 7 5 2 0

either cultural beliefs or systems outcomes other than for one of the outcome measures. This provides empirical evidence that the sample was generally homogeneous with respect to these key constructs. Thus, findings strongly support the contention that these culturespecific beliefs and technological culturation are not confounded by subculture or country sampling biases and that Arabs, in general, are of like cultural mind on these variables. The issue regarding subcultures is extremely important and difficult to tease out. What we can say is that the sample was drawn from working adults who are generally from a higher

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162 Straub, Loch, & Hill

socio-economic and educated segment of the general population. This would mean, for example, that it is highly unlikely that there are Bedouins or Berbers in the Egyptian sample (Hobbs, 1990). The same logic holds for the Sudan where the sample was drawn from University-educated people who are ethnically Arab and typically not members of African tribes. Indeed, the percentages of the populations that are ethnically Arab in the figures cited indicate that there is probably no problem with sampling in Saudi Arabia, Lebanon, and Jordan.

DISCUSSION: LIMITATIONS, CONTRIBUTIONS, AND FUTURE RESEARCH Although the only culture-specific belief that was examined in this work was the Arab sense of time, the examination of a single belief in its context is consistent with the cultural influence modeling approach. A broader assortment of beliefs and new methods of capturing these beliefs would surely be useful in that the current study examined only one, albeit a powerful explanator. Sense of time could be supplemented with other beliefs in order to test the model via a more robust procedure. Larger sample sizes are always desirable, as are samples from Arab cultures that are less tied to the West, countries like the United Arab Emirates, Yemen, and Algeria, for example. By using samples from countries that are more westernized, the conditions for testing our theory were more robust, but lacked the representativeness of a sample that included all Arab countries, for instance. As viable a technique as scenario creation is, qualitative methods are also excellent for exploring the phenomenon of interest. Quantitative methods have their strengths, but also their weaknesses, and a multi-pronged approach, where there are good measures of cultural impacts from qualitative sources would be extremely helpful.

Table 7: MANOVA Test of Birth and Sample Site Country-by-Country Differences Birthplace F

p-value

Sample Site F

p-value

Culture-specific V3A Beliefs V1C

.152 .157

.859 .855

.493 .191

.688 .902

ITT/ Systems Outcomes

V2 V3C

4.067 1.294

.019 .277

3.608 1.262

.015 .289

Technological Culturation

14B TRAVELA TRAVELB Overall F Test

.857 .347 1.130 1.35

.426 .707 .325 .174

1.087 .721 .307 1.29

.356 .541 .821 .170

Fixed Factors

Birthplace Sample Site

(1 through 4 for Egypt, Sudan, Lebanon, and Jordan) (1 through 5 for Egypt, Sudan, Saudi Arabia, Lebanon, and Jordan)

Construct

Dependent Variable

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Contributions In spite of the limitations outlined above, we feel that cultural-influence modeling is a research innovation that has now been empirically demonstrated for the first time in this paper. This work represents a departure from generalized cultural belief perspectives that have been deployed in prior work. The specific-cultural belief that we have studied in the present research is the Arab sense of time. The planning scenario used was explicitly designed to evoke a cultural response as related to time. We expected that Arabs reading and reacting to the scenario would resist the value of the system. In spite of the fact that the sample group was highly attuned to the advantages of the technology, the correlations were significant, indicating that this specific cultural belief had a strong impact on IT outcomes. Rival hypotheses to our interpretation indicate that this particular cultural belief does have a bearing in this context. What are other specific contributions of this study? The findings from this study provide scholars and managers with valuable information. Analysis of the dataset suggests that both culture-specific beliefs and technological culturation significantly affect ITT, and that CB showed a much stronger effect than did TC. Based on the results of this study, we extrapolate that successful transfer of IT into organizational/business workplaces in culturally and socially diverse countries requires an understanding of micro-level beliefs, norms, and actions within the framework of national and international macrostructures. Culture is an independent variable that impacts ITT and is reflected in formal and informal organizations/ businesses. Culture gives people the sense of order they have to their everyday lives; cultural beliefs and values of different cultures differ markedly in terms of how they construct a meaning for technology. In this way our findings generally support the contemporary critical theory literature on Arab society and culture. The cultural influence model attempts to represent the important cultural influences on ITT. Three kinds of cultural variables were conceptualized in the present work, and relationships between two of these and ITT/systems outcomes were explored. National IT development, including technological policies and IT infrastructure, vary by nation and, consequently, countries will differ in how well they can encourage technological innovation. Future studies can and should integrate the national IT development component into tests of the model. Preliminary findings indicate that specific cultural components of Arab culture have an influence on how IT is viewed and the extent to which it might be utilized. Culture does not necessarily need to be viewed as a barrier that obstructs ITT. Indeed, culturally appropriate IT design and implementation which considers the differential influence of culture on ITT can enhance its transfer. This process can effectively “Arabize” technology. Instead of blaming the workers or culture for ITT failure, we propose that using specific cultural components of culture in the ITT process will encourage the transfer process. When individuals hold cultural beliefs that are at variance with the dominant cultural beliefs and values, they have been influenced, more often than not, by an external factor, such as personal and informal exposure to the technology of the non-Arab industrialized world. Moreover, cultural influence modeling is a research innovation because it argues that researchers should provide evidence for specific cultural beliefs holding in particular cultures and then testing the effects of those beliefs. The approach is more demanding and intensive in that it requires researchers to examine the beliefs in the field as well as in the literature. Nevertheless, it represents a viable, new approach that differs significantly from the Hofstede-styled cultural variables studies. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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The literature documenting U.S. experiences with ITT (Brancheau & Wetherbe, 1990; Cooper, 1994; Leonard-Barton & Deschamps, 1988; Moore & Benbasat, 1991; Prescott & Conger, 1995; Zmud, 1982) is increased by the findings in the current work. Culture is a factor in how systems are viewed, but this IT literature is relatively light on work that delineates cultural and social variables that foster or impede the adoption of new information technology. In keeping with the spirit of the descriptive work by Goodman and colleagues (Ariav & Goodman, 1994; Danowitz et al., 1995; Dedrick et al., 1995; Goodman, 1991a, 1991b; Goodman & Green, 1992; Goodman & Press, 1995; La Rovere & Goodman, 1992; Mesher et al., 1992; Nidumolu & Goodman, 1993; Odedra et al., 1993; Wolcott & Goodman, 1993), IT diffusion differs significantly around the world, and researchers need to develop and test scientific hypotheses that advance theory on the phenomenon of ITT. The present study attempts to respond to this void. Indeed, it adds evidence to those studies that have already empirically tested cultural impacts on the adoption and diffusion of new information technologies, such as Ho et al. (1989), Straub (1994), and Raman and Wei (1992). This work is tied in closely with prior research, but also extends it by stimulating and measuring cultural attributes and their affect on IT acceptance. While new methods can also be deployed, the scenario creation method served its purpose in this study. The practical implication of the empirical findings is for managers to acknowledge cultural differences and adapt the technology to the cultural context. Since technological culturation is experientially-based, firms in developing countries might be advised to expose their employees more to high technology cultures, for instance. While education, training, and strengthening of entrepreneurship have been shown to have significant implications for entrepreneurs in underdeveloped Arab countries such as Jordan (Yasin, 1996), preliminary evidence from our study does not support the idea that formal culturation is effective. Ironically, it appears that informally-derived experiences are more valuable. From the standpoint of practical implications of the finding that cultural beliefs significantly impact ITT, there is a general principle that can be tentatively espoused and then several specific suggestions. First, managers should attempt to work with, rather than against prevailing cultural patterns, especially in the case of managers and workers who have not been technologically culturated. In a strongly patriarchal, tribal, and communal society like the Arab culture, for example, top management buy-in and championship must be ensured before attempting to introduce new IT, as Yavas et al. (1992) found. If further studies find that the Arabic cultural preference for face-to-face communication works against the use of certain technologies, it does not make sense to stress the face-to-face replacement value of any system, such as E-Mail or Electronic Meeting Systems. To do so is likely a blueprint for disaster. Rather E-Mail, for example, may be “sold” to management as a supplemental system to enhance information exchanges in support of their face-to-face meetings.

Future Research Culture influence modeling takes the stance that the only way to understand the effect of cultural beliefs is to examine them individually in their respective cultural contexts. We postulate that cultural beliefs should not always be measured and tested in the aggregate, á la Hofstede (1980). The scientific approach will allow us to understand the phenomenon through the accumulation of studies, each of which examines different cultural beliefs. Time is only one of the culture-specific beliefs. Future research should test other culture-specific beliefs to determine how these distinctly different themes in Arab culture impact technology transfer. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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This research will hopefully spur others to investigate the generalizability of these findings across different cultures and different IT innovations. There are certainly at least three levels of culture– ethnic, organizational, and IT– and these should be explored for conjunctive (Lincoln, Hanada, & Olson, 1981) as well as separate effects on ITT. As firms internationalize, there is a growing need to understand how cultural factors might affect a multinational organization’s ability to adopt and utilize IT. Further studies that expand upon this one may lead to knowledge that will help IT researchers and practitioners in improving the technology transfer process. Such knowledge will be valuable to practitioners because it may spell the difference between success and failure in implementing IT in the Arab world and other developing nations and regions.

ENDNOTES 1

2

3

4

5

6

Technology transfer carries the alternate meaning of importing technology to other countries (or, say, from universities to industry), as illustrated in Djeflat (1988) and in Harrison (1994). A developing country is generally defined as one that has a per capita gross national product less than USD$2,000 (Ball & McCulloh, 1990). In addition to having a relatively low GNP per capita, developing countries are characterized by a dualism of modern and unsophisticated technology, a high rate of illiteracy, low saving rates, and inadequate banking facilities (Ball & McCulloh, 1990), population increase, economic development (debt management, deficit of balance of payment, budget deficit and economic liberalization / restructuring, basic needs of citizens (water, food, security, housing), etc. (Kamel, 1995) The Arab world is generally defined as the following countries: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Palestine (including the West Bank, Gaza, and East Jerusalem), Qatar, Saudi Arabia, Sudan, Syria, Tunisia, United Arab Emirates, and Yemen. The term “acculturation” is being used much less frequently in anthropology today, not even appearing in the recent edition of the encyclopedia of cultural anthropology (Levinson & Ember, 1996). Historically, some anthropologists used the term to imply that superior cultures rightly impose their beliefs and values on other cultures. In recent years, the study of culture-to-culture influences has adopted a less jingoistic stance on how and why such transfers take place. Nevertheless, there are enough negative connotations that we prefer to use the term “culturation” for our construct. The term “acculturation” is only retained when discussing its historical usage in the anthropological literature. Our definition of IT includes not only hardware and software, but also the process by which systems are developed. Of these three components, software and system development processes are particularly susceptible to cultural influences. A National Science Foundation grant #0082473 was awarded in September of 2000 to Karen Loch, as Principal Investigator, and Detmar Straub and Carole Hill, as CoPrincipal Investigators. The goal of this grant is to study this DEV Þ ITT link. A possible, but less parsimonious model would posit that technological culturation challenges established cultural beliefs and knowledge, social structures, and technologies. The level of culturation may determine variation in cultural beliefs and interactive patterns, national IT development, and, therefore, indirectly, information system

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7

8

9

10

outcomes. In such a model, TC would affect ITT through CB and DEV as well as directly. Causal coefficients in LISREL are similar to betas in regression and may be interpreted in a like manner. For a statistically significant improvement, the improvement in C2 should compensate for the degrees of freedom lost by estimating the additional parameters. The fact that only one of the systems outcome measures was significant, and the two variables for outcomes are highly related as shown by their Cronbach’s a, suggests that this is not a systematic effect. This significance is likely explainable by chance. This issue regarding sub-cultures is extremely important and difficult to tease out. According to the WWW CIA Factbook, the percentages of the populations in the sampled countries that are ethnically Arab indicate that there is probably no problem with sampling in Saudi Arabia, Lebanon, and Jordan. While Jordan has a population that is 98% Arab, and Lebanon is 95% Arab, the percentage is a little lower in Saudi Arabia (90%), and is lower still in the Sudan (39%), where a sizable proportion of the population is black or members of tribal groups, such as the Nubians. In Egypt, there is a significant Arab population, 90% of people being “Egyptian,” the remaining 10% being Berber or Bedouin. What we can say is that the sample was drawn from working adults who are generally from a higher socio-economic and educated segment of the general population. This would mean, for example, that it is highly unlikely that there are Bedouins or Berbers in the Egyptian sample (Hobbs, 1990). The same logic holds for the Sudan where the sample was drawn from University-educated people who are ethnically Arab and typically not members of African tribes.

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This article was previously published in the Journal of Global Information Management, October - December, Copyright © 2001.

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The IS/IT Outsourcing Phenomenon 173

Chapter X

The IS/IT Outsourcing Phenomenon in the Public Sector of a Developing Country: An Exploration of Critical Issues Abdulwahed Moh. Khalfan College of Business Studies, The Public Authority for Applied Education and Training, Kuwait Tom G. Gough University of Leeds, UK

ABSTRACT This chapter presents an overview of a national case study exploring the IS/IT outsourcing phenomenon in the public sector of a developing country. The study is empirically based and provides a logical extension to earlier research studies/endeavors in the field of IS/ IT outsourcing. Kuwait, where the data collection for this study was carried out, has been used as an example of a developing country . The primary data on IS/IT outsourcing practices, obtained for the first time in Kuwait, were collected by means of survey questionnaires and semi-structured interviews supported by organizational documentation. The research seeks to identify the factors that give rise to the IS/IT outsourcing phenomenon, and the degree to which they influence the practices, procedures, and outcomes of IS/IT outsourcing arrangements in Kuwait. The overall research aimed to provide a comprehensive

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pragmatic picture of IS/IT outsourcing practices, including motivations, risk analysis, contract drafting and legal issues, vendor selection criteria, evaluation practices, decisionmaking processes, and post-evaluation experience. There is growing evidence within the Kuwaiti environment to suggest that public organizations are not achieving the desired benefits from their IS/IT outsourcing operations. IS/IT outsourcing projects in Kuwait are still undertaken in ways that are not clearly related to strategic change. It is clear that IS/ IT outsourcing is a multi-faceted phenomenon that should be studied broadly in context. The lesson is that the solutions must make sense for the particular context in which they will be implemented, considering all cultural and environmental factors. It was found that culture plays an important role throughout the outsourcing process. The findings of this study also suggest that there will be an increasing utilisation of IT outsourcing services in the public sector of Kuwait.

INTRODUCTION IS/IT outsourcing has emerged in recent years in both the private and public sectors as a key method of managing different aspects of Information Systems/ Information Technology (IS/IT). IS/IT outsourcing is a term that encompasses a variety of approaches. It leads to significant changes in the management processes of the IT organization. The evolving literature on IS/IT outsourcing has been concerned with “make-or-buy” or “in-source-or-out-source” decisions in relation to organizational behavior (Coase, 1937; Williamson, 1979; Loh & Venkatraman, 1992) and transaction cost economics (Williamson, 1985; Benko, 1993; Lacity & Hirschheim, 1993) However, the decision to in-source or outsource has never been an easy task for the people involved in IT management. The reason is that it involves considerable complexity and business risks (Cronk & Sharp, 1995). IT outsourcing has been recognised as one of the top ten issues for success in the 1990s (Rockart et al., 1996). The study of what makes IS/IT outsourcing successful is one of the most important topics in IS/IT management nowadays (Seddon, 2001). In the past decade, the IT outsourcing industry has been growing at a staggering rate of about 20% a year, reaching around $55 billion in 1998, while outsourcing deals have been getting larger and longer (Caldwell & McGee, 1997). The information technology outsourcing services are booming. Industrial analysts predict that the global market will grow $86 billion in 1996 to more than $137 billion in 2001 (Diromualdo & Gurbaxani, 1998). On conservative estimates, IT outsourcing may well represent, on average 30%-35% of IT budget by 2002 (Lacity & Willcocks, 2001).

IS/IT Outsourcing Framework Precise definitions of IS/IT outsourcing differ in the literature (Glass, 1996). But there is a general agreement that it is the carrying out of IS/IT functions by a third party (Kettler & Walstrom, 1993). IS/IT outsourcing is what Williamson (1985) calls a “market versus hierarchy” decision. Rands (1992) calls it the “make-or-buy” decision, while Gurbaxani and Whang (1991) and Porter (1980) label it “vertical integration.” In this study, IS/IT outsourcing is defined as by Cheon, Grover, and Teng (1995) : The organizational decision to turn over part or all of an organization’s IS functions to external services provider(s) in order for an organization to be

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able to achieve its goals. This definition includes the following external services: applications development and maintenance, systems operations, network/communications management, end-user computing support, systems planning and management, and purchase of application software, but excludes business consulting services, after-sale vendors services, and the lease of telephones lines. An organization can obtain these services through complete outsourcing, facilities management, systems integration, time-sharing, and other contracts (including rental, installation and procurement, and maintenance and programming). (p. 209) The definition is very broad and includes all sorts of external relationships. There are different types of IS/IT outsourcing. For example, Buck-Lew (1992) introduced “pure versus hybrid outsourcing,” while Ang (1994) identified systems integration, thirdparty maintenance, and data center privatization. Lacity and Hirschheim (1993) provide a taxonomy of outsourcing options. They divide IS/IT outsourcing into three categories: body shop, project management, and total outsourcing. The first one, the body shop, is primarily for short-term demands like the use of the contract programmers. The second category, project management, is primarily used for a specific project or portion of the IS work. The third category, total outsourcing, is where the management’s decision is to turn over the entire hardware and software support to an external vendor and for the vendor to be in full charge of the data centers and telecommunications operations.

Outsourcing in the Public Sector In recent years, IT outsourcing has been used increasingly in the public sector as a policy instrument for changing the way publicly funded services are provided. Governments have been outsourcing for decades under the term “contracting out” (Dorsi, 1998). In fact, outsourcing is difficult to distinguish from contracting out (Burgess & Macdonald, 1999), although the latter term tends to be more commonly used in the public sector. In this respect, outsourcing can be defined as “ a distinct form of privatization where particular functions of public institutions are transferred to the private sector” (Gordon & Walsh, 1997, p. 267). In the public sector of the UK government, the term IT outsourcing is now used interchangeably with other programs: market testing, compulsory competitive tendering (CCT), and contracting out (Currie, 1996). The trend, which started in the 1990s, was to seek privatization of the IS/IT department in the public sector through IT outsourcing (Gordon & Walsh, 1997; Lacity &Willcocks, 1997). Indeed, a number of factors are pushing towards that direction, e.g., lowering the cost, adding value, lack of IT skills, joint IT management responsibility, and more flexibility. Additionally, the complexity of information systems in the public sector is often very high (De Looff, 1997). O’Looney (1998) argues that U.S. government officials have endorsed IT outsourcing for many reasons, including: lack of skills; downsizing; accessing new IT technology; a general belief among the public sector managers that the private sector does a better job; concentrating on “prime responsibilities.” At the same time, Lacity and Willcocks (1997) note that the growth of privatization in the U.S. may be attributed to “Americans increasing loss of faith in big government” (p. 86). In recent years, there has been growing importance and interest on the public sector IS outsourcing (Lacity & Willcocks, 1997).

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Moreover, many public sector organizations have considered outsourcing as a viable option (Currie, 1996; Lacity & Willcocks, 1997).

Research Objectives As IS/IT outsourcing represents a fundamental change in the way “firms govern their IT infrastructure” (Loh & Venkatraman, 1992), It could be viewed as an administrative innovation. IS/IT outsourcing has become a critical management instrument in facing highly sophisticated IS/IT demands/solutions. However, IS/IT outsourcing is a complex process involving many features. Outsourcing, like any other facets of management, “has different features and characteristics depending on the particular business environment and organizational culture” (Lee & Kim, 1997, p. 205). The aim of this research is to explore IS/IT outsourcing practices as an information systems strategy in the context of the public sector of Kuwait as a developing country. Attention will be focused on differences between Kuwait and the developed countries and their implications for outsourcing. Specific issues related to IS/IT outsourcing include motivation, the client/vendor relationship, types of outsourcing, risk analysis and evaluation, contractual and legal aspects, vendor selection criteria, and post implementation evaluation. The vast majority of existing research into IS/IT outsourcing has been primarily conducted in the developed nations, with most studies focusing on organizations in the U.S.A. or Europe (see, for example, Apte, Sobol, Hanaoka, Shimada & Saarinen, 1997; Cronk & Sharp, 1995; Cross, 1995; Currie & Willcocks, 1998; Jurison, 1995; Lacity & Hirschheim, 1993, 1995; Loh & Venkatraman, 1992; Mclellan, Marcolin, & Beamish, 1995; Palvia, 1995). To date, IS/IT outsourcing has received “little academic attention in the non-Western context” (Lee & Kim, 1997, p. 1). Our literature review has found that there is no research with regard to information system strategies in developing nations such as Kuwait. Yet, Kuwait and other Gulf Co-operation Council (GCC) countries differ from the industrialized countries in terms of culture, economics, and social and legal issues (Abdul-Gader, 1997). Culture plays an important role in IS implementation (Odedra, 1990). Previous research found differences between developed and developing countries along certain cultural dimensions (Hofstede, 1980). Therefore, one cannot rely on prescriptions suggested by IS researchers in developed countries to understand IS/IT issues in the developing countries without empirical evidence supporting the applicability of these guidelines. The main objective of the present study is to gain a deeper, grounded understanding of why the different Kuwaiti ministries in the public sector opt for IS/IT outsourcing solutions despite the fact that IS/IT outsourcing poses a number of inherent risk factors (e.g., security, hidden costs) that challenge its success.

Developing Countries A developing country is generally defined as one that has a per capita GNP less than $2000 (Ball, 1990). In technological terms, the developing countries are those that are going to receive technology from the developed (industrial) nations (Samli, 1985). Developing countries or less developed nations, according to the United Nations Committee on Science and Technology in Developing Countries, is a classification that is used to refer to almost to 120 nations of the world, including Kuwait (COSTED, 1980, p. 222). Many of the developing countries are generally poor and over populated. They have inappropriate administration and

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political systems, ineffective or unattractive educational systems, a high rate of illiteracy, inflating economies and ill-initiated financial systems — in addition to a high rate of unemployment, low per capita income, and income distribution characterized by variation and inconsistency (Ball, 1990; Kamal, 1995; Straub, Keil, & Brenner, 1997). Quantitatively and qualitatively, the developing countries are different in terms of capital, human resources, and populations. However, even in the context of the developing countries, there are similarities and differences between countries depending on many factors, such as the size of the population, the geographic location, and GNP. Kuwait, as an example of a developing nation, has characteristics including a very small population, a strong financial position as a major oil exporter, and a willingness to absorb and capture state-of-the-art technology.

IT Research in Developing Countries A number of IT researchers have addressed various aspects of IS/IT issues in the developing countries. Kamel (1995) discusses the experience of Egypt with IT as a tool for social-economic and cultural development. Hassan (1998) proposes a framework for IT industry development in Pakistan. Harindaranath and Liebenau (1995) discuss the IT issues faced by the Indian software industry as it copes with a changing state policy of increasing liberalization of the economy. Roche (1993) proposes that developing nations should provide more incentives to multinational companies in order to attract corresponding transfer of technology. Enns and Huff (1999) discuss the IT implementation issues in developing countries, especially for Internet adoption. Straub et al. (1997) stressed the importance of information technology transfer to developing countries and tested the cultural influence where a new model was presented. The challenges facing the organizations in developing countries while attempting to deploy telecommunications networks (e.g., lack of resources, lack of in-country expertise, non-supportive regulatory environments, and so on) were thoroughly identified and discussed by Roche and Blaine (1996). Yavas, Lugmani, and Qurashi (1992) discussed the adoption of IT in Saudi Arabia. De Boer and Walbeek (1999) highlighted the importance of policy formulation in the developing countries. Azad, Erdem, and Saleem (1998) proposed a framework for realizing the potential of IT in developing countries, where they offer guidelines for planning, implementing, and expanding the role of IT technology.

IT Management in the Public Sector of Developing Countries It is recognized that successful implementations of IT projects are complex tasks dependent on factors both internal and external to the organization (Klein & Hirschheim, 1987). Most studies on IS/IT management have focused on issues more germane to developed countries and specifically on organizations in the private sector. They have limited relevance to IS/IT projects in public organizations in developing countries mainly for two reasons. The first reason is that there are dissimilarities between issues related to IS/IT management in the government and the private sector (Bozeman & Bretschneider, 1986; Bretschneider, 1990). The second reason is that there are differences related to IS/IT management issues in developed and developing countries, largely due to the differences in the social, political, economic, cultural, and environmental contexts. The far greater impact of the environment on organizations (and IS/IT) in developing countries influences IS/IT design and implementation in ways that are different in the two contexts (Jain, 1994).

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Background on Kuwait The State of Kuwait lies on the northeast shore of the Arabian Peninsula, bordered on the east by the Arabian Gulf, in the north by Iraq, and in the south and west by Saudi Arabia. Kuwait is an oil-rich country that is fairly homogenous in terms of its level of urbanization and infrastructure development. Kuwait is considered to be a developing country with a stable political system, a relatively liberal economic policy, and an increasingly significant role in the global economy. Unfortunately, very little research has been undertaken on the status of Information Systems (IS) in Kuwait. Kuwait has been under-researched in the IS/IT literature (Alshawaf, 2001). No studies on IS/IT outsourcing have yet to be found for Kuwait.

RESEARCH METHODOLOGY This section provides a methodological overview of the investigation. It discusses issues related to the research design selected and the data collection and analysis methods used to conduct the research study. It explains the methods and procedures used in the investigation. It describes the stages of the investigation, the sources of data, and procedures used to acquire the data.

Research Approach The lack of systematic research into the IS/IT outsourcing phenomenon in the developing countries’ context justifies the exploratory nature of this study. There is a need to establish an integrative and holistic view on IS/IT outsourcing practices in developing countries. This type of research calls for knowledge about the “what” (structure) and “how” (process) components of implementation. The structural aspects of research require the use of quantitative methods, while the procedural aspects are best investigated using qualitative methods. This calls for a combination of both methods (triangulation) to address the different aspects of this study (Denzin, 1988). In this study, a methodological triangulation approach is adopted through the use of a national case study, whereby a survey questionnaire is used as the selected quantitative method (“hard” data), and semi-structured interview to collect the qualitative data (“soft” data). The study aims to elicit the experience of organizations regarding elements and key factors in IS/IT outsourcing practices. This is clearly targeting the “what” components of research, and it requires a large sample and a wide range of organizations. Given the nature of the topic, as supported by Eisenhardt (1989) and Yin (1989), this type of inquiry favours the use of an exploratory structured questionnaire survey. Semi-structured interviews and organizational documentation, based on the qualitative method, are chosen. As established before, sole reliance on the questionnaire/survey does not answer the questions of “how” and “why” (Mason, 1984), which relate to the process aspects of implementing the key elements in IS/IT outsourcing. The questionnaire/survey technique can only measure the “what” elements, which alone are not enough to uncover and understand the process that lies behind the phenomenon. Quantitative methods also deal with technological and organizational features statistically rather than dynamically (Kaplan & Duchon, 1988).

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Following the recommendations of Guba (1981), Benbasat, Goldstein, and Mead (1987), and Yin (1989, 1994), the data in this study were collected thorough questionnaires and semistructured interviews supported by the collection of some organizational documents. A variety of methods used within the same overall study can be advocated as a positive advantage (Easterby-Smith et al., 1991, p. 133) enabling “data triangulation” techniques.

Case Study Case study research is an accepted research strategy in the Information Systems (IS) discipline. Many researchers have used the case study approach as their research strategy (see, for example, Cavaye, 1996; Gable, 1994; Walsham, 1995; Yin, 1994). Yin (1994) states that a case study, from a research strategy point of view, may be defined as follows: “an empirical enquiry that investigates a contemporary phenomenon within its real-life context, when the boundaries between phenomenon and context are not clearly evident, and in which multiple sources of evidence are used.” As a research strategy, case studies are a particularly powerful technique to answer “how” and “why” questions. Case studies are most appropriate for exploratory and explanatory research since they are able to capture a greater depth and breadth of detail on the subject’s activities. Several authors, such as De Leeuw (1990), and Yin (1994), have suggested that a case study research strategy is particularly appropriate for exploratory phases of research in new areas.

Questionnaire Design Based on the literature review, a standardized questionnaire was developed to collect data from a large number of organizations in Kuwait. The questionnaire consisted of 15 pages and was designed to obtain a comprehensive view of IS/IT outsourcing practices in Kuwait, and identify the current framework of outsourcing practices in the public Kuwaiti sector. The survey drew upon previous studies of outsourcing practices and general IT (Currie, 1995; Lacity & Hirschheim, 1993, 1995; Lee & Kim, 1997; Tye & Chau, 1995). The questionnaire consisted of six main categories with mainly closed questions. In addition, two final openended summary questions were used. The general structure of the questionnaire was as follows: Organizational Profile; Information Technology Department Profiles and Plans; Outsourcing Terminology and Issues; Outsourcing Decision Process; Training and Educational Issues; Personal and Job-related Profile; and General Comments. In general, questionnaire design was carried out according to guidelines laid down by such as Oppenheim (1968, 1992) and De Vaus (1990). Particular attention was focused on the wording, structure, sequence, and overall presentation of the items in the questionnaire. The instrument was validated using the procedures recommended by Straub (1989), i.e., instrument review by an expert in the field, a pilot test, internal reliability, and statistical conclusion validation. It should be noted here that the questionnaire was written and administered in English. The use of an English-language questionnaire eliminated the cross-linguistic equivalence problem associated with questionnaire translation (Douglas & Craig, 1983). In order to check the applicability of the questionnaire in context, it was pre-tested on a number of organizations in Kuwait. A revised survey was then dispatched to the organizational targets.

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Semi-Structured Interviews Marshall and Rossman (1989) provide a framework for matching research purpose and strategy with research methods and data capture techniques. They suggest that when the research study has a descriptive and exploratory focus, as was the case in this study, appropriate research strategies are field studies comprising in-depth interviews. Many writers have placed great importance on semi-structured interviews as an important tool for gathering qualitative data (see, for example, Jankowicz, 1995; King, 1994). Jankowicz (1995) argues that semi-structured interviews involve asking questions whose content and sequence are not fully specified in advance. He labels the technique as “openended,” in that the respondents are “encouraged to answer in their own words.” Miles and Huberman (1994, p. 6) indicate that a qualitative approach can “result in a holistic understanding of the situation, of the factors involved and how they interrelate, identifying the less obvious issues as well as those which initially grab the attention.” Finally, as Mintzberg, (1979, p. 587) states, “semi-structured interviews provide a controlled framework which facilitates analysis but also allows for the collection of ‘soft’ anecdotal data.” Interviews were recorded to free the interviewer from note taking and to increase the accuracy of data collection. Interviews were conducted in both English and Arabic, because the interviewees were multi-cultural, originating from different nationalities. Recordings were later transcribed, and the data was organized and analyzed in terms of the research model. A content analysis (Remenyi, 1992; Jankowicz, 1995; Remenyi, 1992) was used to discover important patterns from the data.

Selection of Respondents Those main public sector ministries that can be described as intensive IT users were selected to participate in the study. They include: the Ministry of Planning, Ministry of the Interior, Ministry of Electricity and Water, Ministry of Trade and Commerce, Ministry of Finance, Ministry of Justice, and Ministry of Public Health. The intention of the study was to target the highest possible level in the IT departments of each organization, i.e., IT general managers, IT directors, heads of IT departments, or the equivalent.

KEY IS/IT OUTSOURCING ISSUES IS/IT Outsourcing Motivation The growth of IS/IT outsourcing as an important IT strategy can be attributed to a number of factors. The most important consideration when organizations think about outsourcing is the benefit that the organizations could obtain (Yang & Huang, 2000). Altinkermer et al. (1994) stress the importance of carefully examining all the potential benefits and risks of outsourcing in order to facilitate or gain more understanding of various issues that will help the top management to make “knowledgeable decisions about outsourcing” (p. 252). Much previous research has concentrated on the advantages and disadvantages of outsourcing (see, for example, Loh & Venkatraman, 1992; Kettler & Walstrom, 1993; Lacity & Hirschheim, 1993; Grover et al., 1994; Loh, 1994). There are many reasons why organizations consider IS/IT outsourcing. The motivations for IS/IT outsourcing have been proposed in terms of three main types of expected potential benefits: strategic, economic, and technological (Grover et al., 1996; Loh &

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Venkatraman, 1991; McFalan & Nolan, 1995; Yang & Huang, 2000). Strategic benefit means that organizations can concentrate on core functions by outsourcing routine IT activities (Alexander & Young, 1996; Apte, 1990; Loh & Venkatraman, 1992; Schiffman & Loftin, 1991), and creating new strategic initiatives (Henderson, 1990, Yang & Huang, 2000). Second, economic benefits accrue with substantial savings through economies of scale and labor specialization through utilizing the human and technological resources of the IS service providers (Apte, 1990; Lacity & Hirschheim, 1993; Mclellan et al., 1995; Yang & Huang, 2000). Third, technological benefits refer to ability of the organization to gain access to leading-edge technology (Altinkemer et al., 1994). Other researchers have noted the lack of skilled IT manpower as a prime motivation (Slaughter & Ang, 1996). In addition, increased availability of outsourcing services providers has motivated outsourcing (Apte, 1992). There are also other drivers behind the IS/IT outsourcing process, including business process re-engineering (Diromualdo & Gurbaxani, 1998; Rothery & Robertson, 1995), organizational restructuring, benchmarking, new alliances or partnership (Rothery & Robertson, 1995).

Cost Reduction The classical driver for IT outsourcing is cost reduction. The most direct and immediate benefits associated with IT outsourcing are those associated with reducing expenses by obtaining external services at a cost less than the firm’s internal cost to provide the services. In fact, the basic argument for outsourcing is cost saving due to the vendor’s economies of scale and labor specialization. The cost saving or reduction that organizations expect to realize because of outsourcing is often “the primary factor driving the move to outsourcing” (Huff, 1999). IT vendors claim that a reduction of between 5% to 20% of IS/IT costs will be achieved. The actual savings that have been realized by some organizations were consistent with these estimates, while for other organizations the savings were not as great. In a recent study of IT sourcing decisions, “expected IT cost savings” was the most cited reason for outsourcing, appearing in 80% of the decisions considered (Lacity & Willcocks, 1998).

Shortage of Skilled Human Resources There is difficulty in finding qualified and skilled manpower (Huang & Yang, 2000). Research by Rosenthal and Jategaonkare (1995) found that the number of students interested in the Management Information Systems (MIS) discipline was decreasing. On the other hand, the demands for skilled human resources are rapidly increasing. Severe shortage of information technologists is said to be a worldwide dilemma, and the forecasts are formidable (Meadows, 1995). At the same time, Collins and Millen (1995) found out from their empirical research that the most cited benefits of IT outsourcing, according to the top American firms, was benefiting from the “skills of outside staff” (p. 11). Moreover, Avgerou and Cornford (1998) attribute the failing of IS projects to the lack of skilled staff to build “the required technical components or to maintain them” (p. 51). They also believe that shortage of IT technical human resources is a worldwide problem; they suggest outsourcing “sophisticated” technical projects in order to find a solution for the sharp shortage of technical expertise.

Improving Service Quality and Productivity The quality and productivity of IT services improve through the deployment to an external agency (Clark, Zmud, & McCray, 1995). This occurs for numerous reasons. The

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vendor may (1) have access to more current technological environment; (2) have more qualified or more motivated staff; (3) provide a variety of IT services; (4) have a better management system of coordination and control; and (5) be more committed than the internal staff in making the alliance with the client organization work well (Clark et al., 1995).

Gaining Access to State-of-the-Art Technology and Know-How Access to leading-edge technology is a persuasive argument for outsourcing (Kakabadse & Kakabadse, 2000; Lacity & Willcocks, 2001). In fact, outsourcing can provide immediate access to the most up-to-date technology, as the organizations can request the latest and most advanced technology. Apte (1990) argues that IS/IT outsourcing may increase “the competitiveness of products offerings” through the use of the state-of-the-art technology that may not be easily available in-house. In building a new IS center from scratch, outsourcing can save on capital investment in hardware and on hiring costs (Burg, 1992).

Flexibility and Control Crucially, outsourcing can provide organizations with greater capacity for flexibility (Harrison, 1994). Collins and Millen (1995) have recognized the importance of flexibility and control in the outsourcing arrangements as an important impetus. Quite often, it is more effective or much easier for an IT vendor to implement a radical (managerial, technical, or organizational) change than it would be for an internal IS group (Clark et al., 1995). This is simply because of two main reasons. First, the vendor might have more expertise and experience with change management and initiatives. Second, the vendor is “under far less pressure to bend to the bureaucracy or politics of an organization” (Clark et al., 1995, p. 63).

Strategic Choice The sourcing debate has moved from whether to outsource to what and how to outsource (Venkatraman, 1997). By and large, conventional wisdom argues that core activities should stay in-house while non-core activities can be outsourced in order to preserve core competencies (Prahalad & Hamel, 1990; Quinn & Hilmer, 1994; Mullin, 1996). IS/IT outsourcing needs to be considered strategically (Grover et al., 1994). The strategic sourcing literature points out that outsourcing of goods and services should be integral to an organization’s overall strategy formulation process (Venkatraman, 1997; Quinn, 1999).

Improved Business Performance Loh and Venkatraman (1992) proposed improving business performance as one of the determinants of IS outsourcing activities. Other researchers have realized that this motivation is a long-term objective that can only be detected after a period of time (Mclellan et al., 1995).

Increased Number of IS/IT Vendors One of the industrial factors that has helped in accelerating the movement towards IS/ IT outsourcing is the rapid emergence of third-party vendors who offer reliable, affordable services across a wide breadth of IS/IT products and services. The number of firms has grown substantially (Apte, 1990). Many of those IT suppliers entered the market as small consultancy agencies; however, they have expanded. At the same time, many large equipment manufacturers, including IBM, Microsoft, and DEC, have established outsourcing subsidiaries

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(Collins & Millen, 1995). It is widely believed that such specialized IT agencies can improve customer service, lower costs, and improve asset utilization. Indeed, client organizations have been looking for “added value” from their IT outsourcing vendors (Willcocks & Lacity, 1998). Value-added outsourcing refers to the vendor and client organization combining “their capabilities to market IT products and services” (Willcocks, Fitzgerald, & Lacity 1999).

Faster IT Application Development IT applications can be developed in a much faster and more efficient way by the IT vendor for numerous reasons. First, the IT vendor may be able to retain considerable skilled personnel. Second, the vendor has a portfolio of development projects, so in case one technical solution fails, it would be possible to offer an alternative. Third, the IT vendor retains considerable IT resources and capabilities. Clark, Zmud, and McCray (1998) have examined this issue empirically and found out that this view was supported by many organizations.

Risk Analysis IT outsourcing, as a legitimate management strategy, has deficiencies and drawbacks as well as several advantages. Following Willcocks and Margetts (1994), risk is taken to be “a negative outcome that has a known or estimated probability of occurrence based on experience or some theory” (Willcocks et al., 1999, p. 286). Also, risk has different meanings in different contexts (Jurison, 1995). The purpose of risk analysis is to assist the IT managers in making informed decisions about IT investments and developing risk management polices concerning outsourcing strategies. It should be emphasized here that the distinction between risk and uncertainty is not always clear in the management literature, and there is “considerable overlap in the usage of the term risk and uncertainty” (Baird & Thomas, 1985). Venkatraman and Loh (1993) concluded in their empirical study of 209 outsourcing practices in the Fortune 500 corporations, that outsourcing should be viewed as the “process of balancing benefits and risks through a portfolio of relationships.” It has been argued that there are “too few academic studies of types of IT outsourcing risk, their salience and their mitigation” (Willcocks et al., 1999, p. 286). Willcocks (1998) generated risk reduction guidelines from studying 40 organizations and their IT outsourcing practices. Additionally, Elitzur and Wensley (1998) argue that information systems are subject to a variety of different types of risks. The types of risk that will be relevant to IT outsourcing will vary according to the nature of the products/ services covered by the outsourcing arrangement. In addition, Currie and Willcocks (1998b) note that a relationship exists between the scale of IT outsourcing and risk. Total outsourcing, which involves more than 80% of the IT budget, carries the most risk, whereas in-sourcing carries the least risk. A number of disadvantages are reported in the literature, including hidden cost and security issues.

Hidden Cost Although the price of entry into IS/IT outsourcing can be relatively low in relation to in-house cost, it can rise steeply after the organization is “locked-in.” Lacity and Hirschheim (1993) call it “excess fees” and note that it was a major concern expressed by many

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organizations. In a more recent study, Currie and Willcocks (1997) revealed from their empirical investigation that the major risk that materialized after initiation of outsourcing was hidden cost. In addition, it was observed by Hendry (1995) that outsourcing can have hidden cost, especially in the longer term, arising from lack of awareness of the changing environment and technology and perhaps user requirements. In their empirical research, Lacity et al. (1995) indicate that “in virtually every supplierwritten contract we studied, we uncovered hidden costs, some adding up to hundreds of thousands — even millions — of dollars” (p. 91). Ducan (1998) believes that hidden cost is in fact some kind of “opportunistic behaviour” (p. 677). Willcocks et al. (1995) argue that sources of hidden cost may all relate to “weakness in contracting.”

Information Security Issues Data security refers to the level of protection provided to prevent unauthorized access and “tampering.” As noted by Fink (1994) and Sherwood (1997), information security is an area often neglected in outsourcing arrangements. Information security covers both data security and business recovery planning (Lee, 1995). The former aims to ensure the integrity and privacy of data owned by the organization, whereas the latter aims to include measures that ensure the rapid restoration of normal business operations in case of an occurrence of IT-related problems (e.g., infliction of computer virus, destruction of data, sudden outage of the IT function). When the IT function is outsourced to an external service provider, the organization no longer retains full control of information security (Lee, 1995), whereas full control of the information security is retained when the IT function is provided in-house. According to Collins and Millen (1995), “corporate security issue” was one of the major frequently cited reservations made by American firms.

Decision-Making Process The primary objective of managers in making decisions on IT outsourcing is to minimize total cost (service and transaction cost) and maximize total value to the organizations. Ngwenyama and Bryson (1999) stressed the importance of top management carefully examining the following questions: (1) What are the risks and benefits of different outsourcing strategies? (2) What is the “potential vulnerability” to the organization if the vendor fails to perform the IT activities according to the details of the contract? (3) How to protect the organization from “opportunistic bargaining” by its vendors? (4) How should outsourcing contacts be structured to ensure quality and reliability? (5) What level of core competence should be retained? In fact, IS outsourcing decisions are complex (Ngwenyama & Bryson, 1999), because they involve a number of factors, including: (1) entering and managing a long-term relationship with an “autonomous agent,” and (2) exposing vital organizational assets and resources to the control of a third- party agent. Moreover, when IT managers consider outsourcing, they must balance different organizational needs and make decisions under “uncertainty and incomplete information” (Ngwenyama & Bryson, 1999). The outsourcing decision should consider the various factors (Huang & Yang, 2000), including the tangible (such as cost, computing facilities, human resources) and the intangible (such as strategy, quality) factors. In addition, the decision process should include clear, coherent analytic steps and should be able to generate results to convince those who are involved to accept the outcome. So, different organizations will have different considerations.

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IT Outsourcing Decisions Strategies Some organizations have experienced success with their outsourcing strategies, while for others there has been failure (Lacity & Hirschheim, 1993). One explanation for some of the failures is the complexity of IS/IT outsourcing decisions (Kakabadse & Kakabadse, 2000; Lacity & Willcocks, 2001). Another explanation is the lack of decision models and tools to help the managers systematically analyze outsourcing decisions (Chaundry et al., 1992). An empirical study by Lacity and Willcocks (1995) found out that in 53 out of 63 outsourcing cases, managers reported unsatisfactory outcome. Several organizations have “prematurely” terminated contracts and re-established their data centers (Lacity & Hirschheim, 1993). Two basic IS outsourcing strategies (single vendor and multiple vendor) have been adopted by organizations (Ngwenyama & Bryson, 1999), and the most common is the single vendor approach (Rochester & Douglas, 1990).

Outsourcing Contract A contract is defined as: “An agreement between two or more people or organizations, ‘parties’ to the contract, which creates rights and obligations for those parties. These obligations can be legally enforced by a party who is entitled to their benefits” (Klinger & Burnett, 1994, p. 58). A contract enables the different parties to achieve their strategic and commercial aims. It regulates the relationship of the different parties, pointing out risk and costs. It also can provide a framework for continuing to work together. A good contract is often the key to a successful IT outsourcing relationship (Lee, 1995). As Lacity and Hirschheim (1993, p. 243) explain, “the contract is the only mechanism that establishes a balance of power in the outsourcing relationship.” The contract usually defines the rights, liability, and expectations of both the outsourcing parties (i.e., the vendor and the organization), and is often the only solid mechanism for regulating the relationship between them. However, research on IT outsourcing negotiations and contract building tend to be mostly theoretical and very limited in scope (Lee, 1995). Currie (1995) points out that one of the most significant problems of any IT outsourcing deal is “defining the legal contract that underpins the client-supplier relationship” (p. 194). Contracts are an important and critical part of outsourcing decisions and can be very complicated due to the fact that there is often a transfer of assets, including people, equipment, software, and buildings from the client to the vendor. Also equally important, as Richmond and Whinston (1992) note, is that to effect the agreement, the terms of the contract must be “enforceable.” For the terms of the contract to be enforceable, they must be “verifiable.” Based on their empirical research, Diromualdo and Gurbaxani (1998) identified elements “critical” to the success of contractual agreements, including: (1) the contract type, (2) performance measurement and evaluation scheme, (3) the compensation systems, and (4) assignment of decision-making rights to the vendor.

Critical Criteria for Contract Negotiation Negotiations may be defined as: “the bargaining process between two or more parties seeking to secure predetermined objectives, usually with a clear sense of purpose” (Klinger & Burnett, 1994, p. 13). The key element to be negotiated is the service level agreement (SLA). The SLA should be a major part of any outsourcing contract and has been considered as the most important component of any outsourcing deal (Klinger & Burnett, 1994; Forst, 1999;

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Kliem, 1999). The SLA refers to the “details and/or quantifies in schedules the minimum level of service which the customer (i.e., client organization) will obtain” (Parry, 1997). In addition, the SLA contains the technical details of the proposed systems, performance levels and standards, methods of monitoring, the output (i.e., deliverables), priorities, response times, termination notice, and so on.

Vendor Selection Criteria The vendor is the IT service provider. Michell (1994) found that vendor definitions of outsourcing varied according to “the business needs and position in the market” (p. 224). Also, the range of IS services offered by IT vendors is large and growing rapidly. While discussing the demand side of the client organizations in their search for the “best” vendor, it should be borne in mind that the process of selecting and evaluating a vendor is to be viewed as “important” and treated “seriously” (Michell & Fitzgerald, 1997, p. 232). In fact, the vendor selection process requires a great deal of attention and should not be done in a rush. Hence, considerable attention should be paid to “correctly pre-qualify” those vendors who will receive a Request For Proposal (RFP) (Parry, 1997). In addition, IT outsourcing decisions should not be made only on the basis on subjective and personal preferences or on the basis of the lowest competitive bids. Parry (1997) has suggested many “critical” issues that must be addressed while negotiating with the service providers, including: • Time scale (e.g., commencement date, duration of the contract). • Contractual terms (e.g., renewal options, termination, and dispute issues). • Service Level Agreement (SLA) (e.g., elements of services which will be/not provided). • Price (e.g., total price, escalation terms, and payment terms). (p. 40) Apte (1990) added new “characteristics” of a vendor that organizations should carefully analyze: • Track Record: refers to the previous record of the vendor’s experience and achievements, and determining the quality of the completed IT projects and outsourcing services previously provided by the vendor. • Human and technology resources: refers to the main resources that the vendor should acquire (human skills and capacity). Therefore, under any IT outsourcing deals, the project management skills and specific software engineering skill of the vendor should be verified. • “Staying power of the vendor”: refers to the financial strength and the overall sustaining power of the vendor should be verified.

Request-for-Proposal (RFP) Choosing a vendor is by no means a simple process. However, creating a thorough Request for Proposal (RFP), and following up with diligent research and evaluation can go a long way toward ensuring success. The process of selecting a vendor begins with the issuance of RFP. The RFP is a document that surveys a group of vendors and yields information on their background history, IT services, experiences, expertise, and costs.

Client/Vendor Relationship The key to a successful outsourcing arrangement is the relationship between the client and the vendor organization (Kettler & Walstrom, 1993). Indeed, the outsourcing relationship Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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reflects the roles to be played by each of the parties once an outsourcing decision is made and also the way in which each one will relate to the other. Willcocks et al. (1999) believe that “the area in IT outsourcing that has received the least research attention so far is the relationship issue” (p. 290), and particularly the characteristics that determine “effective and ineffective outsourcing relationships.” Clark et al. (1998) argue that the key to a successful vendor relationship is flexibility. In fact, flexibility is needed from both parties, the client and vendor— for the client, the flexibility to change the service requirement and for the vendor, the flexibility to change the means by which service requirements are met. At the same time, research by Currie and Willcocks (1998a, b) identified four distinctive types of IT outsourcing decisions (relationships): total IT outsourcing; multiple supplier sourcing; joint venture/ strategic alliance sourcing; and finally, insourcing (retaining an in-house IT department).

Post-Implementation Evaluation Although many advantages have been reported in the literature for utilizing outsourcing as a legitimate IT management tool for securing innovation and enhancing the performance of organizations, it was revealed by Lacity and Hirschheim (1993) that assessing and evaluating outsourcing agreements was a difficult task, since the duration of these contracts is quite long (five to 10 years in some cases). Willcocks et al. (1996) also explored many difficulties and limitations in IT evaluation practices that organizations face. Very few organizations operate an “integrated evaluation system covering strategic, business, enduser and technical performance across a system’s lifetime” (Willcocks, 1994; Willcocks et al., 1996). Lacity and Hirschheim (1993) claim that the “failures of outsourcing are underrepresented.” Moreover, it could be argued that the success rate of outsourcing agreements has not been particularly high. For example, Lacity and Hirschheim (1993) reported that, of the organizations that they had studied carefully that had had outsourcing contracts in place for more than twenty years, 60% were dissatisfied and 40% were actively thinking of terminating the agreements. Similarly, Lacity and Willcocks (2000b) have analysed 116 sourcing decisions, and found 38% of “total” outsourcing decisions successful. By comparison, 77% of selective outsourcing and 76% of in-house sourcing decisions had successful outcomes. Willcocks et al. (1996) have argued for the urgent need to judge vendor performance by using a number of matrices other than technical and service delivery criteria only. Finally, Kern (1997) argues that the outcomes from outsourcing deals can be characterized by commitment and trust, satisfaction and expectation, cooperation and conflict, and power and dependency. Kern further notes that commitment and trust are “interdependent,” as greater commitment leads to greater trust and vice versa. One final note is that the continuing growth of IS/IT outsourcing does not necessarily imply that there exist satisfied clients/customers.

DISCUSSION AND ANALYSIS This section focuses on the analysis of the research data for the public sector of Kuwait.

Outsourcing of IS/IT Functions, Total or Partial The level and extent of agreement of the respondents regarding the outsourcing of IS/ IT functions were examined in this question. The respondents were asked whether they felt outsourcing could be an appropriate business decision. The results of this question are Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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significant. There were two choices provided, total outsourcing and partial (i.e., selective) outsourcing. A majority of respondents (84.7%) did not agree with total outsourcing. The majority of respondents (76.9%) agreed or strongly agreed that partial outsourcing could be an appropriate business decision and prefer a selective (partial) outsourcing strategy.

Past Experience with IT Outsourcing This question was designed to determine if the organizations had any experience in dealing with IT outsourcing in the past. 84.6% of the respondents have had some experience and had dealt with IT outsourcing previously.

Type of IT Outsourcing Agreement Preferred This question had as its aim to identify the type of outsourcing agreement that each organization under investigation has practiced previously. There were six choices provided. The three most popular types of outsourcing appear to be “selective outsourcing.” “projectbased outsourcing,” and “education and training.” As discussed previously, the concept of total outsourcing agreement is not favored in the public organizations. 84.6% of the respondents favored the selective outsourcing agreement. In addition, 76.9% of the respondents favored the project-based outsourcing agreement. The third most accepted type of outsourcing agreement is education and training, which captured 61.5%.

IT Functions Previously Outsourced (from 1991) This question was designed to find out what IT functions have been outsourced in the public organizations following the liberation of Kuwait. Almost all the IT functions were outsourced for the majority of the organizations. However, the most common tasks to be outsourced were: network and communication management, education and training, systems/software development and maintenance, and technical support functions. This is not surprising, given the relative maturity of these areas and the extent to which they can generally be performed, detached from the specifics or peculiarities of the business operations that they support.

IT Outsourcing Part of Future Organizational Strategy This question was to determine if IT outsourcing was a part of the IT future strategy in the organization. Some 76.9% of the respondents said that strategic outsourcing is a part of the IT future strategy and something that is always on the top of the agenda for any IT executive to consider as a viable option.

Preferred Type of Outsourcing Relationship The purpose of the question was to determine what type of relationship the organizations prefer. Most organizations, (84.6%) of the respondents, prefer a short-term relationship (i.e., one to three years). Very few (15.4%) prefer an over-three years type of relationship. The main reason for the short-term (i.e., trial and error approach) to IT outsourcing arrangements is the poor definition of role and service that permeates the practice of IT outsourcing. Without the guidelines or set terms of reference afforded by clear role definitions, service level agreements, and delivery expectations, there is no rule book by which to operate. Without

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a set of rules to fall back on when any conflict occurs, the result is chaos and confusion. It easier when the ad hoc contracting arrangements dominate. At least it would not be very costly compared with total outsourcing. From the vendor perspective, it was also found that due to some social, environmental, and political reasons, the major IT vendors (i.e., foreign subsidiaries) would not like to establish a long-term commitment.

Data Security as Major Outsourcing Concern This question surveyed the opinions of respondents on whether the issue of data confidentiality (e.g., security) is a matter of major concern when they are discussing the possibility of IT outsourcing arrangements. The majority of the respondents (84.6%) consider the issue as critical and significant, while (15.4%) of the respondents were neutral.

Initiation of Decision on IS/IT Outsourcing The purpose of this question was to identify who initiates the IS/IT outsourcing decisions. The IT managers mostly initiate the decision on IS/IT outsourcing; neither the top management nor the MIS executives have any major decision initiation on IT outsourcing. The lack of top management involvement and support is an issue of concern. The IT literature is replete with studies that emphasize the importance of top management support in making progressive use of IT (Grover & Goslar, 1993). Top management support can facilitate implementation of new IT strategies in various ways. It is crucial for mobilizing resources for implementing the IT strategy. It can also influence organizational members to focus attention on core rather than non-core requirements, and the non-core can be outsourced. Top management must help with the political and budget allocation issues that often arise in these types of situations. Also, in a high power distance cultures like Kuwait’s (Aladwani, 2001), power structures are respected and top officials tend to dominate decisionmaking. However, it should be noted here that most, if not all, of the top management executives in the Kuwaiti public organizations are lacking crucial awareness and adequate knowledge of IT in general. This line of argument is supported by Abdul-Gader (1999), who found a severe lack of sufficient computer knowledge among middle and top management in the public sector of Arab Gulf states.

Legal Representation This question was used to determine if the organizations have hired a legal representative to represent them as part of the outsourcing decision-making process. The striking fact is that 69.2% of the respondents have indicated that no legal representative would be hired in any outsourcing decision-making process, while 30.8% of the respondents replied they would hire one. This finding is contradictory to conventional wisdom. In the developed countries, each outsourcing arrangement is closely followed by and the contract is drafted by a combination of technical committees and legal authorities. It is a well-known fact that a proper contractual agreement is the key factor in any successful outsourcing practice. It seems a clear deficiency here in the public sector, as they do not pay enough attention to the legal aspects of the IT outsourcing deals. There is also a lack of rigorous legislation relevant to the computer-related technology environment. All the IT managers and MIS executives have expressed concern over this

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issue. Matters are made even worse when the multi-national companies come to Kuwait; they avoid the Kuwaiti local laws since they do not protect these firms on any IT-related issues.

Reasons or Motivations for IS/IT Outsourcing This question proposed to the respondents a number of reasons that could be a motivation for the organizations to outsource IT functions. The respondents were asked to rate their degree of agreement on each reason, using a five-point scale. The percentages quoted in the following discussion indicate the number of respondents who agreed or strongly agreed with the relevant statement. The mean is a weighted calculation with greater weight given to strongly agree. The reasons are ranked according to the mean. Respondents were asked to rank the reasons most often quoted in the literature for IT outsourcing. Apte (1992), for example, notes that cost reduction pressure, the difficulty of finding a suitable systems workforce, the need to access leading-edge technology, and the increased availability of outsourcing vendors in the marketplace are, among other reasons, the most substantial in motivating outsourcing in the developed economies. It was notable that “Resources are not available internally” was ranked as the most prominent factor in motivating IT outsourcing in the Kuwaiti public sector (see Table 2). In fact, all the respondents (100%) agreed that this factor is the most important. Organizations often outsource because they do not have access to the required resources within the organization, whether managerial, software, hardware, or manpower. Currie (1995) found “resources acquisition” was an important reason for investigating IT outsourcing. Also very important, “Gaining access to leading-edge technology” was a prime reason for outsourcing; it has attracted 76.9% of the respondents’ views. Seeking an external vendor, therefore, would fulfill this demand by the acquisition of the most sophisticated IT technology. One probable explanation for this result is that the IT managers were scared of being left with old IT technology. They seek the newest technology without realizing that there should be adequate IT strategic planning, especially considering the lack of sufficient computer knowledge among middle and top management in the Kuwaiti public sector. Another important dimension that captured a high level of agreement was “Faster application development.” Indeed, an overwhelming majority (84.6%) of the respondents agreed on that factor. It can be argued that IT service providers have the capability to produce computer software applications in a faster and more efficient way than in-house developers. The most telling insight was that most IT managers strongly believed that third-party IT service providers can develop and maintain application software in a much more efficient and systematic way. A possible explanation is that IT outsourcing can allow organizations to concentrate on leading-edge software, as they do not have to devote scarce resources to maintain or upgrade old software. With regard to the fourth factor, “Shortage of technical staff,” that was stimulating outsourcing, it was found that 84.6% of the respondents have come to accept this finding. Skills shortage became (and remains) a serious impediment to implementation of technical strategies, and, therefore, this factor will be a leading motivating factor. A similar difficulty was found in the U.S. public administration as “government agencies had had trouble attracting and retaining IS professionals because of below-market salaries” (Lacity & Willcocks, 1997, p. 87).

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Table 1: Ranking of Motivating Reasons for IS/IT Outsourcing in Public Sector Motivating Reasons Resources are not available internally Gain access to leading-edge technology Faster application development Shortage of technical staff Rapid pace of technological change Reduce and control of operating cost Enhancement of IT staff expertise Increased availability of service providers (vendors) Improve core business competence Enhance flexibility and responsiveness Avoiding of obsolescence risk Share risk Cash infusion

Rank 1 2 3 4 5 6 7 *8

Mean 4.46 4.23 4.15 4.08 4.00 3.85 3.77 3.69

Standard Deviation 0.52 1.01 0.69 0.64 0.82 1.34 1.01 1.18

Scale 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5

*8 10 11 12 13

3.69 3.62 3.38 2.92 2.62

0.85 0.77 0.77 1.04 1.04

1-5 1-5 1-5 1-5 1-5

* Denotes Tie for Motivating Factor The most frequently cited motivating factor in the IT outsourcing literature is cost reduction (see, for example, Kakabadse & Kakabadse, 2000; Lacity & Willcocks, 2001). It was ranked sixth in this study, although it was evident that one of the main drivers of outsourcing was cost reduction. The majority of managers (61.6%) have recognized this fact, as public sector ministries have been under tighter budget constraints, required to cut costs, increase the level of services, and provide access to new IT technologies. In a recent study in the Australian Federal Government, Seddon (2001) argues that “cost savings through outsourcing are surprisingly hard to measure and may be unattainable” (p. 7). He found out that achieving cost savings proved to be harder than the government expected because once a contract is underway, conditions change and it becomes “increasingly difficult to define, let alone measure, realized cost savings” (p. 23).

Risk Factors in IS/IT Outsourcing IT outsourcing, as a legitimate management strategy, has deficiencies and drawbacks as well as several advantages. This study has unveiled the main disadvantages to IS/IT outsourcing in the public sector of Kuwait, and Table 3 shows the rank, mean, and standard deviation of each risk factor. The purpose behind this question was to examine and elicit the opinions of respondents about which factors they consider as being risky when dealing with IS/IT outsourcing. An examination of the mean values in Table 3 confirms that the key risk factor is “Security issues/ data confidentiality,” since all risk factors follow a very similar mean pattern, with the exception of “Security issues” which loads considerably higher. In fact, this should come as no surprise, since data confidentiality always has very high priority in the region. Indeed, this finding is consistent with that of Badri (1992); he found IS/IT security was a prominent and top priority issue in the Arab Gulf region. In addition, “Ability to operate or manage new systems” ranked as the second risk factor while considering outsourcing. It is a common perception that an internal IT department

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Table 2: Ranking of Risk Factors in IS/IT Outsourcing in Public Sector Factor Security issues (data confidentiality) Ability to operate or manage new systems Loss of key IT employees Hidden cost (unspecified in the contract) Inadequate planning and management Lack of prior outsourcing experience Rapid pace of technological change Loss of in-house IT capability Loss of innovative ability Organisation resistance Loss of flexibility/control

Rank

Mean

1 *2 *2 *4 *4 *4 7 8 9 10 11

3.77 3.46 3.46 3.31 3.31 3.31 3.23 3.15 2.92 2.85 2.77

Standard Deviation 1.09 0.97 1.27 1.18 1.11 1.03 1.01 1.28 1.04 1.14 1.33

Scale 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5 1-5

* Denotes Tie for Risk Factor cannot manage the transition to new technological platforms effectively and soundly. One possible explanation is that the organizations, as discussed earlier, have no internal capability to handle or manage the new systems. “Loss of key IT employees” was also ranked second in terms of mean value and importance. Gupta and Gupta (1992) recommend that key IT employees be involved in the IS/IT outsourcing decision. They believe that it is critical for those employees to understand the rationale and motives behind the decision It was also interesting to note that “hidden cost” (i.e., unspecified in the contract) is considered to be a major drawback. A serious concern is that vendors may charge excessive fees for “additional” services—services that would have been thought to be included in the scope of the contract (Lacity & Hirschheim, 1993). The notion of working in “partnership” which is encouraged by vendors is also problematic (Currie, 1995) for two obvious reasons. First, it should be remembered that both organizations (client and vendors) are organizations with separate ‘profit and loss statements’. Second, many outsourcing ‘partnership’ deals have suffered when the vendor imposed additional fees which were not in the original contract (Currie, 1995). While the client organizations assume that the vendor is offering some additional work as a part of the contract, the vendors are quick to explain that these “extras” will be charged accordingly. In addition, in the interviews, IT managers pointed to the hidden costs or excessive charges made by IT vendors for items whose costs have not been included in the initial contract. The respondents were also pointing to “Inadequate planning and management” as the next pitfall of IT outsourcing. In a study of computer-based information systems (CBIS) in the Arabian Gulf countries by Abdul-Gader and Alangari (1994), it was found that “lack of appropriate IT planning” was by far “the most significant obstacle towards a successful CBIS diffusion.” However, perhaps among the greatest risk factors after security considerations, according to the interviewees, are the loss of control and flexibility, a view noted elsewhere (Lacity et al., 1995; McFarlan & Nolan, 1995). Particularly vulnerable is software IT outsourcing (Ang & Toh, 1998). It is also interesting to note that the public sector in Kuwait has been encountering the same difficulties others in the developed nations are experiencing: tighter budgets, lack of

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specialized skills in the government sector, downsizing of the government, and so on (Dorsi, 1998). Yet a number of other issues were also considered as risks in the interviews. A senior IT director identified some: for example, obsolescence risk, where technologies that were state-of-the-art last year are behind this year; similarly, financial risk, where the possibility of financial loss when the organization has invested in a particular IT system, but the project yields no return; and technical risk, which refers to the likelihood that it will not be possible to develop IT systems that will function technically. Another issue under discussion by the IT managers was that the longer the duration of the contract, the greater the danger that the client organization will find itself “locked in.” and, therefore, lose the flexibility it needs for adaptation to “new” or emerging IT technology during the contract life.

Vendor Selection Criteria The attitudes and opinions of the respondents regarding the criteria for the selection of vendors were examined in this question. For a series of statements setting out the generally accepted criteria for vendor selection for the public sector in Kuwait, respondents were asked to rate each statement on a five-point Likert-scale, rating the statement as they perceived it. Table 3 shows the rank, mean, and standard deviation for each criterion in the public sector. An examination of Table 3 shows clearly that almost all factors are important, since the agree/strongly agree ratings appear to have high loading. The only deviations from this pattern are the “cultural match” and “location” criteria. Two selection criteria are rated equally as the first priority in the public sector, “reputation/ preference” and “commitment to quality.” The selection of reputation can be attributed to the cultural factors, where reputation and fame play a big role in making decisions about the IT service providers. The vendors are seen as trustworthy by the potential clients since they are very famous brand names (for example, IBM, Microsoft, Digital, and so on). The clients believe that such famous brands have all the capability and infrastructure to have the job done in the best manner. Also equally important, “commitment to quality” has received the same mean weight. It simply means that respondents believe strongly that the vendors who commit themselves to highest quality work are to be rated highly within the selection procedure. Again, this could be included within the cultural umbrella. “Price” was the third most important factor in the government sector in selecting the vendors. It was found that the government sector has a formal procedure where each ministry submits its request to a central governmental committee, the “Central Tendering Committee” (CTC). This committee has the power to select the vendors for the ministries. During the interviews, a number of IT managers in the public sector were complaining that the tenders are awarded on the basis of the lowest competitive bids in most of the cases, despite the weaknesses of such a mechanism. Other factors, such as “existing relationships,” “location,” and “cultural match” are not regarded as important, as they were at the end of the list. By contrast, Klepper (1994) stressed the importance of the “cultural fit” factor or cultural match between the client and the vendor in the Western environment, where both parties can work with each other in a “comfortable relationship with shared corporate values and working practices.” The cultural factors can be described as the “unspoken factors.” A number of cultural problems were cited during the interviews. For example, the IT managers in the public sector

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Table 3: Vendor Selection Criteria in Kuwaiti Public Sector

Factor Reputation/preference Commitment to quality Price Flexible contract terms Additional value-added capability Existing relationship Scope of resources Location Cultural match

Rank *1 *1 3 *4 *4

Mean 4.54 4.54 4.46 4.38 4.38

Standard Deviation 0.52 0.66 0.52 0.65 0.77

Scale 1-5 1-5 1-5 1-5 1-5

6 7 8 9

4.08 4.00 3.77 3.46

0.49 0.82 0.73 1.05

1-5 1-5 1-5 1-5

* Denotes a Tie for Selection Criteria

fear that IS/IT outsourcing may cause some loss of their “authoritarian type of governance” as a result of sharing of management responsibilities during any outsourcing arrangements with the IT service provider. In addition, most, if not all, of the IT vendors provide expatriate IT employees who can be described as “newcomers” to a totally new environment and culture. It takes much effort and a huge amount of time to understand the “new” culture and overcome all the communication barriers between the user/client and IT service providers. Many failed IT projects in the government institutions were attributed to the “culture shock” and lack of understanding of the environmental factors. Moreover, some IS managers from the governmental institutions talked about the “political lobbying and favoritism” by some senior executives when contracting out for IT services to external IT vendors, which occurs at the expense of IS development within the organization. Many respondents complained of the poor and inefficient IT services that were provided by vendors, including major international names. They are not fully prepared to deal with the management side of IS/IT outsourcing arrangements, especially considering medium to long periods of time (five to 10 years). One explanation is that they are perhaps aware of political instability and the cultural and social constraints inhibiting them from engaging in long-period contracts. Collins and Millen (1995) found from their empirical research that the most cited obstacle to implementation was “developing working relations between in-house and outside personnel” (p. 10). A similar concern was raised by the American organizations in regard to the “cultural fit” between the “newcomers” and the organization, as to what extent the “outsiders” may be familiar with the cultural norms of the organization. The difficulties of integrating the newcomers with inhouse personnel may be attributed to the low involvement of human resources managers in the outsourcing decisions (Collins & Millen, 1995). The concern about cultural and environmental issues expressed in the interviews is at odds with the lack of concern shown in the questionnaire responses.

Post Implementation Evaluation The respondents to this question rated a number of factors that can be considered drawbacks in the post-contract evaluation of IT outsourcing projects. The respondents agree

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that all factors except one—“viruses brought by others”—are major drawbacks in the postcontract period of IT outsourcing. These comments are confirmed by the results in Table 4, which indicate that all factors (with only one exception) have similar patterns. This set of questions was used as a form of evaluation of the outcomes of IT outsourcing practices. Clients/customers typically have an expectation of IT service quality prior to awarding a contract to a specific vendor—the “desired performance,” as Domberger et al. (2000) call it. Indeed, a necessary part of contract management involves an evaluation of the realised performance of the contract. In the public sector, “late delivery” was ranked first (see Table 4). This seems to be a significant problem and has many negative implications for the organizations using outsourced services. During the interviews, there were a number of IT managers who expressed their fears about late delivery of IS/IT services. The government institutions were not applying any punishment mechanisms, perhaps because of lack of experience in dealing with such cases, but were looking to consider it in the future. Such limitations could be attributed to poor existing evaluation practices. It was found by Willcocks et al. (1996, p. 338) that “poor preexisting evaluation practices” are also present in the developed economies. Willcocks et al. (1996) also explored the importance of the attention that should be given to the relationship between “prior IT evaluation practice and the ability to assess bids from outsourcing vendors.” Equally important, there has been a constant complaint of low quality service. In particular, systems software application development was probably the most persistent and serious problem in dealing with IT outsourcing, according to one interviewee who believed that “poor communication between the two parties, a serious shortage in IT skills, limited vendor technical capability, and client-vendor cultural fit are perhaps the main factors to be blamed for such low quality service.” As previously mentioned, the public sector contracts are awarded on the lowest competitive bids, and inadequate IT capability may be found in many IT vendors to whom contracts have been awarded on this basis. In a number of interviews, many IT managers in the public sector were specifically pointing to the further sub-contracting by the IT prime vendor in order to meet the requirements of the client. This kind of situation has made matters worse and created more difficulties. In most of the cases, this will bring in a new vendor who will take time to adopt the new culture and to fully understand the IT functional requirements. Many issues of cultural differences will arise here, and in a significant number of similar cases the IT projects have failed. Table 4: Post-Implementation Evaluation of Public Sector

Factor Late deliveries Poor communication Lack of documentation Low quality service Further sub-contracting by prime IT vendor Viruses brought by others

Rank *1 *1 *1 4 5

Mean 4.31 4.31 4.31 4.23 3.92

Standard Deviation .85 .85 .85 .83 1.12

Scale 1-5 1-5 1-5 1-5 1-5

6

2.85

1.21

1-5

* Denotes Tie for Evaluation Factors

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To add to the picture, it was extremely difficult to assess the exact number of IT projects that failed and the exact cause of the failure through IT outsourcing arrangements in the Kuwaiti public sector. This difficulty was due to reasons that could be classified as economic, political, cultural, environmental, and technical. Of the 25 IT managers interviewed, 17 of them attributed the problems of failure to the absence of successful and effective cultural communication and to the differences existing between the clients and vendors (suppliers). The interviewees linked their projects’ failure mainly to poor communication (i.e., ineffective cross-cultural communication) between the vendors and the clients. Although it would appear that the non-technical issues are particularly significant causes of failure, as noted by Mumford (1983), there are technical causes of failure as well. Managers reported many different technical causes, such as wrong system specification, insufficient and inappropriate IS/IT training, lack of IT project management expertise, lack of experience in dealing with IT outsourcing issues, and how to manage successful short-term and long-term relationships, managerial and organizational problems, and so on, for their IT projects’ failure.

SUMMARY AND LIMITATIONS In this chapter, we present the results of our exploratory, empirical research into the practices and views of IS/IT outsourcing in the context of the Kuwaiti public sector. The chapter provides empirical evidence on the extent to which outsourcing of various IS/IT functions is being practiced and the views of senior IT executives concerning the advantages, disadvantages, and motives for IS/IT outsourcing. The primary contribution of this research is to begin developing a better understanding of the IS/IT outsourcing phenomenon in the context of Kuwait as an example of a developing country. A general observation based on the analysis of the sample of public sector organizations is that IS/IT outsourcing is more common than believed. In Kuwait, IS/IT outsourcing is a relatively new but fast-growing phenomenon. Until the beginning of the 1990s, Kuwaiti organizations outsourced only specific application development projects. They were reluctant to consider large-scale IT outsourcing projects due to the potential exposure of confidential data and lack of reliable IT service providers. In this survey, as many as 61.6% of the respondents had outsourced at least one IT function (excluding the purchase of packaged software). It can be said with certainty that outsourcing of IS/IT services in the public sector of Kuwait is an increasing trend. There is growing evidence within the Kuwaiti environment to suggest that organizations are not achieving the desired benefits from IT outsourcing. IT outsourcing decisions are rarely taken with a thorough and detailed strategic perspective, and many public organizations adopt a short-term approach. The results, as found in this study, have been mixed. Some of the IT outsourcing projects have been highly successful and their applications are in wide and regular use across the different governmental institutions, while others are not yet available in satisfactory form and are, moreover, in danger of running over budget and over time. In spite of all obstacles and problems, there are major opportunities and benefits connected with IS/IT outsourcing. For public administration, these benefits center around the provision of cheaper, faster, and more detailed information, in a form more suited to the needs of the users.

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The IS/IT Outsourcing Phenomenon 197

Often, it is the case that IT outsourcing is used as an emergency measure to improve or develop a new system (e.g., the Y2K problem). Unfortunately, many MIS executives in the public sector consider outsourcing as a “quick fix solution” for a temporary problem. A likely conclusion is that financial and operational factors have to be considered for the successful outcome of any IT outsourcing deals. This is also reflected in the fact that the initiative and final decision is shifting from top management to the IT management, as more selective strategies call for function-specific or project-based expertise and experience. However, as discussed previously, the involvement of executive/top management is critical to ensure the success of IT outsourcing practices. In addition, a deep understanding of the “real” motives behind IT outsourcing must be carried out, and continuous evaluation of both the “actual” benefits and the pitfalls and risks must be done. It is also clear that the existence of poor IS/IT management in the public sector must be given due weight. IT strategies were developed ad hoc, largely as a consequence of external (environmental) and internal (structural) change. There seemed to be a wide gap between strategy (the vision) and implementation (the reality). There is a strong relationship between IT outsourcing and information planning and strategy (De Looff, 1997); this concept is missing in the public organizations. An important finding was the considerable lack of understanding among top management about IT as a potential business operation tool. As has been mentioned previously, senior management are also poor in formulating IT strategies in light of organizational objectives. However, in terms of the perceived advantages of IT outsourcing, all public organizations recognized its importance, but lack of IT project management expertise and difficulty in managing the outsourcing relationship with the vendor are also considered to be an important impediment for any IT outsourcing arrangements. The perceptions concerning the risk factors have been variable. For example, loss of control over the quality of the software and the project timetable was an issue (Foxman, 1994). It was found, also, that security issues have been a major concern throughout the sector. Also, hidden cost was the second most critical pitfall of all IT outsourcing arrangements. In terms of the vendor selection criteria, it was found that reputation/preference, commitment to quality, and price were the most important factors in choosing the vendors for the public sector. From the evaluation dimension, many complaints were about the monitoring of, and communication with, the vendors, losing IT knowledge and control of IT projects, late delivery, and poor communication between the concerned parties. This indicates that the establishment of good vendor relationships may have moderated at least some of the managerial fears and caution over IT outsourcing. In addition, a successful IT application requires that users are intimately involved in the development process, and this is as important as competent project managers and technical skills. But this involvement may be easier to prescribe than to realize. One issue is identifying the end user. Within the Kuwaiti public administration and institutions, for example, there are multiple users. The wide range of users has led to the development of a highly complex set of relationships. We can predict, based on the survey analysis and interviews (including those with senior staff in the government), that IT outsourcing practices will be increasing in the foreseeable future in the public sector of Kuwait because:

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1. 2. 3. 4. 5. 6.

There is a strong move towards privatization, as the role of the private sector is booming. Sophistication in IT is also increasing, which requires skills and specialities that the public sector does not have and cannot afford to develop. Cutting cost remains one of the significant variables in contemplating new options (like outsourcing) in the Kuwaiti public sector. The rocketing demand for IT skills and workers is a worldwide phenomenon, and the IT skills shortage is a particular problem in the public sector of Kuwait. Demand by clients for more sophisticated systems requires improved technology, increasing the need for scarce skills. The move towards more utilization of IT outsourcing will gather pace to meet the pressures outlined above.

The survey analysis and interviews conducted as a part of this study have confirmed the significant need to develop best practice guidelines. As was observed throughout the chapter, current IS/IT outsourcing arrangements and experience have been variable. In developing countries such as Kuwait, the introduction of IT is very recent, and its use and effect have not been systematically assessed or evaluated. Lessons from Kuwait are applicable to other developing countries that are in the process of establishing their information infrastructure. As is the case with other research studies, this study has a number of limitations that need to de discussed. These limitations are mainly related to the broadness of the topic under investigation, time constraints, and the limited access to information. As noted earlier, the IS/IT outsourcing phenomenon is an area of research where theory is still inadequate. This has justified or pushed for the option to follow an exploratory approach in this research. This is particularly the case as the research seeks to develop a holistic and integrative understanding of outsourcing, a feature that demands broadening the scope of the study in reviewing a large body of relevant literature and collecting a large set of appropriate data. However, while the researcher has endeavored to meet such requirements by reviewing various bodies of literature and seeking different types of data from primary and secondary sources, it is not possible to claim that the empirical investigation of the study has come across all the issues related to this holistic perspective. Time frame and limited access to organizational information are the main constraints. A complete investigation of the phenomenon under consideration, especially with the interviews, could not be undertaken (Eisenhardt, 1989). Though all possible efforts were made to interview as many as people as possible in the many organizations studied, lack of time was seen as the main inhibitor. Probably with more time provided for the investigation, richer data could have been obtained. At the same time, limited access to information provided by organizations was seen as another limitation adversely affecting the study . This is a particular issue in the developing countries where access to information is considered to be a pivotal “private” issue. Significant efforts were made to obtain such data and access. Social relationships in this part of the world play an important role in achieving this goal. The analysis that was undertaken (and that also covered the private and semi-private sectors) has its limitations. Nevertheless, with so little previous research on developing

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countries in general and in Kuwait in particular, this study may attempt to provide good input and insights for IT policy makers and managers in the different sectors of Kuwait and similar developing countries.

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Richmond, W., Seidman, A. & Whinston, A. (1992). Incomplete contracting issues in information systems development outsourcing. Decision Support Systems, 8: 459-477. Riddle, J. (1998). Outsourcing the information management/information technology (IM/IT) function in Canadian governments. Newsletter of U.S. General Service Administration, Office of Governmentwide Policy, (Outsourcing Edition), 3:6-7. Robson, C. (1993). Real world research. Oxford, UK: Blackwell. Roche, E.M. & Blaine, M.J. (1996). Introduction: Information technology, development and policy. In E.M. Roche & M.J. Blaine (Eds.), Information technology: development and policy, (pp. 1-24), Aldershot, UK: Avebury. Rochester, J. & Douglas, D. (1990). Taking an objective look at outsourcing. IS Analyzer, 28: 1-16. Rockart, J. F., Earl, M. J., & Ross, J. W. (1996). Eight imperatives for the new IT organization. Sloan Management Review, 38(1):43-55. Rosenthal, D. S. & Jategaonkare, V. A. (1995). Wanted: Qualified IS professional. Information Systems Management, 12 (2): 27-31. Rothery, B. & Robertson, I. (1995). The truth about outsourcing. Hampshire, UK: Gower Publishing Limited. Samli, A. (1985). Technology Transfer: Geographic, Economic, Cultural and Technological Dimensions. London: Quorum Books, pp. 3-17. Schiffman, S. & Loftin, R. (1991). Outsourcing of information systems services. In Proceedings of the Decision Sciences Institute Conference, Atlanta, GA, pp. 922-925. Seddon, P. (2001). The Australian federal government’s clustered-agency IT outsourcing experiment. Communications of the AIS, Vol. 5, Article 13. Shanks, G., Rouse, A., & Arnott, D. (1993). A review of approaches to research and scholarship in information systems. In Proceedings of 14th Australian Conference on Information Systems, Brisbane. Sherwood, J. (1997). Managing security for outsourcing contracts. Computers & Security, 603-609. Slaughter, S. & Ang, S. (1996). Employment outsourcing in information systems. Communications of the ACM, 39(7):47-54. Straub, D. (1989, June). Validating instruments in MIS research. MIS Quarterly, 147-166 Straub, D., Keil, M., & Brenner, W. (1997). Testing the technology acceptance model across cultures: A three country study. Information & Management, 33:1-11. Venkatraman, N. (1997). Beyond outsourcing: Managing IT resources as a value centre. Sloan Management Review, 38 (33): 51-64. Venkatraman, N. & Loh, L. (1993). The shifting logic of the IS organisation: From technical portfolio to relationship portfolio. Information Strategy, 10 (2): 5-11. Walsham, G. (1995). Interpretive case studies in IS research: Nature and method. European Journal of Information Systems, 4:74-81. Weikart, L. & Carlson, P. J. (1998). Implementing computer systems in the face of fiscal scarcity. Public Productivity and Management Review, 21(3):284-292. Willcocks, L. (1994). Information Management: Evaluation of Information Systems Investments. London, UK: Chapman and Hall. Willcocks, L. (1998). Reducing the Risks of Outsourced IT, Mastering Global Business. London: Financial Times/ Pitman.

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Chapter XI

Intangible Determinants in the Introduction and Development of Information Technology: Mediterranean Evidence Ana R. del Águila University of Málaga, Spain Sebastián Bruque University of Jaén, Spain Antonio Padilla University of Málaga, Spain

ABSTRACT In a global and highly competitive context, the human-machine interaction re-emerges as an important topic of research among IS academics and practitioners. In this chapter, we propose an empirical analysis applied to the Pharmaceutical Distribution Industry in Spain, with the aim of detecting the influence that some human and managerial intangibles have on the level of effective implementation of IT in organizations. Finally, we present some theoretical and managerial implications that can be applied not only for the Spanish case, but also for the European Union and for a global environment.

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INTRODUCTION From the start of the computer age (Kaufman, 1966), it has been suggested that the development and introduction of information technology (IT) has positive effects on business (Cash & Konsynski, 1986; McFarlan, 1984; McLean & Soden, 1977; Parsons, 1983; Porter & Millar, 1985; Parsons, 1983). Information Technology could have a strategic effect, either affecting the conditions in which products are made available or manufactured, or affecting the actual market structure, the production economies, and the level of internationalization of the firm. IT could also modify each of Porter’s competitive strategies (1980), that is to say, cost leadership, differentiation, or specialization in a market niche. The revolutionary effect of information technology on economic and social structures has meant that an important number of researchers have tried to clarify the circumstances in which information technology acts as a driving force in business performance (Amit & Zott, 2001), in interorganizational relationships (Shapiro & Varian, 1999) or in organizational change (e.g., Kling & Lamb, 2000; Orlikowski & Iacono, 2000; among others). Given the relevance of the technological factor in organizations, in this chapter we consider if technology needs certain human or managerial conditions for its successful introduction and development. This question will be looked at in the first part of the chapter, and in the second part, we will go over theoretical background that links human and managerial intangibles to the introduction and development of new technology; this will allow us to formalize subsequent hypotheses. Later, we will develop some analyses that will prove the validity of the theoretical premises. Finally, we will discuss the results, taking into account the implications for IT global management.

BACKGROUND AND HYPOTHESES Over the last few years, the question of interaction between human and managerial factors and information technology has been of interest to an increasing number of researchers. In some cases, the relationships linking certain human and managerial characteristics to the overall performance of the company have been studied (Bharadwaj, 2000; Byrd & Douglas, 2001; Clemons & Row, 1991; Duhan, Levy, & Powell, 2001; Hagmann & McCahon, 1993; Hitt & Brynjolfsson, 1995; Neo, 1988; Powell & Dent-Micallef, 1997; Ross, Beath, & Goodhue, 1996; Lee, 2001;), as have the processes in which information and communication technology is involved (Lee & Menon, 2000; McAffee, 2001; Mukhopadhyay, Rajiv, & Srinivasan, 1997). In other cases, the problems of management of the staff working in the field of Information Technology and Systems have been analyzed (Cheney, Hale, & Kasper, 1990; Gupta, Guimaraes, & Raghunathan, 1992; Martinsons & Cheung, 2001; Martinsons & Westwood, 1997; Woodruff, 1980; Yellen, Winniford, & Sanford, 1995), especially when Business Process Re-engineering, BPR, outsourcing and downsizing occur and when final users have access to key activities in IT areas, for example, the substitution of a system organized in central servers by a decentralized system using personal equipment (Martinsons & Cheung, 2001). Surprisingly, little attention has been paid to the relationship existing between the presence of certain human and managerial intangibles and the actual introduction of computer and communication technology (Hassan & Ditsa, 1999). However, studies have been made on the combined positive effect of intangible resources together with IT and their

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ability to improve the company’s competitive performance. This subject has been dealt with using primarily the Resource Based View of the Firm (Barney, 1995; Penrose, 1959; Wernerfelt, 1984). Several resources that complement IT have been identified. Neo (1988) identified 10 complementary factors, including the existence of fluid communication between technical and managerial staff, coordination between the company’s strategic planning and IT, and previous experience in technological development. Kettinger, Grover, Guha, and Segars (1994) identified as being key factors the commitment made by high management in the introduction of IT and the existence of a strong learning effect related to technological development. Mata, Fuerst, and Barney (1995) underlined the ability of managers to conceive, develop, and exploit applications based on IT. Ross, Beath, and Goodhue (1996) highlighted three assets that promote technological efficiency: the first related to the human dimension, the second to the design of the technological platform, and the third that involves the relationships between technical and managerial teams in the organization. Powell and DentMicallef (1997) identified as key elements the absence of conflict, organizational flexibility, fluid internal communication, and certain managerial techniques, including the use of interdepartmental workgroups and an effort to train in new technology. Brynjolfsson, Hitt and Yang (2000) continue working along these lines, although they use different methodology based on econometric analyses across different industries. Table 1 shows an outline of the resources identified. The table clusters the resources in the three aforementioned groups. Resources based on the human factor in organization are included in the first one (Group A), while in the second one are included the resources based on company management techniques (Group B). The third one (Group C) includes the resources based on the technical design of technological infrastructure. Using the theoretical analyses, our intention is to determine if the intangibles identified in the literature as complementary to the competitive effect of IT are in fact associated with a greater and more effective presence of this technology. This proposal is structured on the following hypotheses (see Figure 1), in which we have differentiated between human nature factors and managerial factors. Hypothesis H1: A stronger presence of complementary intangibles of a human nature leads to a higher level of IT introduction and development. Hypothesis H2: A stronger presence of complementary managerial intangibles leads to a stronger level of IT introduction and development.

RESEARCH METHODOLOGY To make our analyses, we will carry out a study of one industry, the pharmaceutical distribution industry. This industry was chosen because of the advanced technological development of this type of organizations (Martínez, 1996), in which we can identify a considerable amount of computer, robotic, and telecommunication technology. Moreover, this sector was one of the pioneers in the introduction of info-communications in the organization, the computerization and automation of internal processes going back to the early 1970s (Malo, 1994). The Spanish pharmaceutical distribution industry is made up of 77 organizations (Martínez, 1996) that, in 1998, had a global turnover of more than 6,000 million Euro

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210 Águila, Bruque, & Padilla

Table 1: Identification of Complementary IT Resources and Capabilities — A Summary Complementary resource

Correspondence to

A) Resources based on the human factor in organization: Frank and receptive organizational atmosphere Fluid communication between the members of the technical and managerial staff High management leadership in the introduction and improvement of IT systems Few organizational conflicts Flexible organization; ability to adapt to change Understanding of the nature of the business on the part of technical staff

Human factors by Keen (1993) IT promoting factors by Neo (1988) Managerial skills related to IT by Mata, Fuerst & Barney (1995) Human and relational assets by Ross, Beath & Goodhue, (1996) Human resources which complement IT by Powell & DentMicallef (1997) Human and organizational aspects by Benjamin & Levinson (1993)

B)

Resources based on company management techniques (managerial resources) Organization in workgroups Training in the use of information technology Joint planning of business strategy and IT Others: leverage in relationships with suppliers, process re-engineering, explicit benchmarking policies, etc.

Complementary business resources by Powell & DentMicallef (1997) Groupwork skills by Mata, Fuerst & Barney (1995) Human assets by Ross, Beath & Goodhue, (1996) Technological assets by Ross, Beath & Goodhue, (1996) IT promoting factors by Neo (1988) Learning effect related to IT by Kettinger et al. (1994) Organizational factors by Brynjolfsson, Hitt & Yang (2000)

C)

Resources based on the technical design of technological infrastructure: Unequivocal architectural design of IT Establishment of standards for the use and management of data in the organization

Technological assets by Ross, Beath & Goodhue, (1996)

Source: The Authors (Farmaindustria, 1999). The main function of these organizations is managing the complex flow of information necessary to acquire, classify, store, and dispense more than 20,000 references of highly specialized products. The geographical area analyzed covered 10 provinces in southern and central Spain – the regions of Andalucía and Murcia, and the province of Ciudad Real. A total of 16 pharmaceutical distribution companies carry out their activities in the area, including, in the year 2000, four of the five largest organizations if we take into account the national classification (Fomento de la Producción, 2000). These companies deal with a population of 8,834,000 inhabitants, 22% of the Spanish population. In this area, the final pharmaceutical consumption in 1998 was 1,384 million Euro, which represents 22.4% of the Spanish pharmaceutical consumption, according to data published by the Ministry of Health. No significant differences can be seen in the main characteristics of this industry in Spain and in the geographical area covered in this analysis: medium size, proportion of companies with co-operative capital, number of inhabitants per store, and applicable legal framework (Martínez, 1996; Bruque, 2001). The size of the population — 16 companies — together with our efforts to limit sampling errors, supposes a certain guarantee for the study that involves intangible factors related to human behavior (Rouse & Daellenbach, 1999). We will basically use primary information sources with the intention of measuring the variables that make up the empirical framework. We consider two types of variables: human and managerial variables on the one hand, and technological variables on the other.

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Figure 1: Hypotheses

Presence of complementary intangibles of a human nature

H1

Level of IT introduction and development

Presence of complementary managerial intangibles

H2

Human and Managerial Variables To detect and measure internal intangible variables, we must use a process based on the organization as an immediate analysis element (Rouse & Daellenbach, 1999). After contacting a manager of each company by telephone, we developed a procedure for gathering information using interviews at each of their head offices. Each of these companies carried out pharmaceutical distribution in 1999 in the 10 provinces analyzed. The people interviewed in the organization came from three different levels: high management, information technology management, and workers from the area of operations. Based on the analysis of literature and preliminary research, in which managers from three organizations took part, we drew up a different questionnaire for each level. These questionnaires had a maximum of 45 items using Likert-type scales with a width of five and differential semantic scales. The questionnaires were tested with three managers and employees before massive data gathering. Technological managers and workers from the area of operations answered fewer questions, 33 and 10 respectively. The questionnaire included questions designed to identify the level at which intangible resources complementary to technology appeared, as well as the intensity with which each company used IT. The questionnaire was completed after an initial interview phase with open-ended questions, designed to serve as an introduction to the next phase and to obtain qualitative information. Information was obtained from December 1999 to October 2000 from a total of 36 interviews carried out in the 16 organizations that made up the population. On 16 occasions, interviews were held with an executive director, on 14 occasions with an information technology director, and on six occasions with shopfloor workers. We visited the organization for at least one complete working day. The average response made by the three groups to each item gave us an estimation of the intangible resources in each company. Measures were taken to avoid making systematic errors not directly concerned with the sample, and to eliminate sampling errors by taking into account the whole population. To be more specific, two fundamental control instruments were used: (1) the use of multiple informants in each

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212 Águila, Bruque, & Padilla

company, and (2) the use of instruments that measure the reliability and validity with which the different questions measure analysis concepts. As an internal reliability measure (Sekaran, 2000), we calculated at 0.48 the average correlation level (Spearman’s mean correlation coefficient) between the responses made by each participant to one particular item. The standard error between responses given by high level directors and the rest of the informants had a value of 0.62 points. These results are inferior to others obtained using similar methodology — Powell and Dent-Micallef (1997) and Lee and Miller (1999) obtained correlations of 0.54 and 0.61. Nevertheless, we consider the relationship to be acceptable if we take into account that the previous figures correspond to very numerous populations in which external factors tend to be less significant. We went on to calculate the alpha indexes (Cronbach, 1951) in order to analyze the integrity of the multidimensional scales used in the questionnaire. Although this index has no minimum value, some authors set the value at 0.35, and so ensure an acceptable value for each dimension (Van de Ven & Ferry, 1979; Powell & Dent Micallef, 1997). Other cases refer to a value of 0.70 (Hair, Anderson, Tatham, & Black, 1999). In our study, we reach an average value of 0.80, thereby more than covering our expectations related to the reliability of the scales. We have also contemplated some tests of predictive validity and content validity, shown in the high levels of negative correlation between opposite variables, such as those that link organizational conflict with internal communication (r = -0.73), confidence (r = -0.66), and cognitive capacity of technical staff (r = -0.54). We have also tried to give scales content validity based on a previous revision of specialized literature. Based on the theoretical revision described above, a total of 18 intangible resources have been analyzed (see Table 2) which, together with IT, would have a positive and complementary effect. These factors were grouped in three blocks of resources (see Table

Table 2: Resources that would complement information technology p gy 1. There is fluid communication in our organization (COMMUNIC1). 2. The staff in our company communicates with all other workers and not just those belonging to the same department or section (COMMUNIC2). 3. There is frequent consultation between computer or communications staff and directors about technical or managerial decisions (CONSULT). 4. On the whole, computer and communications staffs carry out their duties as negotiators, instructors and consultants correctly (COMPUTPERS). 5. There are few conflicts in our organization (CONFLICT1). 6. There are few conflicts between the company’s head office and territorial distribution centres/stores (CONFLICT2). 7. On the whole, our computer staff are highly creative (CREATIV). 8. Our computer and communications staff are used to continuous training (LEARN). 9. Our employees are open minded and have the utmost confidence in their colleagues (CONFIDEN). 10. Generally, our staff accepts change quickly (CHANGE). 11. Our staff has accepted the use of new IT with enthusiasm (PERMEAB). 12. New technology projects have the complete support of the company directors (SUPPORTDIR). 13. There is very little bureaucracy in the company (FLEXIB). 14. Company management has been at the front of the renewal of IT (LEADTECH). 15. We frequently call on interdepartmental teams to solve key problems (TEAMS). 16. IT training is a priority in our company (TRAIN). 17. Our company has better IT introduction and development costs than our competitors (ITCOSTS). 18. On the whole, the availability of computer and communications systems, their response time, and management costs are better than those presented by our competitors (QUALSYST).

Source: The Authors

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Table 3: Groups of Resources Analyzed p

Factor HUMAN FACTOR

Dimension Frank and fluid communication between the different members and levels of the organization (COMMUNIC)

Degree of organizational conflict (CONFLICT) Quality of technical staff (TÉCH)

MANAGERIAL FACTOR

Direction towards change and technological innovation (ORGCHANGE) Managerial support for IT (SUPPORT) Use of interdepartmental teams to resolve key problems Little bureaucracy

y

Made up ofª COMMUNIC1, COMMUNIC2, CONSULT, COMPUTERS, CONFIDEN. (C.ALPHA= 0’81) CONFLICT1 CONFLICT2 (C.ALPHA = 0’85) CREATIV, LEARN. (C.ALPHA = 0’76) CHANGE, PERMEAB (C.ALPHA = 0’65)

Overall Result (St. Dev.) 4’01 (0’49)

1’99 (0’66) 3’97 (0’59) 3’78 (0’40)

SUPPORTDIR, LEADTECH, TRAIN. (C.ALPHA = 0’86) TEAMS

4’19 (0’52)

FLEXIB

3’27 (0’89) 3’13 (0’78)

3’70 (0’81)

TECHNOLOGICAL Technological efficiency and QUALSYST, ITCOSTS SUITABILITY availability, better introduction and (C.ALPHA = 0’90) FACTOR managerial costs than those obtained by competitors (TECHNO) Average response 3’55 a In those factors made up of more than one item, we have included the Cronbach Alpha reliability analysis (C.ALPHA).

3) which refer to the different dimensions in which human, managerial, or technological suitability can arise. In our analysis, the human factor refers to four dimensions (see Table 3): (1) fluid internal communication, confidence building, encouragement in training skills, and sharing of knowledge for technical staff (COMMUNIC); (2) low level of organizational conflict (CONFLICT); (3) creative capacity and continuous training on the part of technical staff (TECNICH); and (4) direction towards change and the adoption of new technology by organization members (ORGCHANGE). The managerial factor includes the following resources (see Table 3): (1) support from directors for the introduction and development of new technology (SUPPORT); (2) regular use of interdepartmental teams to resolve key problems (TEAMS); and (3) efforts to obtain organizational flexibility (FLEXIB). Lastly (see Table 3), the suitable technology factor (TECHNO) refers to the reliability and efficiency of technological infrastructure, meaning, therefore, that high scoring indicates that managerial and introduction costs are lower than the sector average, a situation that could be due to a correct adaptation of technology to a particular culture and organizational structure (Ross, Beath, & Goodhue, 1996). Table 3 shows an outline of the resources used.

Technological Variables We have identified a total of 17 types of computer, robotic, or telecommunications technology (Scott Morton, 1991; Madnick, 1991) that are used in the pharmaceutical

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214 Águila, Bruque, & Padilla

Table 4: Information Technology in the Pharmaceutical Distribution Industry — Level of Implementation gy

p

y

p Average level of usage. (Standard Deviation)a One-way communication by modem between pharmacy offices and the company computer 4’68 systems (TI1) (0’57) Two-way communication by modem between pharmacy offices and the company computer 4’22 systems (TI2) (1’27) Electronic trading with buying centers EDI (TI3) 2’81 (1’74) Electronic trading with buying centers through Internet (TI4) 1’56 (1’71) Electronic trading with pharmaceutical laboratories -EDI- (TI5) 2’20 (1’66) Electronic trading with pharmaceutical laboratories through Internet (TI6) 1’50 (1’37) Own local network which connects the different computer systems with company offices 4’51 (TI7) (0’75) E-mail and document transfer between all company computers (TI8) 3’65 (1’66) Bar code reading system to classify articles in the dispensing department (TI9) 3’05 (1’75) Weight control systems to return erroneous orders (TI10) 0’83 (1’35) Automated dispensing systems for articles with different turnover (TI11) 2’92 (1’96) Pallet loading system and transfer of merchandise by remote control (TI12) 1’27 (1’46) Office management software specifically designed for the pharmacy for its own use (TI13) 3’14 (1’63) Own website (TI14) 2’93 (2’13) Intranet with restricted use for customers and organization members (TI15) 2’37 (2’02) Professional and technical information through the Web (TI16) 2’05 (1’79) Electronic commercial website for the sale of non-medical products to the general public 0’39 (TI17) (0’83) a 0 indicates that the company is not interested in the introduction of technology; 1 means that implementation has not yet begun and 5 indicates that its introduction in the company is highly advanced.

TYPE OF TECHNOLOGY

distribution industry. This type of technology was evaluated by including the respective items with Likert-type scales (0-5) in the questionnaire given to the members of the organizations that took part in the study and participated in the previously described interviews. In this case, value 0 indicated that the organization was not interested in introducing technology; value 1 indicated that the organization was interested in its development, but had not yet got under way; and value 5 indicated that the technology is fully implemented. Table 4 shows the average descriptive statistics for each of the technological variables. Note that in this study, the degree of introduction of IT is measured using perceptual variables arising from the opinions given by company members. In this way, we deal with the problem of efficiency in the conversion of this type of technology from a competitive point of view (Lee, 2001), given that an investment in technology does not always guarantee its usefulness. That is to say, IT that is not put into use is of no value to the company. For this reason, measuring the investment made in IT is not enough, since it would be impossible to

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see if the investment is transformed into real hardware and software functions or if these functions are in fact used at all. In short, perceptual measurements (Spanos & Lioukas, 2001) can eliminate this problem and, together with the diversity of informants, can ensure a correct measurement of the effective introduction of IT in organizations. In order to facilitate subsequent calculations, we have drawn up two index summaries of IT implementation. The first, which we will call the General Technological Index (TECHIND1), refers to the overall use of technology in the company, and it corresponds to the average value of the 17 technological items. The second indicator, called Specific Technological Index (TECHIND2), is more selective, only taking into account more advanced technology that is, therefore, less widely used. This technology corresponds to: (1) internal communication systems and endogenous networks; (2) robotic and stores management technology; and (3) Internet/Intranet technology.

ANALYSES AND RESULTS The method chosen to materialize these analyses consists of the determination of Spearman’s correlation coefficients, whose results appear in Table 5. The choice of this statistical instrument is due to the fact that it is not a parametric method, which is useful in cases in which one of the variables is not of a normal type (maximum Kolmogorov Smirnov test values: Z = 0.045, p = 0.997). Table 5 shows not only the intangible dimensions and IT, but also the General Technological Index and Specific Technological Index variables. The first represents the overall level of use of technology, and it corresponds to the average presence of IT included in the model. The second is also an average parameter, but in its calculation only the most advanced and, therefore, somewhat scarce technology variables have been included. With regard to the results, we must note that Spearman’s correlation coefficient can be affected by spurious relationships between variables, something that we will take into account when we justify certain associative relationships. In Table 5, we have underlined associations over 0.35, a threshold that has also been used in studies in this field (Miller & Shamsie, 1996; Powell & Dent-Micallef, 1997), although other authors demand an inferior value, as is the case of Lee and Miller (1999) who set a value of 0.20. If we focus on the first column, we can observe that frank and fluid interorganizational communication (COMMUNIC) is not correlated to the General Technological Index (TECHIND1). There are, therefore, no reasons to suggest that enterprises that allow a free and fluid exchange of information between their members necessarily achieve greater technological development. On the other hand, there is no significant level of relevant association between COMMUNIC variables and the Specific Technological Index that indicates the position held by the company in the introduction of advanced technology (TECHIND2). If each type of IT is individually analyzed, we can conclude that only relevant connections can be observed between the COMMUNIC variable and IT8, IT11, IT13, and, especially, with IT16 technology. These instruments correspond to: (1) e-mail and document transfer between the company’s computers (IT8); (2) automated dispensing systems for articles with different turnover (IT11); (3) pharmaceutical management programs designed exclusively for the company (IT13); and (4) professional and technical information through the Web (IT16).

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COMMUNI CONFLICT TÉCHNIC ORGCHAN SUPPORT FLEXIB TEAMS TECHNO GE C 0’09 -0’10 0’31 0’76 -0’47 0’35 0’79 0’48 0’27 0’30 -0’10 0’18 -0’51 0’78 0’72 0’54 0’20 -0’26 -0’18 0’19 -0’20 0’19 0’16 -0’12 0’14 -0’30 0’16 0’32 0’30 -0’11 0’63 0’48 -0’25 -0’26 -0’26 0’25 -0’08 -0’28 -0’29 0’04 0’24 -0’16 0’24 -0’00 0’01 0’56 0’44 0’48 0’02 -0’11 -0’21 -0’14 -0’17 -0’17 0’10 -0’13 0’21 -0’08 0’21 -0’04 0’19 -0’35 0’15 -0’14 0’12 0’29 0’18 0’04 -0’43 0’39 0’77 0’49 0’13 0’10 0’39 -0’46 0’44 0’71 0’84 0’67 -0’13 0’01 0’23 -0’30 -0’06 -0’03 0’58 0’57 -0’14 0’03 -0’14 -0’10 -0’11 -0’14 -0’26 -0’36 0’23 0’28 0’81 0’83 0’46 -0’57 0’59 0’54 -0’12 0’00 -0’18 0’06 -0’18 0’28 0’11 -0’38 -0’58 0’33 0’31 0’09 0’37 0’69 0’72 0’71 0’28 0’35 -0’04 0’13 0’79 0’87 -0’41 0’37 0’13 0’17 -0’07 0’10 0’60 -0’41 0’69 0’44 0’30 0’31 0’48 0’61 -0’69 0’44 0’52 0’46 0’05 -0’30 -0’06 -0’06 0’08 0’16 0’12 0’32 ts that denote a certain degree of association between variables appear in bold type. It is not necessary to calculate the significance index ata comes from the total population (there is no sampling error).

Table 5a: Level of IT Development and Intangible Dimensions — Non-Parametric Bivariate Correlations

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Organizational conflict (CONFLICT) covers a wide range of negative correlations with diverse technological factors. We point out that there is a considerable negative correlation with the two global indices of technological introduction — especially with the specific index TECHIND2. That is to say, the organizations in which there is less organizational consensus show a lower index of real IT use. This association could be justified by the fact that companies tend to put off new investments when there is any internal conflict. We could also say that conflict could arise as a result of the low level of technology introduced or the loss of competitive position in the market. On other occasions conflict can arise because projects to introduce new IT are being undertaken (Mirvis, Sales, & Hackett, 1991). Having analyzed the technological instruments individually, the CONFLICT variable shows considerable correlation coefficients that are always negative with the following technological instruments: (1) own local networks (IT7); (2) e-mail and document transfer between company teams (IT8); (3) automated article dispensing systems (IT11); and (4) managerial software for the pharmacy office and technology based on Internet (IT13, IT14, IT15 and IT16). It is surprising to note that these last types of technology are more sensitive to situations in which there is a low level of consensus, perhaps because this factor does not permit the implantation of instruments that have an uncertain impact on the result, are high risky, and require a very large investment in human capital. The creative conditions and training guidance put forward by technical staff (TECHNIC) show a modest level of association with the Global Technological Index (TECHIND1), while there is practically no relationship with the Specific Technological Index (TECHIND2). Four cases of correlated variables appear only if we analyze different types of technology individually. We are referring to the following instruments: (1) own local network (IT7); (2) e-mail and document transfer (IT8); (3) automated dispensing systems (IT11); (4) own website (IT14); and (5) information and added value through the Web (IT16). They are instruments in which staff can play a key role, particularly in aspects related to adaptation and subsequent development after their initial introduction. Paradoxically, a greater direction towards change (ORGCHANGE) is not associated with any global technological index. There is only a very slight negative degree of association with the use of weight control systems to return erroneous orders (IT10) and with pallet loading systems and the transfer of merchandise by remote control (IT12), facts from which we can not draw definitive conclusions given the scarce global use of these technological instruments — a maximum of three organizations use them effectively. Support for IT by directors (SUPPORT) does however show a high level of correlation with the intensive use of IT. As can be seen in the sixth column of Table 5, the efforts made by company management in finance, training, and leadership in technological change are related to superior effective use of technology. Moreover, results indicate that when there is solid company management support for IT, it is channelled homogeneously towards alternative technology, regardless of whether it is up to date or not. Proof of this is that the correlation of the variable with both the specific and general technological indicators is practically identical. If we look at the different types of technology separately, there are superior correlation coefficients for IT2 — two-way communication with customers; IT4 — electronic trading with buying centers through Internet; IT7 — local network that connects company computers and offices; IT8 — e-mail and document transfer; IT9 — bar-code reading systems; IT11 — automated dispensing systems; IT13 — managerial software for the pharmacy office; and

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IT14, IT15 and IT16 — Internet related technology. In this group of instruments, the ones that dominate are those that are related to the creation and development of both internal and external communication networks, in which support from the management could have played a significant role, given that it is in this group where the greatest advances in the last decade have been made. If we study the technology that shows no correlation with management support, we can also obtain some interesting conclusions. This way we will identify those that, in the opinion of the company management, are not sufficiently attractive. The ones that appear among them, apart from some EDI instruments, are: weight control systems to return erroneous orders, merchandise control by remote control and, lastly, the use of the Web as a Business to Consumer platform B2C or electronic commerce models. Diverse types of problems have arisen with the implantation of this group of techniques. For example, the application of B2C models in the pharmaceutical distribution industry has run into considerable resistance by members and public administration, while the conflict of interests between production companies and distribution companies has paralyzed numerous projects to implant EDI and weight control systems. The control technique using remote control has not been well received, perhaps because it is an instrument whose use is restricted to big companies that deal with large quantities of merchandise in plants covering a considerable area. One of the strongest interactions is related to the use of interdepartmental teams to resolve key problems (TEAMS). There is a strong association with both technological equipment indices (TECHIND1 and TECHIND2), and with most of the types of technology listed in Table 5. We can confirm that TEAMS is related to all the variables except those that refer to: (1) one-way communication (IT1); (2) EDI systems (IT3, IT5 and IT6); (3) weight control systems to return erroneous orders (IT10); (4) pallet-loading systems and transfer of merchandise by remote control (IT12); and (5) electronic commerce with final customers (IT17). That is to say, the relationship is weak in those types of technology that have had problems at the implantation stage or have become obsolete — as is the case of one-way communication with customers (IT1). For the rest of the variables we can observe important association levels. The initial interpretation of the results could lead us to conclude that the use of interdepartmental workgroups favors the use of technology in the company and, alternatively, that IT could favor the implantation and development of workgroups, for example, through groupware technology. Experience shows us that both effects can currently occur. In fact, process re-engineering based on IT needs frequent structured contact between employees and technical staff or between employees and managerial staff (Davenport, 1999; Davenport & Prusack, 1998; Ranganathan & Dhaliwal, 2001; Swan, Newell, Scarbrough, & Hislop, 1999). Nevertheless, we can’t underestimate the effect that can be produced by other variables that determine the use of interdepartmental teams, particularly the size factor. The size of the company is related to the use of interdepartmental teams —correlation coefficient = 0.67; it’s of no surprise then that the size of the company is what, to some extent, determines interdepartmental collaboration in the shape of teams and, at the same time, the degree of implantation and development of information technology. This hypothesis is confirmed by the fact that the partial correlation TEAMS-TECHIND1 controlled by size offers a result of 0.63, slightly lower than the original coefficient (0.78). Lastly, from the analysis of the last column of Table 5, we can see that there is an important association relationship between the TECHNOLOG variable and the degree of

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implantation and development of the IT most used in the pharmaceutical distribution industry. This variable refers to the degree of suitability of the IT for the particular culture and structure of the company, measured in terms of the advantages gained by its use compared to the measurement obtained by competitors. As the use of IT in the company increases, especially the most advanced types (as is the case of IT8, IT11, IT13, IT15), this variable shows better results. This result could imply the existence of stronger complementary effects with other resources in the companies with a high technological endowment, which could indicate the presence of more consolidated experience and/or learning effects in this type of organizations.

IMPLICATIONS AND CONCLUSIONS While the joint study of human and managerial behavior has been a subject of discussion for researchers in Business Management and Information Systems, there is little empirical background that analyzes the connection between complementary IT intangibles and the effective presence of such technology. This chapter aims to throw new light on this problem, focusing mainly on the relationships that arise in the nucleus of organizations. To this end, we have employed a mixed procedure for the obtainment of information, in which we have used quantitative and qualitative data from the analysis of the organizations as an immediate study factor. From the analyses made, we have obtained diverse results that may be of use in subsequent research and for system and information technology management in organizations. From a research point of view, results confirm that the companies that use more technology have lower levels of organizational conflict and their technical staff demonstrates more cognitive, creative and relational qualities. Moreover, in this type of organization, the managerial team has put itself at the forefront, promoting technological change and carrying out initiatives for the implantation and development of new computer and telecommunication instruments (Ross, Beath, & Goodhue, 1996). Results also indicate that the companies that most frequently use interdepartmental teams to resolve key problems are, in fact, those that have achieved a higher degree of both general and specific technological development, which could indicate that the companies most advanced from a managerial point of view could also be the most advanced from a technological point of view. We shouldn’t, however, overlook the function that other modulating factors can exert, such as organizational size which can be an indicator of the economical resources that the organization counts on or has counted on to finance new technology investment. Organizational conflict has, in our study, shown to be an obstacle in the effective development of IT, especially in the development of the most innovative, and therefore risky type of technology, in which more decisive support is required from all sections of the company. Many studies have looked at the effects produced by conflict on different business aspects (Burgeois, 1980), however, we haven’t found any precedent that explains the relationship between the actual degree of IT implantation and levels of conflict. We have not discovered any relationship between variables that, according to other studies, are the origin of certain IT effects that favor organizational results. We are referring to the existence of frank and fluid communication, direction towards change by the members of the organization, organizational flexibility, and a low level of bureaucracy. Consequently,

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we can’t confirm that these intangibles promote the effective use of technology, thereby leaving open the lines of research that aim to identify the circumstances under which these factors can influence the level of use of technological equipment. This chapter also presents certain innovation in methodology that signifies a step forward in the development of this line of research. We have used a measurement of technological development that is not based on quantitative investment data, but that includes the opinions of different members of the organization on the actual development of the implantation of technological options; in this way, we have eliminated one of the habitual problems in this area of research (Lee 2001; Mahmood & Mann, 2000).

Managerial Implications Regarding managerial implications, the study has revealed the importance of the socalled “soft” factors in the success of companies’ technology implantation processes. We have demonstrated that intangibles not only have an influence on the economic and competitive success of IT, but also determine the degree of implantation of such technology. This finding implies that technological investment does not always coincide with the actual technological development but, rather, is the result of a more involved process in which both financial availability and the quality of management and technical staff have an influence. The people in the company who are in charge of IT implantation projects should plan the adaptation of human and managerial capital to the new technological environment before technological development is carried out. In the area of global IT management, this study can be a first approach to addressing the differences in IT introduction determinants between the Spanish case and that of other countries. We have found that the level of directive support, the absence of conflict, the use of interdepartmental teams, and the quality of the IT staff are related to a higher level of IT development. This conclusion does support the predictable relationships between human or managerial resources and IT, and it seems to agree with the international patterns of IT adoption (Hassan & Ditsa, 1999). Nevertheless, there exist in this study other results that do not confirm some likely relationships. We are referring particularly to the null connection between organizational flexibility and IT introduction and development, and between frank and fluid communication and IT introduction and development. We are not able to explain the ultimate reasons that are behind the former result, although they can be a good starting point for new studies. This future research could describe also the differences in this issue between the Spanish case and other cultures different from the Mediterranean culture. Another interesting question for future research would be the introduction of labor conditions as determinants of IT introduction and development. A better understanding is necessary of the relations that exist between labor stability, worker involvement, and effective IT utilization in Latin countries.

Limitations and Future Research This study is not exempt from limitations, which we will go on to mention. Firstly, it is a non-longitudinal analysis in which we have not taken into account the dynamic nature of technological implantation processes. Nevertheless, we believe that the long-term effects do not represent a serious threat to the research, since the magnitudes involved are of a very stable nature. Thus, the types of technology we have analyzed are a result of strategic

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decisions whose implantation usually requires a long period of time, while it is also known that organizational intangibles are difficult to mold in the short term. The second limitation refers to the set of structural or organizational variables that can have an influence on the use of technology in organizations. Although we have taken some of them into account (such as size) in certain analyses, others that explain the effective use of technology may exist. Among these variables, we can indicate competitive rivalry, which favors technological contagion, or the cooperative or non-cooperative character, a factor that may be revealing in a sector where there is a predominance of cooperative firms. Lastly, we have mainly used correlation analyses, which could limit our ability to explain the results. Nevertheless, this technique has shown to be the most suitable, given that it uses variables that, in many cases, do not fulfill the criteria required in parametric analyses. Both this and previous limitations could constitute a basis for further research that aims to clarify interactions between technology and organizational social infrastructure. The aforementioned limitations can be the basis for new research work. Specifically, the analysis of differences in different industries or countries with different level of IT utilization is a line of research that remains open.

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Sekaran, U. (2000). Research methods for business: A skill business approach. New York: John Wiley & Sons. Shapiro, C. & Varian, H.R. (1999). Information rules: A strategic guide to the network economy. Boston, MA: Harvard Business School Press. Spanos, Y.E. & Lioukas, S. (2001). An examination into the causal logic of rent generation contrasting Porter’s competitive strategy framework and the resource-based perspective. Strategic Management Journal, (22): 907-934. Swan, J., Newell, S., Scarbrough, H., & Hislop, D. (1999). Knowledge management and innovation networks and networking. Journal of Knowledge Management, 3(4): 262275. Van de Ven, A. & Ferry, D. (1979). Measuring and assessing organizations. New York: Wiley. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5: 171-180. Woodruff, C.K. (1980). Data processing people – Are they really different? Information and Management, 3(3): 133-139. Yellen, R.E., Winniford, M., & Sanford, C.C. (1995). Extraversion and introversion in electronically supported meetings. Information and Management, 28(1): 63-74.

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Chapter XII

An Overview of the Diffusion of Advanced Techniques Davood Askarany University of South Australia, Australia

ABSTRACT This chapter addresses a variety of factors influencing the diffusion of advanced techniques in organizations with particular reference to advanced cost and management accounting practices. Having identified almost all of influencing factors addressed in the literature, this chapter also develops a model for the diffusion of advanced techniques and clarifies the most significant group of influencing factors responsible for such a diffusion process from users’ point of view. Addressing diffusion of advanced techniques in the global environment as a practical issue requires global evidence, which is almost impossible to provide in a single study. However, to address such an issue and to explore significant factors influencing the diffusion of advanced techniques in the organizations, this chapter relies on the results of recent surveys on the diffusion of advanced cost and management accounting techniques as an example. The diffusion model developed in this chapter is more likely to be applicable to any diffusion study, investigating the diffusion process of either accounting or nonaccounting advanced techniques in the global environment, with minor modification.

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INTRODUCTION The nature of global competition faced by organizations in different aspects of their operation (such as manufacturing process, operation technologies, and information systems) has changed significantly during the last two decades (Shields, 1997). This has placed a greater emphasis on developing and implementing advanced techniques including manufacturing practices and management accounting innovations (Perera, Harrison, & Poole, 1997). Consistent with systems approach theory, a common theme for the diffusion of advanced techniques in the global environment is that changes in an organization’s operating environment, such as changes in communication, information systems, competition, and manufacturing processes, may lead to the consideration of the subsequent changes necessary in other parts of the organization, such as administration systems, cost and management accounting techniques, etc. (Kellett & Sweeting, 1991). Given the extent of recent advanced technological changes, the growing level of global competition has intensified the challenge for managers to consider more effective ways of achieving competitive advantage and improved organizational performance for the survival of their organization. Any attempt to facilitate diffusion of advanced techniques in any sector of organizations, such as communication, information systems, manufacturing processes, and administration systems, can be considered a means of achieving such a competitive advantage in the global environment. With regard to the current ever-changing nature of global environment, it is not an exaggeration to suggest that an organization’s ability to function successfully and survive in the current intensified global competition depends highly on the availability of accurate, detailed and up-to-date information that can be used by decision makers in the organization. This highlights the important role of advanced cost and management accounting techniques in providing such information and emphasizes the significant contribution of any effort to facilitate the implementation of new management accounting techniques in practice. However, a progressing major concern is that why the adoption rate of these new advanced cost and management accounting techniques is low and which factor(s) influence diffusion of such techniques. Addressing the diffusion issue of advanced techniques, several studies suggested some elements as hindering or facilitating factors in diffusion and investigated their roles in diffusion processes of management accounting and accounting information systems (e.g., Askarany & Smith, 2000a; Bjornenak, 1997; Booth & Giacobbe, 1998; Chenhall & LangfieldSmith, 1998; Damanpour, 1988; Damanpour & Gopalakrishnan, 1998; Gosselin, 1997; Hartnett & Lowry, 1994). Most of these studies reported some kind of relationship between diffusion of cost and management accounting innovation and some influencing factors such as organizational, structural, or cultural factors. However, no significant influencing factor explaining the majority of variance in diffusion processes has been reported. Shedding light on the diffusion of advanced techniques, this chapter explains the diffusion process, identifies influencing factors addressed in the diffusion literature and develops a diffusion model by classifying all influencing factors into three main categories: characteristics of innovations, characteristics of innovators, and other influencing factors that can not be categorized therein (notably factors related to social system, environment, and so on). Reporting on the results of recent surveys on diffusion of advanced techniques, this chapter also tries to identify the significant group of influencing factors that might be responsible for the great majority of the variance in the diffusion process of advanced techniques.

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DIFFUSION OF ADVANCED TECHNIQUES We may refer to an “advanced technique” as an innovation in this chapter. Rogers (1995) defines an innovation as “an idea, practice, or object that is perceived as new by an individual or other unit of adoption.” Further, he suggests that if the individual has no perceived knowledge about an idea and sees it as new, it is an innovation. Likewise, Damanpour and Gopalakrishnan (1998) define innovation as “the adoption of an idea or behavior new to the organization.” The common criterion in any definition of innovation is newness. According to Rogers (1995), newness in an innovation might be expressed not only in terms of new knowledge, but also in terms of first persuasion or a decision to adopt. The second element that needs some clarification is diffusion. Wolfe (1994) explains diffusion of an innovation as a way the new ideas are accepted (or not) by those to whom they are relevant. Rogers (1995) extends this definition to consider diffusion as a process by which an innovation is communicated through certain channels over time among the members of a social system. A clear understanding of the complexities of the innovation process and of alternative diffusion methods is central to any innovation diffusion study. Depending on the source of innovation, the diffusion of the innovation might follow different stages, so that alternative approaches and perspectives might be applicable under different innovation diffusion processes. According to Damanpour and Gopalakrishnan (1998), diffusion of innovations in organizations takes place in two ways: generation and adoption. In the case of generation, innovations are generated by organizations for their own use or for export to other organizations. In the case of adoption, innovations are imported into the organization for adoption. The process of adoption of an innovation is a very long and difficult process, especially because many innovations need a long period of time to become widely adopted (Rogers, 1995). Rogers further emphasizes that increasing the diffusion rate of an innovation is a common problem for potential adopters of that innovation. The process of innovation diffusion is different when the innovation is generated by the organization; in that case, the main stages include: the stages of idea generation, project definition, design, development, and marketing and commercialization (Cooper & Kleinchmidt, 1990). In the case of adoption of an innovation which has been developed outside the organization the stages will be: awareness of innovation, attitude formation, evaluation, decision to adopt, trial implementation, and sustained implementation (Zaltman et al., 1973). Furthermore, Wolfe (1994, p. 411) added that when innovation is generated in the organization the stages “tend to be mulled and overlapping,” while in the case of adoption the stages “tend to occur in the expected order.” Depending on whether the innovation is generated within or adopted by an organization, two alternative general models can be formulated to describe the diffusion process. An important contribution is made by Rogers (1995), who suggests there are six phases for the diffusion of an innovation, including: recognition of a problem or need, basic and applied research, development, commercialization, diffusion and adoption, and consequences. However, he emphasizes that these six phases are somewhat arbitrary, as they might not always occur in order and some of them might be skipped in the case of particular innovations. An innovation development consists of all decisions and activities and their impacts that occur during these phases. These suggested stages for innovation development are largely consistent with the generation approach of Damanpour and Gopalakrishnan (1998). Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Zahra and Covin (1994) adopt a different perspective suggesting that there are three major sources of innovation: imitative, acquisitive, and incubative. They define these three major sources of innovation as follows. Imitative sources are those innovations that are first introduced by other firms and then copied by organizations. Acquisitive sources also include those innovations that have been developed by other firms but are acquired through purchase, licensing, acquisition, or merger. Finally, incubative sources are those innovations that have been developed in organizations for their own use. This categorization is compatible with the generation and adoption approach of Damanpour and Gopalakrishnan (1998) in that “imitative innovations” and “acquisitive innovations” can be classified as “adopted” innovations and “incubative innovations” as “generated” ones. From a process point of view, Rogers (1995) divides the innovation process in organizations into two sub-processes: an initiation process and an implementation process. The initiation process itself includes two stages: agenda-setting and matching. These two stages involve all activities, such as information gathering, conceptualizing, and planning for the adoption of an innovation. The implementation process includes three stages: redefining/restructuring, clarifying, and routinizing. These three stages contain all of the actions, events, and decisions involved in implementing an innovation. This classification is again consistent with the adoption method explained by Damanpour and Gopalakrishnan (1998). Given the compatibility of the alternative diffusion methods suggested by Zahra and Covin (1994), Rogers (1995), and Damanpour and Gopalakrishnan (1998), innovation diffusion will be categorized into two separate groups of generation approach and diffusion approach, illustrated as Figures 1 and 2, respectively. Given this classification, the diffusion of an advanced technique as an innovation (either as a generation or an adoption approach) in an organization is influenced by a variety of factors. The next section identifies a variety of influencing factors addressed in the literature.

INFLUENCING FACTORS An advanced technique as an innovation may not simply emerge and develop fullblown. Some groups of people, some places, or some organizations have immediate access to the advanced techniques, some access them later, and some never do. As Schumpeter (1934) remarked, an innovation and its diffusion are part of a larger pattern of social, political, and economic activity. So, it is expected that the diffusion of an innovation is influenced by a variety of factors. It is also noticeable that the characteristics of an innovation and factors influencing its diffusion change over time, rather than remaining static. The following are among the most important influencing factors that have been addressed in the literature.

The Overall Benefits and Uncertainty It has been suggested that the rate of diffusion of an innovation is a function of the degree of uncertainty associated with the innovation, the amount of investment required to adopt the innovation, and the extent of economic advantage of the innovation (Askarany & Smith, 2000b; Mansfield, 1961; Moore, 1991; Rogers, 1995). Askarany and Smith (2000b) found that the degree of uncertainty associated with the innovation was one of the hindering factors in the diffusion of cost and management accounting techniques in Australia.

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An Overview of the Diffusion of Advanced Techniques 229

Figure 2: Adoption of Innovation Figure 1: Generation of Innovation

Awareness of innovation

of

Idea generation Attitude formation

Project definition Evaluation

Design Decision to adopt

Development Trial implementation

Marketing and commercialisation Sustained implementation

Supply and Demand Rationale Some researchers, like Brown (1981), Griliches (1957), and Robinson and Lakhani (1975), proposed a supply and demand rationale as an explanation of diffusion rate. Brown (1981) explained that the market and infrastructure factors exist in the supply side of diffusion and shape its course. He further emphasized that the central element of supply framework is the diffusion agency. Clark (1984) believes that the demand approach in the diffusion process is more diverse and more extensive. It focuses on the adoption of innovations that are available to everyone. He thinks the supply approach is dealing with cases where the innovation is not universally available due to the fact the supply is under control. In other words, when every potential adopter of an innovation does not have equal access to an innovation, supply factor might be considered as an important influencing factor in the diffusion process of that innovation.

Learning Perspective and Information Transfer Explanation The learning perspective has been introduced as another factor affecting the diffusion rate of an innovation by Casetti and Semple (1969) and Sahal (1981). Expanding the scope of influencing factors, Hagerstrand (1967) and Bernhard and MacKenzie (1972) proposed an information transfer explanation as being a factor that influences the diffusion rate. Some other researchers like Blackman (1972) and Sharif and Kabir (1976) considered the diffusion of an innovation as a replacement process and claimed that the dynamics of this replacement process account for the diffusion rate during the diffusion period. However, in some cases, Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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an innovation might be an addition to an employed technique or an ongoing capacity and not a complete replacement.

Continuity of the Innovation Progress Surprisingly, continuity of the innovation progress as an influential factor is suggested to have a negative impact on the diffusion of an innovation. Brown (1981, p. 158) confirms that “deliberation and slowness in the adoption decision is encouraged by the continuity of the innovation process which results in many improvements during the course of diffusion.” Rosenberg (1976) also confirms that there is often a delay in adoption because of the expectation of future improvements in the innovation. He emphasizes that the expectation of continued improvement might lead to a slowing down in the rate of diffusion of an innovation. In line with the above suggestion, it can be argued that the slow initial rate of the diffusion is likely to reflect the time needed to improve the innovation and supply it to the potential users. In this case, delays and caution can be justified because such improvements are anticipated, in much the same way as computer purchases might be postponed in the expectation of imminent product improvements. It can be concluded that one of the factors influencing the diffusion rate of an innovation is the outcome of a rational decision-making process that expects that tomorrow’s innovation is likely to have more advantages than today’s. However, the idea of negative impact of continuity of improvement on the diffusion of an innovation is not consistent (Brown, 1981; Innes & Mitchell, 1995; Rosenberg, 1976). Brown (1981) argues that an innovation is generally crude and inefficient when it is first developed, and it might offer few or no advantages over the existing ones. He concludes that the continued improvements during the diffusion process are very important and might lead to an increase in the adopters or the rate of diffusion. So, continuity in the improvement of an innovation might have both a negative and a positive influence on the diffusion of that innovation. It seems very difficult to measure such influences and give a preference to the negative or positive influence of such impact. For example, the continuity of the improvement of a technique might encourage those who are not usually seen as adopters of that special technique to implement it. Meanwhile, such improvement might lead potential adopters to postpone implementation of the technique based upon having the knowledge that tomorrow’s technique is likely to be considerably better than today’s.

Resistance to Change Attitudes of employees and their resistance to change has been introduced as another factor that might result in lags in the use of innovation or a slow rate of diffusion (Askarany & Smith, 2000b; Brown, 1981; Foster & Gupta, 1990; McGowan & Klammer, 1997; Shields, 1995). The development of technical skills and learning perspective among users has been suggested to reduce employees’ resistance and to facilitate the diffusion of an innovation (Bernhard & MacKenzie, 1972; Blackman, 1972; Brown, 1981); Casetti & Semple, 1969; Hagerstrand, 1967; Sahal, 1981; Sharif & Kabir, 1976).

Profitability Another factor influencing the diffusion of an innovation is said to be profitability. Linstone and Sahal (1976) propose that the more profitable the innovation and the smaller

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An Overview of the Diffusion of Advanced Techniques 231

the required investment, the greater the rate of the diffusion. Profitability of an innovation can be interpreted as cost saving, relative advantage, or cost effectiveness of that innovation. Considering conventional investment theory, Brown (1981) suggests that the rate of diffusion for an additional innovation is expected to be greater than the rate of diffusion for a replacement innovation, because in the case of replacement, industry already has a sunk cost to be amortized or written off. Therefore, it can be concluded that since new firms do not have such a sunk cost, they are more likely to implement a new technique (innovation) than the older firms, which have already implemented an old technique.

Technological Factors According to Brown (1981), technological factors are other elements that influence diffusion of innovations. He explains these technological factors as the continuity of inventive activity, the development of technical skills among users, the development of skills in machine making, complementarities and improvements in old technologies.

Competition Competition is said to be another factor influencing the diffusion rate of an innovation (Anderson, 1995; Booth & Giacobbe, 1998; Innes & Mitchell, 1995; Krumwiede, 1998; Libby & Watherhouse, 1996; Parker, 1974). Parker (1974) states that some of the early adoption takes place because certain firms wish to gain an advantage over their competitors. Then, later adopters follow the adoption either to remain competitive or to take advantage of the innovation.

Characteristics of Innovation Diffusion of an innovation is also expected to be affected by its characteristics (Anderson, 1995; Chenhall & Langfield-Smith, 1998; Innes & Mitchell, 1995; Moore, 1991; Rogers, 1995; Shields, 1995; Tornatzky & Klein, 1982). Rogers (1995) has identified five aspects of an innovation that affect its rate of diffusion in a population to whom the innovation is relevant. He argues that the high rate of diffusion of an innovation would be a feature of its “relative advantage” over the current practice, its “compatibility” with other aspects of the culture, its “complexity” to understand, and its “trialability” to experience its “observability” to see the results. Among these five aspects, relative advantage is the most difficult concept to describe. From the profitability point of view, relative advantage may refer to the profitability of an innovation over various periods of time, such as short-term and long-term profitability, which may not be the same. Relative advantage may also refer to a necessary investment for an innovation’s capital cost in comparison with the required investment of other techniques or its effects on the current cost of the system. Relative advantage of an innovation can also extend to aspects other than profitability, such as time reduction, being easily accessible, being comfortably useable, achieving popularity for an organization, attracting the population’s trust, and many more. So, it seems difficult to measure all these relative advantages of an innovation in all aspects over various periods of time (Rogers, 1995). Flexibility or capability of modification of an innovation, which can be classified as another characteristic of innovations, is said to be an important factor influencing the diffusion of an innovation. Kimberly and de Pouvoirville (1993) suggest the capability of

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modification of an innovation increases the chance of its widespread diffusion among potential adopters. They further emphasize that the different context and society will create different needs, so the more an innovation can be adapted to meet these changed circumstances, the higher the diffusion rate will be. It can be argued that type of innovation is another element that might influence its diffusion speed. An innovation can be cost effective in a special society or for firms or organizations for a certain size. It can be concluded that although the size of the firms could influence the diffusion rate of an innovation, the type of innovation might also play an important role in that influence.

Awareness It can be argued that awareness of an innovation as a possible solution for a problem or as an available technique for progress can also impact on the diffusion rate of an innovation (Askarany & Smith, 2000b; Booth & Giacobbe, 1998; Brown, 1981). Sometimes, potential adopters of an innovation might be aware of existence of an innovation but have little or no knowledge about its capabilities and characteristics to see it as a possible solution for their needs. By providing such information, it seems likely that the number of adopters would increase, and innovation would gain a higher rate of diffusion. This argument is compatible with the supply approach of analysis of diffusion provided by Brown (1981), who suggested that the more widespread a marketing strategy, the faster build-up of sales and the faster diffusion rate.

Structural, Process, and Cultural Components Clark (1984) classified diffusion studies into three categories: structural, process, and cultural components of innovation diffusion. He suggested that under process components, the slow adoption of an innovation might be the result of a few factors. Examples of these factors follow: weak communication system, low relative advantages of the innovation, high price of an innovation, high expectations of immediate improvement to the system. Under structural and cultural components of innovation diffusion, innovation is defined in its broadest context as both a product of and an influence on a particular structure or culture of a society. So, the diffusion rates of an innovation under these approaches are not limited to the characteristics of innovations. It can be influenced by conditions of a society or economy. Groups and individuals in a society bring forward innovations and create conditions to increase the diffusion rate of the innovations. In return, innovations alter socialeconomic conditions. Regarding the influence of structural and cultural factors on the diffusion of innovation, Goss (1979) and Gotsch (1972) argued that there should be less emphasis on the role of the innovation itself and more on the spatially variable character of the society into which the innovation is introduced. They believed that the diffusion rate of an innovation depends less on the nature of innovation than on the type of society before the innovation. On the contrary, Rogers (1995) believes that the diffusion rate of an innovation depends more on its characteristics than any other influencing factors.

Aggressiveness and Innovativeness Aggressiveness and innovativeness of management are mentioned as other influencing factors in the diffusion process. Brown (1981) suggested that aggressiveness and

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An Overview of the Diffusion of Advanced Techniques 233

innovativeness of the management of an organization or firm influences the diffusion rate of an innovation. He further introduced the availability or provided level of information about the innovation as another factor influencing the diffusion rate of an innovation. This information generally creates an awareness of the innovation, reduces uncertainty, and helps firms to appraise the costs and relative advantages of the innovation.

Availability and Distribution of Resources Several studies have indicated that availability of an innovation influences its diffusion (Askarany & Smith, 2000b; Innes & Mitchell, 1995; Shields, 1995). Askarany and Smith (2000b) found that from organizations’ point of view, availability of innovation received the first priority among the hindering factors responsible for the diffusion of innovation. However, Clark (1984) places more emphasis on the effect of the cost of an innovation (required funding or investment for an innovation) on its diffusion rate. He explains that only a few innovations out of all that are devised and tested will get the public or private funding needed to take the idea to market. Further, he concludes that innovations that are developed to the market and gain a high rate of spread are those that are interesting to people who control the disbursement of public and private funds. Confirming the above suggestion, Yapa (1976) indicated that the availability and distribution of resources or individual access to the means of production and public goods affect the diffusion of an innovation. Examples of resources in this context would include capital, information, public goods or services such as electricity, transportation, water system, network communication, and education.

Communication Communication is another influencing factor that could facilitate or hinder the diffusion of an innovation (Anderson, 1995; Brown, 1981; Kimberly & de Pouvoirville, 1993; Rogers, 1995; Shields, 1995). Emphasizing the role of communication in the diffusion of innovation, Kimberly and Associates (1993) explain that strong communication informs more potential adopters of the existence of an innovation immediately, and this could increase the overall rate of the adoption of the innovation.

Social Development of Society The level of development of a society might influence the diffusion rate of an innovation (Anderson, 1995; Chenhall & Langfield-Smith, 1998; Gosselin, 1997; Innes & Mitchell, 1995; Malmi, 1997; Tornatzky & Klein, 1982). Brown (1981) argued that the speed with which an innovation diffuses through a population depends upon its correspondence with the development level, personal characteristics, and social norms associated with that population. He further emphasized that, as personal characteristics and social norms relevant to innovation diffusion are themselves related to the level of development, the critical factor influencing the speed of an innovation might be the level of development of the society. So, in general, it might be suggested that the higher the level of development in the society, the faster the diffusions spread.

Size of Organizations Size is one of the most controversial influencing factors in the literature. Some authors argue that large firms have several advantages over smaller firms in the adoption of an Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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innovation (Brown, 1981), while some other authors argue that diffusion of innovation in small firms is quicker than large firms because of the advantages of small size (Acs & Auderetsch, 1988; Julien, 1993; Lefebvre & Lefebvre, 1993; Riding, 1993). However, the controversy on the impact of size on the diffusion of innovation has been increased by the mixed results of the studies investigating the relationship between size as an influential factor and the diffusion of innovation (Aiken, Bacharach, & French, 1980; Blau & McKinley, 1979; Booth & Giacobbe, 1998; Damanpour, 1992; Dewar & Dutton, 1986; Hage, 1980; Krumwiede, 1998; Libby & Watherhouse, 1996). This demands further research on the relationship between size and diffusion of innovation.

CATEGORIZATION OF INFLUENCING FACTORS IN DIFFUSION PROCESS A variety of potential factors that might influence the diffusion of an innovation were addressed in the previous section. Although ignoring the impact of any of those influencing factors on the diffusion of an innovation process in any diffusion research might reduce the ability of such research to offer an appropriate model or suggestion for the current or future status of the innovation, it is more appropriate to categorize the influencing factors into smaller groups, based on some common characteristics or criteria. Wolfe (1994) defined the diffusion of an innovation as a process in which an innovation spreads through a population of potential adopters. Two main elements in this definition are: innovation and adopters. It is possible to categorize most of the influencing factors (explained in the previous section) into these two categories. However, there are some factors, such as the level of development of society, communication channels and change agents, that are more related to the social system than these two categories. Given that, this chapter categorizes all influential factors into three main categories: factors related to the characteristics of innovation (attributes of innovations), factors related to the adopters of innovation (attributes of adopters), and factors related to the social system (attributes of social systems) in which diffusion is taking place. It would be appropriate, therefore, to classify the influencing factors based on their probable relationship with these three main elements: innovations, the adopters of innovations, and the social system.

Attributes of Innovations Under this classification, the primary influential factors in a diffusion process that might be categorized under factors related to the innovation are characteristics of innovations such as: relative advantage, compatibility, complexity, trialability, and observability. Other influencing factors that could be closer to the innovation category than other categories might include factors such as: • the degree of uncertainty associated with the innovation, • the amount of investment required to adopt the innovation, • the extent of economic advantage of an innovation, • continuity of the innovation progress, • overall benefit of an innovation (including economic and non-economic advantage of an innovation), Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

An Overview of the Diffusion of Advanced Techniques 235

• • • •

reinventing and dynamics aspects of innovations, profitability, flexibility and capability of modification of an innovation, availability of an innovation and the information about it for potential adopters, and the type of innovation.

Categorizing all of the attributes of an innovation as a separate group influencing its diffusion is consistent with Rogers’ classification of influencing factors. However, research on the impact of attributes of innovations on their diffusion has received scant attention in the literature. According to Rogers (1995), an accumulated body of literature on diffusion indicates that much effort has been devoted to studying the innovativeness and determining the characteristics of adopters, while relatively little effort has been spent in investigating how the “properties” of innovations affect their rate of adoption. He further emphasizes that this second type of research can be of great value in predicting potential adopters’ reactions to an innovation. He confirms that diffusion researchers in the past have oversimplified innovation units by considering them as equivalent units from the viewpoint of their analyses. Although, characteristics of innovations include more than five factors, Rogers (1995) suggests that the main attributes of innovations can be described by five characteristics. In order to see whether these five factors can explain the main attributes of innovations, it seems useful to understand how they are defined by Rogers. Relative advantage, as one attribute of innovations, is explained as the degree to which an innovation seems to be better than the idea that is replacing. Subdimensions of relative advantages include social prestige, savings in time and efforts, low initial cost, the degree of economic profitability, increase in comfort or decrease in discomfort, and the immediacy of the output. However, it is difficult to demonstrate all potential relative advantages of an innovation as some of them might not be apparent prior to implementation. Compatibility, as another characteristic of innovations, refers to the degree of consistency of an innovation with the needs, expected values, and the norms of potential adopters and their social systems. Complexity can be explained as the degree to which an innovation seems difficult to understand and use. Trialability as the fourth characteristic of an innovation is defined as the degree to which an innovation can be tried on a limited basis before full implementation. The fifth characteristic of an innovation, observability, refers to the degree to which the results of an innovation can be observed by potential adopters. Among these five characteristics of innovation, four (complexity being the exception) are expected to be positively related with the diffusion of an innovation. The diffusion of an innovation in a particular population is usually measured by its rate of implementation. According to Brown (1981), diffusion rates are often measured in terms of the proportion of firms using a new technique (an innovation) as compared with those using the old ones. Rogers (1995) reviewed and classified most of the diffusion studies prior to 1995, and concluded that the diffusion rate of innovations can be explained by these five characteristics of innovations. He defined the rate of adoption as the relative speed of adoption of an innovation by its potential adopters. He explained the rate of adoption as a numerical indicator that is generally measured by the number of adopters who adopt an innovation during a specified period of time. However, he emphasized that scant diffusion research has been undertaken to identify the influence of characteristics of innovations on their diffusion This

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supports further research into the impact of influencing factors (especially attributes of innovations) on the diffusion of innovation. It might be concluded from this section that attributes of innovations as a group of influencing factors are claimed to be of significant importance to the diffusion of innovations. It was also suggested that relatively little effort has been spent in investigating how the properties of innovations affect their rate of adoption (Rogers, 1995). So, consistent with Rogers, this chapter emphasizes that research on the influence of “characteristics of innovations” can be of great value in predicting potential adopters’ reactions to an innovation and providing appropriate suggestions for a better diffusion.

Characteristics of Adopters With regard to the influencing factors that have been addressed in the literature and research studies undertaken on diffusion of innovation in organizations, a number of influencing factors can be related to the adopters of innovations. Factors related to the adopters of innovations in a broad definition could be included in three main characteristics of organizations: organizational strategy, organizational structure and organizational culture. In other words, most of characteristics of organizations can be explained by these three categories. These categories might include factors such as: the size of organizations, the aggressiveness and innovativeness of their managers, level of information about the innovation, the learning perspective of organizations, information transfer explanation by organizations, resistance to change, technical skills of the users of an innovation in organizations, competition, and awareness of an innovation as a possible solution or as an available technique for progress. Although Rogers (1995) did not categorize time as an influencing factor on the diffusion of innovation process, he introduced it as one of the main elements in the diffusion process. He suggested that the time dimension relates to three aspects of a diffusion process: the innovation decision process, the innovativeness of adopters, and the rate of adoption in a system. Rogers emphasized that time factors are central to the five main steps in an innovation decision process: knowledge, persuasion, decision, implementation, and confirmation. He classified innovation-decisions into three main types: optional, collective, and authority innovation decisions and believes that time is involved in each type. He further explained that time also plays a major role in innovativeness, which is the degree to which an individual or other unit of adoption is relatively earlier in adopting new ideas than the other members of the system. He classified the members of a social system on the basis of innovativeness, into five categories: innovators, early adopters, early majority, late majority, and laggards. The diffusion of an innovation is the third particular aspect of a diffusion process in which time is involved. Classifying all characteristics of adopters as an influencing group is consistent with the second category of Rogers’ classification (the type of innovation-decision). However, factors associated with this category are far more than the type of innovation-decision factor. For example, most of the recent research on the impact of contextual factors on the diffusion of innovation confirms the significance of the influence of adopters’ attributes (such as organizational structure, organizational culture, and organizational strategy) on the diffusion of innovations (Bjornenak, 1997; Damanpour & Gopalakrishnan, 1998; Gosselin, 1997; Hoffman, 1999; Smith, 1998).

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An Overview of the Diffusion of Advanced Techniques 237

Besides attributes of both innovations and innovators, Rogers’ classification of influencing factors includes three more categories. In general, he categorizes all factors influencing the diffusion of innovations into five categories: (1) attributes of innovations; (2) the type of innovation decision; (3) the nature of communication channels; (4) the nature of social system; and (5) the extent of change agents’ promotion efforts. However, he claims that 49% to 87% of the variance in adoption rate of innovations can be explained by their attributes (relative advantage, compatibility, complexity, trialability, and observability). He believes that the rest of the variance (13% to 51%) in diffusion of an innovation can be explained by the other four influencing factors. In other words, despite paying less attention to the adopters’ attributes, Rogers does pay full attention to the role of innovation attributes in a diffusion process. He not only gives the most weight to the influencing factors associated with the innovation category, but also argues that the attributes of innovations are the most important factors among these influencing factors that are able to explain the diffusion of innovations. Furthermore, Rogers (1995) suggests that the considerable amount of research already devoted to the characteristics of “adopters” has failed to explain the diffusion process. He suggests that future research should focus more on the innovation decision process and the nature of the innovations itself.

Attributes of Social Social Systems The level of development of a society, communication channels in a society, social concerns, change agents, opinion leaders, and social norms might be classified into the social system factors. It might be possible to categorize all of the influential factors that could not be either related to the innovation category or the adopters category under a social system category. This section explains the rest of the four main elements of the diffusion process (the innovation, communication channels, time, and the social system) as presented by Rogers (1995) that have not been classified under the two other groups of influencing factors. Rogers (1995) classified communication channels, change agents, and social system as separate influential factors in a diffusion process approach. He explained communication channel as the process of providing and sharing information by and between participants for better understanding. In other words, a communication channel is the means through which new ideas are exchanged between one individual and another. Rogers emphasizes that diffusion is a particular type of communication that deals with the exchange of new ideas. He further explained that a diffusion process involves four factors: an innovation, an adopter who already knew about the innovation or adopted it, another potential adopter who has not yet experienced the innovation, and a communication channel that is able to connect these two adopters. Another main element of the diffusion process in Rogers’ definition of diffusion is social system. Rogers defined a social system as a group of individuals that are interconnected and work together to achieve a common goal. He further explained the main factors in a social system that might influence the diffusion process of innovations. These factors include: social structure, system norms, opinion leaders, and change agents. However, classifying one influencing factor into one category does not deny the existence of any relationship between that factor and the other influencing factors in other categories. It should be remembered that an innovation and its diffusion are part of a larger interrelated pattern of social, political, and economic activity. So, some influencing factors might be influenced by or influence other factors.

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Given these classifications, the general diffusion model in Figure 3 can be developed. Adopting the general diffusion model, Table 1 illustrates the majority of influencing factors addressed in the literature as hindering or facilitating factors and classifies them into three categories as shown on the following page. Taking into account different type of innovations and different stages of the diffusion process, the previous basic model can be refined and developed to the general model. Under this model, in general, what makes one diffusion research different from another diffusion research is the type or group of influencing factors and the kind or the number of advanced techniques. So, depending on the type of influencing factors and kind of advanced techniques, a more detailed model can be adopted from the above general model and modified to tailor a specific diffusion research. Also, depending on the research approaches (generation of innovation or adoption of innovation), the central focus of the research might change.

AN EXAMPLE OF DIFFUSION OF ADVANCED TECHNIQUES Recent studies on the diffusion of advanced management accounting techniques may be considered as an example to fit the general diffusion model developed in this chapter. An overview of these studies is also expected to provide further evidence to identify the most significant influencing factors responsible for the diffusion of advanced techniques in organizations. Intensified global competition, along with advanced manufacturing practices such as flexible manufacturing systems (FMS), computer-integrated manufacturing (CIM), and computer-aided design (CAD), has led many authors and practitioners to criticize the efficiency and capability of traditional cost and management accounting practices in coping with the requirements of the current, ever-changing nature of global environment (Beng, Schoch, & Yap, 1994; Bork & Morgan, 1993; Gosselin, 1997; Hartnett & Lowry, 1994; Horngern, Foster, & Datar, 1994 Lefebvre & Lefebvre, 1993; Spicer, 1992). In reply to these criticisms, several advanced management accounting techniques, such as activity-based costing; target costing, and the balanced scorecard, have been introduced during this period. However, a progressing major concern regarding the diffusion of these innovations has led many authors to establish different investigations into the diffusion of recently developed cost and management accounting practices (e.g., Anderson & Young, 1999; Askarany &

Figure 3: Basic Diffusion Model

INOVATORS INNOVATORS

SOCIAL SYSTEM

INOVATIONS INNOVATIONS

DIFFUSION OF ADVANCED TECHNIQUES

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An Overview of the Diffusion of Advanced Techniques 239

Smith, 2000a; Bjornenak, 1997; Booth & Giacobbe, 1998; Chenhall & Langfield-Smith, 1998; Cooper & Kaplan, 1991; Damanpour, 1987, 1988; Damanpour & Gopalakrishnan, 1998; Gosselin, 1997; Hartnett & Lowry, 1994; Malmi, 1999). Yet, the results of these studies have at best been equivocal and, at worst, contradictory, with no study able to provide plausible reason(s) to justify the majority of variance in diffusion process of cost and management accounting techniques. Most of the studies on diffusion of cost and management accounting innovations reported some kind of relationship between diffusion of cost and management accounting innovation and some influencing factors such as organizational, structural, and cultural factors. However, no significant influencing factor explaining the majority of variance in diffusion processes has been reported. For example, Booth and Giacobbe (1998) found no support for the impact of a variety of influencing factors classified as “demand and supply factors” on the diffusion of accounting innovations. In their study, Booth and Giacobbe (1998) investigated the impact of cost structure, product diversity, and competition (termed “demand factors”) and rhetoric, firm size and information source (termed “supply factors”) on the diffusion process of activity-based costing (ABC). Although they found one demand factor—the current level of overhead—and one supply factor—firm size—to influence the initiation of interest in ABC adoption, no demand or supply factors were found to influence the adoption of ABC as a practice. Some studies on diffusion of cost and management accounting innovation either produced a mixed result or suggested further investigation regarding the impact of those limited number of influencing factors that have been under investigation. For example, studies investigating the relationship between size as an influential factor and innovation have produced mixed results. Hage (1980) found a negative relationship between size and innovation, while Aiken, Bacharach and French (1980) reported a non-significant relationship. In contrast, Blau and McKinley (1979), Dewar and Dutton (1986), and Damanpour (1992) found a positive relationship between size and innovation. Interestingly enough, Gosselin (1997) reported a different relationship between size and innovation process during the different stages of innovation of activity management (AM) (which includes activity analysis, activity cost analysis, and ABC). In other words, he found a significant indirect association between size and innovation at the state of adoption of AM in general, while at the stage of adoption of ABC, he found no significant relationship between size and innovation. According to these results, the impact of organizational size on the diffusion of accounting innovation seems to be ambiguous. The identification of a number of hindering and facilitating factors in the diffusion process of cost and management accounting innovations was expected to speed up diffusion of recently developed cost and management accounting innovations. However, despite introducing several recently developed cost and management accounting techniques during the last two decades, the application rates of these techniques are still lower than those of traditional techniques (Askarany & Smith, 2000c; Chenhall & Langfield-Smith, 1998). For example, it has been estimated that only around 10% of organizations that adopt some kinds of cost and management accounting innovations such as activity-based costing continue to use it (Anderson & Young, 1999; Ness & Cucuzza, 1995). This is while many users of traditional cost and management accounting techniques are not satisfied with their current techniques (Beng et al., 1994; Bork & Morgan, 1993; Gosselin, 1997; Hartnett & Lowry, 1994; Horngern, Foster, & Datar, 1994; Lefebvre & Lefebvre, 1993; Spicer, 1992). This situation

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Table 1: Influencing Factors in Diffusion Process Characteristics of innovations Availability of innovation Average years needed Compatibility with existing systems

Complexity to understand Cost saving

Reference(s) Askarany and Smith, 2000b; Innes and Mitchell, 1995; Shields, 1995 Foster and Swenson, 1997 Anderson, 1995; Chenhall and Langfield-Smith, 1998; Innes and Mitchell, 1995; Moore, 1991; Rogers, 1995; Shields, 1995; Tornatzky and Klein, 1982 Anderson, 1995; Innes and Mitchell, 1995; Rogers, 1995; Tornatzky and Klein, 1982 Brown, 1981; Rogers, 1995; Sahal, 1981

Divisibility

Davis, 1986; Moore, 1991; Rogers, 1995; Tornatzky and Klein, 1982

Image Maintaining cost of innovation Observability to see the results

Moore, 1991 Askarany and Smith, 2000b Rogers, 1995; Tornatzky and Klein, 1982

Perceived ease of use Perceived usefulness

Davis, 1986; Moore, 1991; Rogers, 1995 Davis, 1986; Booth and Giacobbe, 1998; Moore, 1991; Rogers, 1995 McGowan and Klammer, 1997 Anderson, 1995; Brown, 1981; Innes and Mitchell, 1995; Krumwiede, 1998; Sahal, 1981; Rogers, 1995; Tornatzky and Klein, 1982

Quality of innovation information Relative advantage over the current practice Relevance to manager’s decisions

Anderson, 1995; Chenhall and Langfield-Smith, 1998; Foster and Swenson, 1997; Innes and Mitchell, 1995; Krumwiede, 1998; Moore, 1991; Rogers, 1995; Shields, 1995

Sales revenue The amount of investment required to adopt the innovation

Innes and Mitchell, 1995

The continuity of the innovation progress The degree of uncertainty associated with the innovation The extent of economic advantage and profitability of the innovation The overall benefits of an innovation Trialability to experience

Anderson, 1995; Askarany and Smith, 2000b; Innes and Mitchell, 1995; Mansfield, 1961; Moore, 1991; Shields, 1995 Brown, 1981; Innes and Mitchell, 1995; Rosenberg, 1976 Askarany and Smith, 2000b; Mansfield, 1961; Moore, 1991 Brown, 1981; Mansfield, 1961; Moore, 1991; Rogers, 1995; Sahal, 1981; Tornatzky and Klein, 1982 Askarany and Smith, 2000b; Mansfield, 1961; Moore, 1991; Rogers, 1995 Rogers, 1995; Tornatzky and Klein, 1982

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An Overview of the Diffusion of Advanced Techniques 241

Table 1: Influencing Factors in Diffusion Process (continued) Characteristics of innovators Adequacy of current system/ technique Aggressiveness and innovativeness Attitudes of employers, worker responsibility/risk Attitudes of manager Availability and distribution of resources Awareness Behavioral factors Capacity to learn Centralized decision making Commitment Competition

Cross-functional support Decentralisation Degree of decision usefulness of cost information Degree of lean production system implementation Degree of potential for cost distortions Degree of total quality management implementation Development of technical skills among users Dissatisfaction with current system Education Formalized job procedure Functional specialization

Reference(s) Askarany and Smith, 2000b Brown, 1981 Anderson, 1995; Foster and Gupta, 1990 Askarany and Smith, 2000b; Foster and Gupta, 1990 Clark, 1984; Yapa, 1976 Askarany and Smith, 2000b; Booth and Giacobbe, 1998; Brown, 1981 McGowan and Klammer, 1997; Shields, 1995 Libby and Watherhouse, 1996 Anderson, 1995; Gosselin, 1997 Anderson, 1995; Foster and Swenson, 1997 Anderson, 1995; Booth and Giacobbe, 1998; Innes and Mitchell, 1995; Krumwiede, 1998; Libby and Watherhouse, 1996; Parker, 1974 Foster and Swenson, 1997; Innes and Mitchell, 1995; Shields, 1995 Libby and Watherhouse, 1996 Krumwiede, 1998 Krumwiede, 1998 Krumwiede, 1998 Krumwiede, 1998 Brown, 1981 Booth and Giacobbe, 1998 Askarany and Smith, 2000b; Argyris and Kaplan, 1994 Anderson, 1995; Gosselin, 1997; Krumwiede, 1998 Anderson, 1995; Shields, 1995

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Table 1: Influencing Factors in Diffusion Process (continued) Heterogeneity of demands

Implementation involvement Information system quality Institutional pressures for innovation Internal communication Job uncertainty Level of clarity and consensus for innovation objectives Linkage to evaluation Linkage to quality initiative Need for change

Anderson, 1995; Chenhall and Langfield-Smith, 1998; Gosselin, 1997; Innes and Mitchell, 1995; Krumwiede, 1998 Anderson, 1995; Foster and Swenson, 1997; McGowan and Klammer, 1997 Anderson and Young, 1999; Krumwiede, 1998 Booth and Giacobbe, 1998 Anderson, 1995 Anderson, 1995; Foster and Swenson, 1997; Krumwiede, 1998; Shields, 1995 Krumwiede, 1998

Shields, 1995 Shields, 1995 Anderson and Young, 1999; Askarany and Smith, 2000b; Booth and Giacobbe, 1998 Number of purposes identified for Krumwiede, 1998 innovation Organizational culture Clark, 1984; Foster and Swenson, 1997; Goss, 1979; Gotsch, 1972; Hoffman, 1999; Rogers, 1995; Smith, 1998 Organizational factors Anderson, 1995; Chenhall and Langfield-Smith, 1998; Clark, 1984; Foster and Swenson, 1997; Goss, 1979; Gotsch, 1972; Malmi, 1997; Rogers, 1995; Shields, 1995 Organizational strategy Bjornenak, 1997 Organizational structure Clark, 1984; Damanpour and Gopalakrishnan, 1998; Goss, 1979; Gotsch, 1972; Rogers, 1995; Smith, 1998 Presence of an internal champion Booth and Giacobbe, 1998 Pressure from consultants for Booth and Giacobbe, 1998 innovation Product diversity Booth and Giacobbe, 1998 Production process knowledge Anderson, 1995 Prospector strategy Gosselin, 1997 Resistance to change Anderson, 1995; Askarany and Smith, 2000b; Brown, 1981; Foster and Swenson, 1997; Innes and Mitchell, 1995; Malmi, 1997 Resource adequacy Anderson and Young, 1999; Booth and Giacobbe, 1998; Foster and Swenson, 1997; Innes and Mitchell, 1995; Shields, 1995

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An Overview of the Diffusion of Advanced Techniques 243

Table 1: Influencing Factors in Diffusion Process (continued)

Reward

Situational variables Size Sponsorship Technical Factors

The information transfer explanation The learning perspective

Time Top management support Training Training investments

Users preparation Vertical organizational structure Voluntariness of use Other Influencing Factors Compensation Competition

Diffusion agency Environmental uncertainty

External communication factors External financial or cost

Anderson, 1995; Anderson and Young, 1999; Foster and Swenson, 1997; McGowan and Klammer, 1997; Shields, 1995 McGowan and Klammer, 1997 Booth and Giacobbe, 1998; Brown, 1981; Krumwiede, 1998; Libby and Watherhouse, 1996 Argyris and Kaplan, 1994 Anderson, 1995; Brown, 1981; Chenhall and Langfield-Smith, 1998; Malmi, 1997; McGowan and Klammer, 1997 Bernhard and MacKenzie, 1972; Blackman, 1972, Casetti and Semple, 1969; Hagerstrand, 1967; Sahal, 1981; Sharif and Kabir, 1976 Bernhard and MacKenzie, 1972; Blackman, 1972, Casetti and Semple, 1969; Hagerstrand, 1967; Sahal, 1981; Sharif and Kabir, 1976 Krumwiede, 1998 Innes and Mitchell, 1995; Krumwiede, 1998; Shields, 1995 Krumwiede, 1998; McGowan and Klammer, 1997; Shields, 1995 Anderson, 1995; Foster and Swenson, 1997; Krumwiede, 1998; McGowan and Klammer, 1997; Shields, 1995 McGowan and Klammer, 1997 Gosselin, 1997 Moore, 1991 References Foster and Swenson, 1997; Anderson, 1995; Innes and Mitchell, 1995; Krumwiede, 1998; Libby and Watherhouse, 1996; Parker, 1974 Brown, 1981; Clark, 1984; Griliches, 1957; Robinson and Lakhani, 1975 Anderson, 1995; Chenhall and Langfield-Smith, 1998; Gosselin, 1997; Innes and Mitchell, 1995; Malmi, 1997 Anderson, 1995; Brown, 1981; Kimberly and Associates, 1993; Rogers, 1995; Shields, 1995 Askarany and Smith, 2000b

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Table 1: Influencing Factors in Diffusion Process (Continued) Heterogeneity of demands

Institutional pressures for innovation Market and infrastructure factors Number of primary applications Pressure from consultants for innovation Reward

Social approval Social development of society Social norms associated with that population Sponsorship Union support

Anderson, 1995; Chenhall and Langfield-Smith, 1998; Gosselin, 1997; Innes and Mitchell, 1995; Krumwiede, 1998 Booth and Giacobbe, 1998 Brown, 1981; Clark, 1984; Griliches, 1957; Robinson and Lakhani, 1975 Foster and Swenson, 1997 Booth and Giacobbe, 1998 Anderson, 1995; Anderson and Young, 1999; Foster and Swenson, 1997; McGowan and Klammer, 1997; Shields, 1995 Tornatzky and Klein , 1982 Brown, 1981 Brown, 1981 Argyris and Kaplan, 1994 Anderson and Young, 1999

raises the question: What are the main influencing factors from users’ points of view that might be able to explain the great majority of the variance in the diffusion process and adoption rate of cost and management accounting innovations? To answer this question, Askarany and Smith (2000a) report on an exploratory study in Australia that identifies characteristics of innovations as the most significant influencing factors from the users’ points of view. Consistent with this view, Rogers (1995), reviewing the literature on characteristics of innovations, believes that characteristics of innovations have the most significant impact on their diffusions and the main attributes of innovations can be described by five characteristics.

FURTHER RESEARCH While the literature review presented in this chapter suggests the significant role of characteristics of innovations on their diffusion, little research on relatively few characteristics of innovations has been reported in the literature (Anderson, 1995); Chenhall & Langfield-Smith, 1998; Foster & Swenson, 1997; Innes & Mitchell, 1995); Krumwiede, 1998; Shields, 1995). Furthermore, these studies neither included all characteristics of innovations nor produced similar results. For example, Anderson (1995), in a case study at General Motors,

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An Overview of the Diffusion of Advanced Techniques 245

Figure 4: A General Model of Influencing Factors and Diffusion Process Level of development of society and social environment Communication channels change agents Opinion leaders Social norms Social concerns

Relative advantage Easy of use Trialability Observability Compatibility

Attributes of innovation

Organizational Structure Organizational Culture Organizational Strategy

Other Factors (Social system)

Attributes of adopters

Diffusion of innovation

Generation of innovation

Idea generation

Adoption of innovation Design

Awareness of innovation

Decision to adopt

Development Attitude formation

Project definition

Marketing and commercialization

Evaluation

Trial implementation

Sustained implement ation

investigated the influence of a small number of characteristics of an innovation (ABC) on its implementation. These factors, which Anderson classified as technical factors, include: complexity for users, compatibility with existing system, relative improvement over existing system, and relevance to manager decisions. Anderson found a positive relationship between three characteristics of ABC including: (a) compatibility with existing system; (b) relative improvement over current system; and (c) relevance to manager decisions and

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implementation. While Shields (1995) found no relationship between implementation of ABC and its compatibility with the existing system. Also, Krumwiede (1998) found no relationship between implementation of ABC and its relative improvement over the current system.

Implications to Adopters The literature review on the impact of influencing factors on diffusion of advanced techniques presented in this chapter reveals that there are a variety of factors influencing the diffusion processes of innovations. However, recent surveys on diffusion of advanced techniques (e.g., Askarany & Smith, 2000a; Chenhall & Lanfield-Smith, 1998) suggest that factors related to the characteristics of innovations are among the first influencing factors that determine whether there is a need for change, innovation, and diffusion of innovation. If an advanced technique is expected to replace an applied technique, the first question in considering such a technique for implementation by an organization would be: What are the advantages or disadvantages of the new technique compared to the existing technique? Indeed, before thinking about other influencing factors such as organizational culture, strategy, structures and so on, potential adopters of an advanced technique would ask about the benefits that such a advanced technique is going to offer, and which might not be achievable with their current techniques. Even when no replacement is involved, the characteristics of that advanced technique are still among the first factors that potential adopters would consider in adopting such an innovation. The findings indicate that characteristics of innovations are important factors to organizations, managers, consultants, and other decision-makers in making decision regarding implementing such innovations.

CONCLUSION This chapter identified the majority of influencing factors addressed in the literature as hindering or facilitating factors in diffusion processes of advanced techniques and developed a diffusion model for further studies. The theoretical model developed in this chapter classified all influencing factors responsible for diffusion of advanced techniques into three main categories: characteristics of innovations, characteristics of innovators, and other influencing factors that can not be categorized therein (notably factors related to social system, environment, etc.). Reviewing the results of the recent surveys on diffusion of advanced techniques (e.g., Askarany & Smith, 2000a; Chenhall & Langfield-Smith, 1998), this chapter suggests that characteristics of innovations (as a group) are the most important influencing factors in the diffusion process of advanced techniques. Further research is recommended to examine the extent of the impact of the characteristics of innovations on diffusion of advanced techniques.

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Cooper, R. & Kaplan, R. S. (1991). Profit priorities from activity based costing. Harvard Business Review, 69(3): 130-135. Cooper, R.G. & Kleinchmidt, E.J. (1990). New product success factors: A comparison of “kills” versus success and failures. R & D Management, 20: 47-63. Damanpour, F. (1987). The adoption of technological, administrative and ancillary innovations: Impact of organizational factors. Journal of Management, 13(3): 555-590. Damanpour, F. (1988). Innovation type, radicalness, and the adoption process. Communication Research, 15: 545-67. Damanpour, F. (1992). Organizational size and innovation. Organizational Studies, 13(3): 375-402. Damanpour, F. & Gopalakrishnan, S. (1998). Theories of organizational structure and innovation adoption: The role of environmental change. Journal of Engineering and Technology Management, JET-M, 15: 1-24. Davis, F. D. (1986). A technology acceptance model for empirically testing new end-user information system: Theory and results. Unpublished Doctoral Dissertation, Massachusetts Institute of Technology, Boston, MA. Dewar, R. D. & Dutton, J. E. (1986). The adoption of radical and incremental innovations: an empirical analysis. Management Science, 32(11): 1422-1433. Foster, G. & Gupta, M. (1990). Activity accounting: An electronics industry implementation. Measures for Manufacturing Excellence, 225-268. Foster, G. & Swenson, D. W. (1997). Measuring the success of activity-based cost management and its determinants. Journal of Management Accounting Research, 9: 107-139. Goss, K. F. (1979). Consequences of diffusion innovation. Transactions of the Institute of British Geographers, 59: 77-79. Gosselin, M. (1997). The effect of strategy and organizational structure on the adoption and implementation of activity based costing. Accounting, Organizations and Society, 22(2): 105-122. Gotsch, C. H. (1972). Technical change and the distribution of income in rural area. American Journal of Agricultural Economics, 54: 326-341. Griliches, Z. (1957). Hybrid corn: An exploration in the economics of technological change. Economics, 25: 501-522. Hage, J. (1980). Theories of organizations. New York: Wiley. Hagerstrand, T. (1967). Innovation diffusion as a spatial process. Chicago, IL: University of Chicago Press. Hartnett, N. & Lowry, J. (1994). From ABC to ABM. Australian Accountant (AAA), 28-33, Melbourne, March. Hoffman, R. C. (1999). Organizational innovation: Management influence across culture. Multinational Business Review, 7(1): 37-49. Horngern, T., Foster, C.G., & Datar, S.M. (1994). Cost accounting: A managerial emphasis. Englewood Cliffs, NJ: Prentice-Hall. Innes, J. & Mitchell, F. (1995, June). A survey of activity-based costing in the U.K.’s largest companies. Management Accounting Research, 137-153. Julien, P. A. (1993). Small business as a research subject: Some reflections on knowledge of small business and effects on economic theory. Small Business Economics, 5(2): 157166. Kellett, B. M. & Sweeting, R. C. (1991). Accounting innovation and adoptions: A U.K. case. Management Accounting Research, 2(1): 15-26.

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Kimberly, J. R. & de Pouvoirville, G. (eds.)(1993). The migration of managerial innovation. San Francisco, CA: Jossey-Bass Publishers. Krumwiede, K. R. (1998). The implementation stages of activity-based costing and the impact of contextual and organizational factors. Journal of Management Accounting Research, 10: 239-277. Lefebvre, E. & Lefebvre, L. (1993). Competitive position and innovative efforts in SMEs. Small Business Economics, 5(4): 297-306. Libby, T. & Watherhouse, J. H. (1996). Predicting change in management accounting systems. Journal of Management Accounting Research, 8: 137-150. Linstone, H. A. & Sahal, D. (1976). Technological substitution: Forecasting techniques and applications. New York: Elsevier. Malmi, T. (1997). Towards explaining activity-based costing failure: Accounting and control in a decentralized organization. Management Accounting Research, 8: 459-480. Malmi, T. (1999). Activity-based costing diffusion across organizations: An exploratory empirical analysis of Finnish firms. Accounting, Organizations and Society, 24: 649672. Mansfield, E. (1961). Technical change and the rate of imitation. Econometrica, 29: 741-766. McGowan, A. & Klammer, T. (1997). Satisfaction with activity-based cost management implementation. Journal of Management Accounting Research, 9: 217-237. Moore, G. C. & Benbasat, I. (1991). Development of an instrument to measure the perceptions of adopting an information technology innovation. Information Systems Research, 2(3): 193-222. Ness, J. A. & Cucuzza, T. G. (1995). Tapping the full potential of ABC. Harvard Business Review, 95: 130-138. Parker, J. E. S. (1974). The economics of innovation. London: Longman. Perera, S., Harrison, G., & Poole, M. (1997). Customer-focused manufacturing strategy and the use of operations-based non-financial performance measures: A research note. Accounting, Organizations and Society, 22(6): 557-572. Riding, A. (1993). Banking on technology: The environment for bank borrowing by small Canadian technology-based firms. Journal of Small Business and Entrepreneurship (JSBE), 10(2): 13-24. Robinson, B. & Lakhani, C. (1975, June). Dynamic price models for new product planning. Management Science, 21: 1113-1122. Rogers, E. M. (1995). Diffusion of innovation. New York: The Free Press. Rosenberg, N. (1976). On technological expectations. Economic Journal, 86: 523-35. Sahal, D. (1981). Patterns of technological innovation. Reading MA: Addison’s Weekly. Schumpeter, J. A. (1934). –The Theory of Economic Development. Cambridge: Harvard University Press. Sharif, M. N. & Kabir, C. (1976). A generalized model for forecasting technological substitution. Technological Forecasting and Social Change, 21: 301-323. Shields, M. D. (1995). An empirical analysis of firms’ implementation experiences with activity-based costing. Journal of Management Accounting Research, 7: 148-166. Shields, M. D. (1997). Research in management accounting by North Americans in the 1990s. Journal of Management Accounting Research, 9: 3-61. Smith, M. (1998). Culture and organizational change. Management Accounting (London), 76(7): 60-62. Spicer, B. H. (1992). The resurgence of cost and management accounting: A review of some

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recent development in practice, theories and case research methods. Management Accounting Research, 3(1): 1-38. Tornatzky, L. G. & Klein, K. (1982, February). Innovation characteristics and innovation adoption-implementation: A meta-analysis of findings. IEEE Transactions on Engineering Management, EM-29, 28-45. Wolfe, R. A. (1994). Organisational Innovation: Review, Critique and Suggested Research Directions. Journal of Management Studies, 31(3): 405-431. Yapa, L. S. (1976). Innovation diffusion and economic involution: An essay. Department of Geography. Columbus, Ohio State University. Zahra, S. A. & Covin, J. G. (1994). The financial implications of fit between competitive strategy and innovation types and sources. Journal of High Technology and Management, 5: 183-211. Zaltman, G., Duncan, R. & Holbek J. (1973). Innovations and Organizations. New York: Wiley.

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Chapter XIII

Critical Strategies for Information Systems Development Projects: Perceptions of Developers from the United States and Japan Chung S. Kim Southwest Missouri State University, USA Dane K. Peterson Southwest Missouri State University, USA

ABSTRACT This study investigated the perceptions of information systems (IS) developers from the United States and Japan with regards to the relative importance of 18 strategies that prior research has indicated are important for the successful implementation of an IS. The results of a principal components analysis revealed that the 18 IS strategies could be reduced to five components: (1) Organizational Integration, (2) Communications, (3) Characteristics of the Project Leader, (4) Characteristics of the Project Team Members, and (5) Project

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252 Kim & Peterson

Development Techniques. The analysis also indicated that there were a significant difference in the perceptions of developers from the U.S. and Japan with respect to the importance of the five components. The developers from the U.S. viewed Communications as the most critical component and Project Leader Characteristics as the least important component. Conversely, developers from Japan perceived the Project Leader as the most crucial component for determining the success of an IS project. Team Member Characteristics was viewed as the least important component by developers from Japan. The results were discussed in terms of cultural differences.

INTRODUCTION For a number of years, academicians and practitioners have been interested in identifying and assessing the importance of strategies crucial to the success of Information Systems (IS). Numerous studies have been conducted to investigate and identify various implementation strategies that are associated with IS success (Li, 1997; Williams & Ramaprasad, 1996). However, most of the studies investigating success strategies have been conducted in the United States and other countries with a similar culture (Elliot, 1996). With an increasing number of corporations developing and implementing IS applications that cross national boundaries and span diverse cultures, there is an urgent need to determine which IS implementation strategies will be effective in other countries (Harris & Davidson, 1999). In an era of corporate multinationalism and globalization of markets, the knowledge gained from cross-cultural research applicable to IS development can determine the difference between success and failure in the implementation of international IS. Due to social and cultural differences, the successful IS implementation in a global environment may differ significantly from methods that have proven to be successful in the U.S. (Shore, 1998). It has been demonstrated that national culture is an important variable in many global studies on IS development (Shore & Venkatachalam, 1995). Cultural differences at both national and organizational levels are two of the major factors affecting the transfer of computer technology (Straub, Loch, Evaristo, Karahanna, & Strite, 2002). In order to successfully develop and implement global IS, it has been suggested that management may need to modify their operating procedures to suit the needs of the host organization (Katz & Townsend, 2000). Thus, it is important for IS managers to know if the procedures that are successful in the U.S. will also be effective in other cultures and, if not, how their management style might need to be altered. Cultural factors are known to be particularly important in the development of global IS when Asian offices are involved (Burnson, 1989). Asian cultures generally differ from the western culture on a number of dimensions (Hofstede, 1991). Thus, it may be especially important for IS managers from the U.S. to be flexible and capable of adopting new managerial approaches when implementing global IS involving Asian countries. In addition, not only have studies on IS development and implementation strategies been conducted primarily in the U.S., but most of the research has relied on the views of the user for evaluating IS success. Prior studies have used a variety of definitions and measures of success that focus on the users’ views, such as user satisfaction, system usage, and perceived benefits (Ballantine et al., 1996; Seddon, 1997). The views of IS developers have generally been neglected in IS research (Kumar & Bjorn-Andersen, 1990). However, IS developers make a series of important decisions associated with the design and implemen-

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tation of the system during the complex and unstructured process of IS development. The developers have to define, interpret, and operationalize IS development strategies, and, in so doing, they have to rely on their own judgment (Kumar & Bjorn-Andersen, 1990). Thus the views of IS developers may influence many important decisions related to IS development, such as project management and resource allocation. It is therefore essential to understand the views of IS developers. The purpose of this study was to compare the perceptions of IS developers in the U.S. with the perceptions of IS developers from an Asian country, specifically Japan, in terms of the strategies that are believed to be most important for determining IS success. The decision to compare the U.S. with Japan was based on a several considerations. First, both are economically sound, with Japan possessing one of the strongest economies in Asia. Both nations are also highly technologically advanced. For example, in terms of the countries with the most number of computers per capita, the U.S. ranks first among all nations and Japan ranks second (Information Please Almanac, 1999). In addition, U.S and Japan both have subsidiaries and actively market goods and services in the other country (Chen, 1995). Another reason for comparing the two countries is based on the fact that there are vast cultural differences between the two nations. It has often been noted that the Japanese management style differs significantly from that of the U. S. (Cusumano & Kemerer, 1990). While both countries are unique, the U.S. shares many cultural similarities with countries from Northern Europe and Japan shares many cultural similarities with other Asian nations (McIntosh, 1999). The comparison between the two nations may provide a good portrayal of some of the differences between Western and Eastern cultures. Moreover, any differences may provide further motivation to explore other Asian countries. Although several studies have compared U.S and Japan in terms of the impact of information technology on business practices (Bensaou, 1997; Guimaraes, Sato, & Kitanaka, 1999; Katz & Townsend, 2000), there are apparently no studies comparing U.S. and Japan in terms of developers’ views on IS implementation strategies.

Cultural Issues National culture plays an important role in global information technology management (Abdul-Gader, 1997). National culture strongly affects management practices, including system development strategies and policymaking (Earley, 1993). Hofstede’s (1991) research on cultural dimensions provides a theoretical foundation that has been frequently used for exploring the impact of cultural differences on the adoption and use of information technology. Hofstede identified four dimensions of societal culture, namely (1) power-distance, (2) the level of uncertainty avoidance, (3) individualism versus collectivism, and (4) masculinity versus femininity. Three of these four dimensions are relevant for the present investigation. Power distance refers to how a society accepts the fact that power in institutions and organizations is unequally distributed. The U.S. is considered a low-power distance culture (Hofstede, 1991). Members in the U.S. culture are reluctant to accept unequally distributed power. Power in the U.S. is generally widely dispersed. Participation and democracy are highly valued. In the U.S., employees want to have a voice in the decisions made by their organizations and expect their company to have an open and accessible communication system. On the other hand, the culture of Japan is predominantly a high-power distance culture. Inequality in power is accepted as appropriate and legitimate. In most cases, there is little perceived need for subordinate participation in the organizational decision-making

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254 Kim & Peterson

process (Redding & Richardson, 1986). Subordinates do not expect to be consulted or to become privy to the information held by management. Uncertainty avoidance (UA) is the degree to which members of a society feel uncomfortable with uncertainty and ambiguity. Cultural members in a strong UA society are stressed by the continuous threat of uncertainty and attempt to reduce this stress by relying on strict adherence to plans, rules, and legal measures (Sekaran & Snodgrass, 1986). Members in a weak UA culture do not feel the same stress. They are generally willing to accept the uncertainty of the future and therefore do not perceive the need for strict regulations. The U.S. is considered low in uncertainty avoidance and hence, there is generally not a perceived need for a rigid set of rules and laws. Individuals may determine their own rules with the leader acting as an arbitrator (Katz & Townsend, 2000). Managers are expected to delegate specific tasks and hold subordinates accountable. Conversely, Japan has a very high UA culture. In a high UA culture, authorities are assumed to be competent and members have faith in the leaders and their knowledge. Members in a high UA culture tend to avoid uncertainty and ambiguity, which may influence the use and adoption of specific IS implementation strategies. The individual-collectivism dimension refers to the relationship between the individual and the group of which the individual is a member. The U.S. is considered high on the individualism scale. In a high individualism culture, members are concerned primarily about themselves and their own self-interest. In the U.S., independence is encouraged, autonomy is highly valued, and the pursuit of self-interest is legitimate. In this culture, belief is placed in individual decisions, and everybody is assumed to have a right to an opinion. This contrasts with the high collectivist culture of Japan. A society considered high in collectivism is one in which individuals consider themselves primarily as members of a group. The collectivist culture places more emphasis on the group interest and on the requirements for maintaining social harmony. In a collectivist culture, organizations are viewed as the providers of expertise and order.

Critical Strategies for Successful IS Implementation In spite of significant technological advances and years of application experience, the development of IS remains a complex process plagued with uncertainties. While many systems development projects have been successful, many others have failed (Clegg et al., 1997). Numerous studies have been conducted to identify strategies that may distinguish between successful and unsuccessful IS projects (Aladwani, 2000; Ewusi-Mensah, 1997; Pinto & Slevin, 1987). Based on previous research in this area, the present study identified 18 strategies applicable to IS developers in international environments. These 18 strategies are presented in Table 1, along with some sample references supporting the importance of each strategy. The following presents a justification for each of the strategies selected in the current investigation.

User Participation in the Project Numerous studies on IS implementation have reported that user participation is critical for IS success (e.g., Ginzberg, 1981; McKeen, & Guimaraes, 1997; Pinto & Prescott, 1990). User participation can result in better assessment of users’ needs and also improve their understanding of the system. Active user participation increases system acceptance, builds the commitment needed to create organizational changes, ensures a more accurate design specification, and enhances the quality of the system being developed (Roberts, Leigh, & Purvis, 2000). Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Table 1: Eighteen Critical IS Strategies Success Strategies 1. User participation in the project 2. Top management support 3. Alignment of project and corporate goals 4. Proper project scope 5. Reengineering business process 6. Clearly stated objectives 7. Detailed project plan 8. Project leader’s feedback to team 9. Project leader experience 10. Project leader’s project monitoring/ control 11. Adequate training for the team 12. Peer review on project progress 13. Team member experience

Supporting Literature Aladwani, 2000; Jiang et al., 1996; Liebowitz, 1999; Pinto & Prescott, 1990; Roberts et al., 2000 Aladwani, 2000; Ewusi-Mensah,1997; Jiang et al., 1996; Liebowitz, 1999; Pinto & Prescott, 1990 Nath, 1989; Watson & Brancheau,1991 Ewusi-Mensah,1997; Liebowitz, 1999; Stone, 1997 English; 1996; Khalil, 1997 Baker et al., 1983; Ewusi-Mensah,1997; Jiang et al., 1996; Pinto & Prescott, 1990; Pinto & Slevin,1987 Aladwani, 2000; Baker et al., 1983; Jiang, et al., 1996; Pinto & Prescott, 1990 Jiang et al., 1996; Pinto & Prescott, 1990 Ewusi-Mensah,1997; Jiang, et al., 1996; Liebowitz, 1999; Pinto & Slevin,1987 Aladwani, 2000; Baker et al., 1983; Ewuisi-Mensah, 1997; Jiang et al., 1996; Pinto & Prescott, 1990 Pinto & Prescott, 1990; Pinto & Slevin,1987 Henderson & Lee, 1992; Jones & Harrison, 1996

14. Team member commitment

Baker et al., 1983; Ewusi-Mensah,1997; Jiang et al., 1996; Liebowitz, 1999 Baker et al., 1983; Ewusi-Mensah,1997

15. Team member self-control

Henderson & Lee,1992; Kirsch & Cummings, 1996

16. Utilizing a prototype

Doke & Swanson, 1995; Ratbe et al., 2000; Shore & Venkatachalam, 1994 Ewusi-Mensah,1997; Liebowitz, 1999; Ratbe et al., 2000; Roberts et al., 2000 Ewusi-Mensah,1997; Jiang et al., 1996; Pinto & Prescott, 1990

17. Utilizing an effective methodology 18. Use of appropriate technology

Top Management Support Several studies have reported that top management support is related to the success of many types of IS and lack of top management support is a major a reason for IS failure (e.g., Aladwani, 2000; Ginzberg, 1981; Pinto & Prescott, 1990). Without management support, it is difficult to secure the required resources for IS projects. Top management support is also important to mitigate users’ negative attitudes toward a new system and the organizational change that typically follows. The failure of senior management to support and also to enforce regularly scheduled management review meetings is known to be a major cause of many IS project failures (Ewusi-Mensah, 1997).

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Alignment of Project and Corporate Goals Survey results demonstrate that alignment of project and corporate goals is considered to be one of the key issues in IS development (Watson & Brancheau, 1991). To harness the potential of an IS as a competitive tool, it is paramount to align the management information function with business goals and the objectives of the organization (Burn & Szeto, 2000). Without proper alignment, IS developers may create an IS incapable of providing the right information for the organization or the users.

Proper Project Scope The scope of the project defines the boundary of the project or what aspects of the system will be included in the project. Project scope has been identified as one of the six critical factors for successful IS application development (Liebowitz, 1999; Stone, 1997). Projects that are excessively grand in scope tend to have built-in difficulties, higher risks, and levels of complexity that may frustrate even competent teams (Ewusi-Mensah, 1997). On the other hand, a project with a small scope may not be able to correct fundamental problems and may cause more severe problems in the future.

Business Process Reengineering (BPR) BPR can reduce delivery time, enhance customer satisfaction, increase product and service quality, and increase revenues and profitability. Traditional IS development practice has focused on automation without considering innovating and simplifying the processes first (Khalil, 1997). Only when systems design is geared toward a process orientation will organizations find effective IS solutions (English, 1996).

Clearly Stated Objectives It is essential to establish clear goals and objectives for the project to guide the information requirement phase of the development process (Pinto & Prescott, 1990). Failure to satisfy this aspect of the project is likely to lead to fragmented efforts and lack of team focus to guide the rest of the development (Ewusi-Mensah, 1997).

Detailed Project Plan Project plan refers to the degree to which time schedules, milestones, manpower, and equipment requirements are specified. The project plan includes a satisfactory measure that enables the judgment of actual performance against plans (Pinto & Slevin, 1987). Detailed plans help control and coordinate the workflow within the IS project (Aladwani, 2000).

Project Leader’s Feedback, Experience, and Project Monitoring A competent project leader is vital to project success (Ewusi-Mensah, 1997). The leader’s experience, project monitoring, and feedback are essential to guide and coordinate the activities of system development lifecycle stages and of the various subgroups. Making allowances for adequate monitoring and feedback mechanisms gives the project leader the ability to anticipate problems, to oversee corrective measures, and to ensure that no deficiencies are overlooked (Pinto & Slevin, 1987).

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Adequate Training for the Team One of the most serious Information Technology (IT) problems facing companies in both developed and developing countries is a lack of IT personnel, or more specifically, a lack of IT expertise. Survey results indicate that improving IT human resources is considered one of the top ten issues in IS management (Bingi, Leff, Shipchandler, & Rao, 2000). Rapid advances in technology have created the need to train IT personnel on a continual basis. The technical competence of the developers is at the core of a number of cancelled projects (EwusiMensah, 1997).

Peer Review on Project Progress A structured walk-through is a widely used technique to provide a test of a proposed system design and is often implemented as a peer feedback and review process. A peer-based review or feedback has been shown to have a significantly high impact on team performance (Henderson & Lee, 1992). Peer reviews also improve team members’ perceptions of their own involvement in a project, which is believed to influence team performance (Jones & Harrison, 1996).

Team Member Experience, Commitment, and Self-Control A project team that possesses a significant inventory of experiences and skills is more likely to develop a successful IS. Lack of team members’ experience and relevant domainknowledge is considered to be a major reason for many project cancellations (Ewusi-Mensah, 1997). Building a successful IS requires team members’ commitment, and cooperation. Individual members need a certain amount of autonomy to produce parts of the solution and management of projects requires a balance between autonomous self-control and controls designed by a project leader (Kirsch, 1997). Several studies support the concept that the performance of technically oriented development teams can be improved if team members engage in increased levels of self-control (Henderson & Lee, 1992).

Utilizing a Prototype A major concern in IS development is project risks, which involve the uncertainty about meeting budget targets, attaining system objectives, and gaining user acceptance. These risks increase with the complexity of system requirements, project size, and the ambiguity of project goals. The literature suggests that prototyping is an effective method of reducing project risks (Doke & Swanson, 1995).

Utilizing an Effective Methodology A formal methodology defines a standard process to conduct all the steps necessary to plan, analyze, design, implement, and maintain information systems. Many different development methodologies exist and are usually classified according to themes or features. Some examples include information engineering, structured systems analysis and design methodology, object-oriented methodology, joint applications design, and rapid application development. In order to select the right methodologies, developers need to consider the characteristics of the environment, such as organizational culture, expertise of the developers, development time frame and other resource constraints. Methodologies are instrumental in helping to manage and control the development of large, complex systems successfully.

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258 Kim & Peterson

Failure to follow an appropriate methodology may result in quality problems and serious maintenance problems later (Ewusi-Mensah, 1997).

Use of an Appropriate Technology Systems are currently being developed in an increasingly complex technological environment. Advances in communication networks and development tools provide numerous options and alternatives for companies in acquiring hardware and software. The technology infrastructure available in a company and technical expertise of the staff need to be critically assessed in determining the adoption of new technology (Ewusi-Mensah, 1997).

Objectives of the Study Given the vast cultural differences between the U.S. and Japan, it would seem reasonable to expect that there may be differences in the views of the developers from the two countries in terms of the importance of the various IS development strategies. The purpose of this exploratory study was to address the following goals. Goal 1: Determine which factors IS developers in the United States perceive as most important. Goal 2: Determine which factors IS developers in Japan perceive as most important. Goal 3: Determine if there are any differences in the perceptions of developers from the U.S. and Japan with respect to the importance of the factors contributing to IS success.

RESEARCH METHODOLOGY Questionnaire The survey was first pre-tested with several faculty members working at a university in the U.S. The questionnaire was distributed to 21 faculty members of a CIS department, of which several provided written and oral feedback on the questionnaire. The questionnaire was then pilot-tested with IS developers from two local companies in the U.S. The IS employees from each company were tested in small groups. They completed the questionnaire first and then provided oral feedback on the list of strategies identified on the instrument. Based on the feedback of the pilot test, some changes were made to improve the clarity of wording and comprehension. The questionnaire was then translated into the Japanese language by a faculty member at a university in Japan and pre-tested by several graduate students and faculty members working at the same institution using the same pre-test methods used for the English language version. Respondents were asked to evaluate the importance of each of the 18 items displayed in Table 1 on a seven-point scale ranging from (1) no contribution to (7) very high contribution in terms of how they contribute to the success of IS projects. The order of the 18 strategies listed in Table 1 was based on the results of a principal component analysis. The order in which the strategies were listed on the survey was randomly determined.

The Sample The 14 companies participating in the study were selected primarily because of previous contacts with the companies through personnel recruitment with the host univer-

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sity. Questionnaires were mailed to an appointed liaison officer at each company with instructions on how to distribute them confidentially to IS developers using a systematic random sampling process. Based on information provided by the contact person, all of the respondents who received the questionnaire supplied data. While the selection of organizations was not random, the use of this procedure avoided the usual problems associated with non-response bias.

Companies The data for the U.S. sample were obtained from six organizations, including two in manufacturing and one each in transportation, wholesale/retail, public utility, and government. For the total number of employees in the companies, two had between 500 and 1,000 employees, two had between 1,000 and 5,000 employees, and the remaining two had over 5,000 employees. The number of IS employees ranged from 50 to over 150. The IS budget was between 5.1 and 10 million dollars for two companies, between 10.1 and 100 million dollars for two companies, over $500 million for one company, and one company left this item blank. The data for the Japanese sample were obtained from eight organizations, including three in financial services/banking/insurance, three in manufacturing, and two in wholesale/ retail. For company size, four had less than 1,000 employees, two had between 1,000 and 5,000 employees, and the remaining two had over 5,000 employees. The number of IS employees ranged from nine to over 170. The IS budget was between 5.1 and 10 million dollars for two companies, between 10.1 and 100 million for two companies, over $500 million for two companies, and two companies left this item blank.

Respondents Individual IS developers were asked to provide some biographical information in addition to their importance ratings for the 18 success strategies. Table 2 summarizes the results of the biographical information. (Due to failure to respond to all items, the final sample consisted of 49 respondents from the U.S. and 46 respondents from Japan.) As can be seen in Table 2, for both countries the majority of IS developers were males. Only 22.1% of the respondents in the survey were females. A majority of the respondents had a least a college degree (79%). The average work experience in the field of IS was about 13 years for both groups. The average age in both groups was about 38. Altogether, the biographical information for the two groups was remarkably similar.

RESULTS An exploratory factor analysis was conducted on the combined data from all respondents to determine if the 18 strategies could be reduced to a smaller set of factors. More specifically, a principal components analysis was used as the extraction technique and varimax as the method of rotation. Without specifying the number of factors in advance, five components with eigenvalues greater than one emerged. The Kaiser measure of sampling adequacy was .764 with 61.4% of the variance accounted for by the five components. The results of the factor loadings are presented in Table 3. For each item, the highest loading is presented in bold print. The simple structure appears adequate for most of the items. In other words, each item loaded high on only one of the five factors. The only exceptions were Items

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260 Kim & Peterson

Table 2: Profile of Respondents

United States

Japan

Total

Gender Male Female

33 16

41 5

77.9% 21.21%

Education Graduate Degree College Degree No College Degree

5 31 13

2 37 7

7.4% 71.6% 21.0%

Experience Mean Standard Deviation

13.13 7.99

13.37 7.02

13.24 7.51

Age Mean Standard Deviation

38.74 7.97

38.09 8.21

38.42 8.05

8 and 12, which had approximately equal loadings on two factors. Thus, the analysis was performed by both including and excluding Items 8 and 12. However, the results were basically the same and, therefore, the results presented will be based on the inclusion of both items. The five components are readily interpretable. That is, the first component is related to Organizational Integration. The second component pertains to Communications. The third component is clearly related to Characteristics of the Project Leader. The fourth component represents Characteristics of the Project Team Members, and the final component consists of items related to Project Development Techniques. Thus, it was possible to categorize the 18 IS success strategies into one of five components. A factor-based score was calculated for each of the five components for each respondent. The mean scores for each component by nationality are presented in Table 4. The means represent the respondents’ views regarding the importance of each component for developing a successful IS with higher values indicating greater perceived importance. A 2 (U.S. vs. Japan) X 5 (Components) mixed ANOVA was conducted on the data. The two-way interaction effect was significant (F = 10.10, p < .01). To examine the first goal, a simple main effects analysis and pairwise comparison tests were conducted on the data obtained from the developers from the U.S. The simple main effects were significant, indicating a difference in the perceived importance of the five components. The post-hoc pairwise comparison tests revealed that Component 2 was perceived as more important than all the other components (p < .05). Component 1 was viewed as more important than all other components, except Component 2. The only other significant difference between the factors was between Components 3 and 4. Therefore, the results indicate that the developers from

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Table 3: Principal Components Factor Loadings

Item

Organizational Project Integration Communication Leader

Team Members

Development Techniques

1.

0.5443

0.2142

-0.0618

0.2918

0.1214

2.

0.6076

0.2283

-0.1832

0.0688

0.1015

3.

0.6320

0.15392

0.1268

0.0394

0.0979

4

0.4386

0.2853

0.0900

0.3206

0.2681

5.

0.7038

-0.2400

0.3240

0.0895

-0.1497

6.

0.2084

0.7058

0.0579

0.0818

-0.1363

7.

0.1726

0.6543

0.2443

0.1699

0.3401

8.

0.2049

0.5004

0.2410

0.4702

0.2933

9.

-0.1235

0.1960

0.7912

0.2330

0.1584

10.

0.1859

0.1477

0.7994

0.0328

0.1468

11.

0.2592

0.2264

0.0092

0.7828

0.1470

12.

0.2587

-0.1997

0.4341

0.4831

0.2778

13.

-0.1417

0.1369

0.3837

0.6617

-0.0387

14.

0.2070

0.1737

-0.0237

0.8439

0.2466

15

0.2213

-0.2843

0.3035

0.5235

0.2740

16

0.0271

0.0020

-0.0405

0.2934

0.7343

17.

0.0901

-0.1265

0.3160

0.1059

0.7312

18.

0.1028

0.2690

0.1237

0.0570

0.6126

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262 Kim & Peterson

Table 4: Mean Scores on Each Component by Nationality Component

United States

Japan

Difference

1. Organizational Integration

5.70

5.60

0.10

2. Communication

5.96

5.63

0.33*

3. Project Leader

5.21

5.80

-0.59*

4. Team Members

5.45

4.93

0.52*

5. Project Development Techniques

5.40

5.21

0.19

* p < .05

the U.S. believe that the Communication component is the most important, followed by Organizational Integration. Characteristics of the Project Leader were considered the least important by IS developers from the U.S. To examine Goal 2, the same analysis was performed on the data for the developers from Japan. The results of the simple main effects analysis were significant, indicating that the developers from Japan did not view each component as equally important. Post-hoc pairwise comparison tests indicated there were no significant differences between Components 1, 2, and 3, but all three of these components were perceived as more important than Components 4 and 5 (p < .05). The difference between Components 4 and 5 was not significant. Thus, the developers from Japan perceived Organizational Integration, Communications, and Characteristics of the Project Leader as the most important factors. The IS developers from Japan viewed the Team Member Characteristics and Development Techniques as the least important factors for determining IS success. To examine Goal 3, post-hoc pairwise comparison tests were conducted on each component comparing the views of IS developers from the U.S. and Japan. The results indicated that the developers from the U.S. considered Components 2 and 4 as significantly more important than did the IS developers from Japan. On the other hand, the developers from Japan viewed Component 3 as more important than did the developers from the U.S. The differences between the countries on Components 1 and 5 were not significant. Therefore, Characteristics of the Team Members and Communications were perceived as significantly more important by developers from the U.S. than developers from Japan. However, Characteristics of the Project Leader was viewed as more important by the IS developers from Japan.

DISCUSSION The results of the present study revealed that the 18 strategies could be classified into five categories. The five categories were labeled (1) Organizational Integration, (2) Commu-

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nications, (3) Characteristics of the Project Leader, (4) Characteristics of the Project Team Members, and (5) Project Development Techniques. The largest difference in the perceptions of IS developers from the two nations was in terms of the Characteristics of the Project Leader. The developers from Japan considered this the most important factor, while the developers from the U.S. viewed it as the least important factor. The result could be interpreted as being consistent with the cultural differences between the two nations. Japan is considered a high power distance culture. That is, the Japanese culture assumes there is inequality in power. Decisions are assumed to be primarily the responsibility of management. Employees do not expect to be involved in the strategic planning process. Thus, the success of IS may be viewed by IS developers in Japan as the responsibility of the project leaders. In addition, the Japanese culture is considered high on the uncertainty avoidance factor, which implies that the members of the culture prefer strict adherence to rules and regulations. Hence, the project team members may view the project leader as the person most responsible for providing and maintaining order. Conversely, the U.S. culture is considered low power distance and low uncertainty avoidance, indicating the project leader’s role is not as crucial for successful IS development in the U.S. The IS developers from the two countries also differed in terms of their views on the importance of Characteristics of the Team Members. The U.S. developers considered this to be the third most important factor, while IS developers in Japan rated it the least important. Again, cultural factors may explain the differences in perspectives. The U.S. culture is one of low power distance suggesting that members prefer to be involved and participate in decisions. The team members expect to make major contributions, and it is assumed that the project leader will delegate responsibility to the members. The U.S. culture is also characterized as high in individualism. Thus, an individual team member’s commitment, contribution, and cooperation are respected and expected to influence IS success. It would therefore seem reasonable that IS developers in the U.S. might consider team members as an important source for determining the success of IS projects. There was also a significant difference between the IS developers with respect to the importance of Communication. The developers in the U.S. rated Communication as the most important factor. This result may be viewed as consistent with the low power distance nature of the U.S. culture. The IS developers in the U.S. expect to have an open and accessible communication system. Feedback is expected and viewed as essential in the U.S. culture. In the U.S., employees assume they will be consulted and have access to information held by management The difference between the IS developer’s views on Organizational Integration was not significant. The U.S. developers rated this as the second most important factor, whereas developers from Japan rated it the third most important factor. It seems somewhat surprising that the developers from Japan did not perceive this factor as more important given the high power distance nature of their culture. Apparently, the Japanese developers view successful IS development as the project team’s responsibility rather than the responsibility of sources outside the IS area, such as top management and users. Finally, both groups rated Project Development Techniques as the fourth most important factor. Although Japan may be slightly behind the U.S. in terms of the implementation of IS technology (Guimaraes, Sato & Kitanaka, 1999), there were no differences in the views of IS developers regarding the importance of this factor for contributing to successful IS development.

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264 Kim & Peterson

Implications for Managers As organizations expand across national borders, IS managers are faced with a host of conditions differing from those affecting their domestic operations. These include differences in national cultures, information-sharing process, and staff expectations (Katz & Townsend, 2000). In such environments, the understanding of different local factors is extremely important for successful IS development. Prior research suggests that if IS are not developed in concert with an understanding of underlying national cultures, the implementation and ultimate success will be severely impaired (Ein-Dor, Segev, & Orgad, 1993; Katz & Townsend, 2000). The results of the present study provide several implications for IS managers. The results suggest that IS managers from the U.S. may have to assume more responsibility in order to be effective in Japan. Managers in the Japan are often responsible for making the critical decisions and strategic plans and are held primarily responsible for the outcomes. Typically, there is less input from subordinates, and therefore the demands and responsibilities of the management position are greater. The developers from Japan also expect more leadership, structure, and expertise from their managers. Thus, the project leaders may need to prepare more detailed plans and provide more specific guidelines. Similarly, the IS developers in Japan may not expect duties to be delegated to those in subordinate positions. Team member characteristics and contributions are considered less important in the Japanese culture. Since participation from team members is vital for successful IS projects, IS managers may need to stress the importance of input from team members and be willing to spend more effort eliciting participation from IS developers from Japan. IS managers and project leaders may need to demonstrate to the IS developers the merits of their work and their potential contribution to IS projects. Communication is not viewed as important in Japan as it is in the U.S. Thus communication lines may not be as effective and open as in the U.S. Managers may find the need and the expectation to communicate with members reduced. In a high power distance society like Japan, a hierarchical type of relationship for communication between managers and members may be more effective. Thus, it appears there may be less demand in terms of keeping communication lines open and keeping employees informed, as this does not seem to be a real expectation among IS developers in Japan While an IS manager from the U.S. may face many challenges in working in Japan, the IS managers from Japan may face even more difficulty adapting to the U.S. An IS manager from Japan may need to learn to be more responsive to IS developers, learn to improve communication with team members, and to delegate responsibility to team members.

Study Limitations and Research Opportunities There are some limitations of the present study, which also suggest future research opportunities. One limitation of this study is the relatively small sample size. The desire in the present study was to avoid sampling too many IS developers from one organization since this could bias the primary objective of making comparisons between the two countries. Therefore, the sample size was limited in terms of the number of contacts with companies in Japan. However, it was believed that the sample was large enough to ensure adequate representation, but the study can be expanded to include a larger sample size to reevaluate the validity of the results. Second, the study developed a list of strategies for successful IS development based on an extensive survey of the relevant literature. However, IT

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technology constantly changes, and a more timely and relevant list could be developed in the future. Finally, each Asian country is very different, and extrapolating the results based on IS developers from Japan to all countries in Southeast Asia is inappropriate and suggests a need for further research involving IS developers from other Asian countries.

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Ewusi-Mensah, K. (1997). Critical issues in abandoned information systems development. Communications of the ACM, 40(9): 74-80. Ginzberg, M. J. (1981). Key recurrent issues in the MIS implementation process. MIS Quarterly, 5(2): 47-59. Guimaraes, T., Sato, O., & Kitanaka, H. (1999). Comparing U.S. and Japanese companies on competitive intelligence IS support, and business change. Journal of Global Information Management, 7(3): 41-49. Harris, R. & Davidson, R. (1999). Anxiety and involvement: Cultural dimensions of attitudes toward computers in developing countries. Journal of Global Information Management, 7(1): 26-38. Henderson, J. C. & Lee, S. (1992). Managing I/S design teams: A control theories perspective. Management Science, 38(6): 757-777. Hofstede, G. (1991). Cultures and organizations: Software of the mind. London: McGrawHill. Information Please Almanac (1999). Willimington, MA: Houghton Mifflin Co. Jiang, J. J., Klein, G., & Balloun, J. (1996). Ranking of system implementation success factors. Project Management Journal, 27(4): 49-53. Jones, M. C. & Harrison, A. W. (1996). IS project team performance: An empirical assessment. Information & Management, 31(2): 57-65. Katz, J. P. & Townsend, J. B. (2000). The role of information technology in the “fit” between culture, business strategy and organizational structure of global firms. Journal of Global Information Management, 8(2): 24-35. Khalil, O. E. M. (1997). Implications for the role of information systems in a business process reengineering environment. Information Resources Management Journal, 10(1): 3643. Kirsch, L. J. (1997). Portfolios of control modes and IS project management. Information Systems Research, 8(3): 215-239. Kirsch, L. J. & Cummings, L. L. (1996). Contextual influences on self-control of IS professionals engaged in systems development. Accounting, Management and Information Technologies, 6(3): 191- 219. Kumar, K. & Bjorn-Andersen, N. (1990). A cross-cultural comparison of IS designer values. Communications of the ACM, 33(5): 528-538. Li, E. Y. (1997). Perceived importance of information system success factors: A meta analysis of group differences. Information & Management, 32(1): 15-28. Liebowitz, J. (1999). Information systems: Success or failure? Journal of Computer Information Systems, 40(1): 17-20. McIntosh, J. C. (1999). Strategic uses of global information technology among manufacturing firms. Journal of Global Information Technology Management, 3(2): 24-41. McKeen, J. D. & Guimaraes, T. (1997). Successful strategies for user participation in systems development. Journal of Management Information Systems, 14(2): 133-150. Nath, R. (1989). Aligning MIS with the business goals. Information & Management, 16(2): 71-79. Pinto, J. F. & Prescott, J. E. (1990). Planning and tactical factors in the project implementation process. Journal of Management Studies, 27(3): 305-327. Pinto, J. K. & Slevin, D. P. (1987). Critical factors in successful project implementation. IEEE Transactions on Engineering Management, 34(1): 22-27.

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Ratbe, D., King, W. R., & Kim, Y. (2000). The fit between project characteristics and application development methodologies: A contingency approach. Journal of Computer Information Systems, 40(2): 26-33. Redding, S. G. & Richardson, S. (1986). Participative management and its varying relevance in Hong Kong and Singapore. Asia-Pacific Journal of Management, 3(2): 76-98. Roberts, T. L., Leigh, W., & Purvis, R. L. (2000). Perceptions on stakeholder involvement in the implementation of system development methodologies. Journal of Computer Information Systems, 40(3): 78-83. Seddon, P. B. (1997). A respecification and extension of the DeLone and McLean model of IS success. Information Systems Research, 8(3): 240-253. Sekaran, U. & Snodgrass, C. R. (1986). A model for examining organizational effectiveness cross-culturally. Advances in International Comparative Management, 2: 211-232. Shore, B. (1998). IT strategy: The challenge of over-regulation, culture, and large scale collaborations. Journal of Global Information Technology Management, 1(1): 1-4. Shore, B. & Venkatachalam, V. R. (1995). The role of national culture in systems analysis and design. Journal of Global Information Management, 3(3): 5-14. Stone, J. (1997). Developing software applications in a changing IT environment. New York: McGraw-Hill. Straub, D., Loch, K., Evaristo, R., Karahanna, E., & Strite, M. (2002). Toward a theory-based measurement of culture. Journal of Global Information Management, 10(1): 13-23. Watson, R. T. & Brancheau, J. C. (1991). Key issues in IS management: An international perspective. Information & Management, 20(3): 214-223. Williams, J. J. & Ramaprasad, A. (1996). A taxonomy of critical success factor. European Journal of Information Systems, 5(4): 250-260.

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Chapter XIV

The State of Teledensity Diffusion in Least Developed Countries: A Review of the Literature Victor W. A. Mbarika Louisiana State University, USA

ABSTRACT This chapter reviews research from academic and major international organizational literature to examine and synthesize the current understanding of teledensity development in Least Developed Countries (LDCs). The obstacles to the growth of teledensity are discussed, and the importance and opportunities for growth of teledensity to solve priority problems and to realize sustainable development in LDCs are examined. The literature findings suggest that various policy, economical, financial, managerial, organizational, technological, political, and geographical factors are important determinants for growth of teledensity in LDCs. A variety of strategies to advance teledensity in LDCs are suggested.

INTRODUCTION The pervasive role of telecommunications in modern world economies is well documented. Across the world, countries are seeking are seeking to improve telecommunications infrastructure and benefit from anticipated increases in economic activity (Dutta, 2001). Both

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The State of Teledensity Diffusion 269

developing and developed countries are investing tireless efforts to improve their telecommunications infrastructures. One such infrastructure is Teledensity. Teledensity is used to refer to the number of main telephone lines for every one hundred inhabitants. Teledensity is also used to refer to the level of a country’s telecommunications infrastructure (Gille, 1986; Mbarika, Musa, Byrd, & McMullen, 2002, Saunders, Warford, & Wellinius, 1994). Least Developed Countries (LDCs) are defined as low-income countries that are suffering from long-term constraints against growth, in particular, low levels of human resource development and severe structural weaknesses: economic, social, and political (Austin, 1990). These countries are particularly ill equipped to develop their domestic economies, which are vulnerable to external shocks and natural disasters. Table 1 contains the list of 48 LDCs, as currently defined by the United Nations General Assembly that was used for this study. The list was most recently updated in December 1998, with the “graduation” of Botswana and the addition of two new countries, Angola and Eritrea, to the list. Of the 48 LDCs, 30 are in Africa, 13 in Asia and the Pacific, four in the Arab Region, and one in the Americas. There were 25 LDCs in the original group in 1971, indicating that the number has virtually doubled in 20 years. The criteria used by the United Nations General Assembly for inclusion in the list of LDCs are discussed below.

Old Criteria for Inclusion The original set of criteria for constructing a list of countries classified as LDCs was adopted in 1971. This includes: • Per capita income per year less than US $200. This figure has been revised periodically, and stood at US $600 in 1998. • Share of industrial production in the Gross National Product (GNP) under 10%. • Adult literacy rate less than 20%.

New Criteria for Inclusion • • • •

New criteria for determining LDCs was established in 1994: Population less than 75 million. Per capita Gross Domestic Product (GDP) less than US $700 (average 1990-92). Augmented physical quality of life index (APQLI) less than 47.1 Economic diversification index (EDI) less than 26.2

Premise of this Study In a study carried out by the International Telecommunications Union (ITU World Telecommunication Indicators, 1995), LDCs were represented to be among the least developed in terms of the state of their telecommunication networks and limited range of services offered. The study showed evidence that LDCs are falling farther behind other developing countries in the race to construct modern telecommunication networks. For example, as far back as 1984, among commonwealth countries, Singapore (a developing country) generated the fourth highest telecommunications traffic after the UK, Australia, and Canada (developed countries), as opposed to LDCs that currently have less than one telephone for every 100 inhabitants (Eward, 1984). The same ITU study mentioned above shows further evidence that the falling of LDCs behind other developing countries in the race to construct modern telecommunication

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270 Mbarika

Table 1: The 48 Least Developed Countries as Recognized by the UN General Assembly Countries Afghanistan Angola Bangladesh Benin Bhutan Burkina Faso Burundi Cambodia Cape Verde Central African Republic Chad Comoros Djibouti Equatorial Guinea Eritrea Ethiopia Gambia Guinea Guinea Bissau Haiti Kiribati Lao (PDR) Lesotho Liberia Madagascar Malawi Maldives Mali Mauritania Mozambique Myanmar Nepal Niger Rwanda Sâo Tomé & Principe Sierra Leone Solomon Islands Somalia Sudan Tanzania Togo Tuvalu Uganda Vanuatu Western Samoa Yemen Zaire Zambia Total 48

Africa

Americas, Asia & Pacific

Arab States

X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 29

1

13

Year of Entry 1971 1998 1975 1971 1971 1971 1971 1991 1977 1975 1971 1977 1982 1982 1998 1971 1975 1971 1981 1971 1986 1971 1971 1990 1991 1971 1971 1971 1986 1988 1987 1971 1971 1971 1982 1982 1991 1971 1971 1971 1982 1986 1971 1985 1971 1971 1991 1991

5

Source: United Nations General Assembly, December 1998 networks arises not so much because they are not installing the latest equipment — in many cases the LDCs have modern, state-of-the-art digital networks — but rather that they are not expanding fast enough to close the teledensity gap with other developing countries. The Maitland Commission (1984) described the teledensity gap as the unbalanced distribution of telephones across the world, with low teledensity, a shortage of exchange capacity, long waiting periods for acquiring a new telephone line, low quality of service, and imbalance of telecommunications infrastructure between urban and rural areas. The ITU (1994) uses national teledensity, which is the relationship between a country’s population and the number of main telephone lines.

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The State of Teledensity Diffusion 271

•

•

The literature synthesized here addresses the following research questions: Why are LDCs not expanding their teledensities fast enough, as compared to developed countries or other developing countries, considering that these LDCs are investing in the latest equipment? Specifically, what are those factors that influence growth of teledensity in LDCs? Given the factors that hinder growth in teledensity for LDCs, what strategies can these countries implement in order to improve growth of their teledensities?

While previous studies have addressed the probable factors that influence growth of teledensity, these studies are over-generalized to include both developing and developed countries (DCs) as a whole. Our research focuses on LDCs and combines various existing economic, political, technological, and geographical factors that influence the growth of teledensity in LDCs. We also suggest strategic actions that LDCs can implement to promote growth of teledensity. The literature used for this study include: • Refereed journals in the area of global information technology management and global telecommunications; • Books that describe LDCs’ economical, political, telecommunications, and cultural history; and • Materials published by international development organizations such as the International Development and Research Center (IDRC), the International Telecommunications Union (ITU), the World Bank, the International Monetary Fund (IMF), and the United States Agency for International Development (USAID). The level of analysis is international, but the focus is specifically directed towards least developed countries as earlier defined. We now turn to a discussion on the importance of growth of teledensity in LDCs and the need for such a study. The chapter will now discuss the importance of teledensity to socioeconomic development, factors that influence growth of teledensity, and suggested strategies to overcome identified obstacles to growth of teledensity.

IMPORTANCE OF TELEDENSITY Teledensity and Socioeconomic Development Realizing the importance of well-developed telecommunications infrastructure, the Group of Eight (G-8) leaders recently pledged to help LDCs improve the state of their telecommunications infrastructure and join the Internet. The Group of Eight industrial powers (the United States, Japan, Italy, Britain, Germany, France, Canada and Russia) pledged to help poorer nations join the world’s advanced economies on the information superhighway. The G-8 nations agreed to form a task force to spearhead efforts to boost Internet access and help bridge the so-called digital divide by sharing information technology. “Countries that succeed in harnessing (information and telecommunications technology) potential can look forward to leapfrogging conventional obstacles of infrastructure development,” according to CNN coverage of the G-8’s summit meeting on this issue (http:/ /www.cnn.com/2000/ASIANOW/east/07/22/g8.summit/index.html). The charter signed by the G-8 members states, “Everyone should be able to enjoy access to information and communications networks.” Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

272 Mbarika

It has been well documented that worldwide there is a high correlation between the level of telecommunications infrastructure represented by teledensity and the level of economic power represented by the national per capita Gross Domestic Product (GDP) (Saunders et al., 1994). This strong correlation was first pointed out by Jipp in 1963 (as cited in Gille, 1986). Since then, many studies have examined the contributions of teledensity to economy and society. Hardy (1980) found a causal relationship between the telecommunications infrastructure and the national economy in over 60 nations. He showed that the number of telephones per million people at a particular time was a significant predictor of GDP at some time in the future. Cronin, Parker, Colleran, and Gold (1991) statistically confirmed that the two variables representing overall U.S. economic activity — the sum of the output of all industries and the annual Gross National Product — were causally associated with the annual amount of U.S. telecommunications investment. Cronin, Colleran, Herber, and Lewitzky (1993) further showed that investment in telecommunications infrastructure (represented by teledensity) was a reliable predictor of national productivity in the United States. Another study in the United States conducted by Dholakia and Harlam (1994) looked at the influence of independent variables, such as the number of business access lines per employee, rural highway miles, and energy consumption on economic development. The two dependent variables used in their study were average annual pay and per capita income. They found that teledensity was an important predictor of the two dependent variables when it was treated as a single independent variable. Even when teledensity was combined with the other independent variables, its effect on the dependent variables was higher than the others in all but one case. Looking at teledensity in the French and Spanish economies, Berry (1983) concluded that the growth of teledensity precedes economic development and argued that the ultimate cost of underestimating the significance of teledensity would be quite high. Jussawalla (1988) supported the above claim in her study that shows how growth of teledensity promotes resource mobilization through improved division of labor and, hence, an agent of development. She further argues that in most economies, investment in information-oriented industries would give rise to overall demand in other sectors. Saunders (1982) discussed the benefits of teledensity in terms of financial and economic returns. He showed that the World Bank’s teledensity investment projects brought an average financial rate of return of 18% and economic rate of returns ranging from 20% to 50%. Clarke and Laufenberg (1983) showed that growth of teledensity brought a variety of social benefits in addition to economic benefits in rural Sub-Saharan Africa. Social benefits were identified in health and social service delivery, education, development projects, the stabilization of migrants, and the handling of natural and social disasters. Hudson (1984, 1989) also presented a number of social and economic benefits of telephone services in rural areas, both in LDCs and developed countries (DCs). Considering the importance of the growth of teledensity, this study borrows from past literature to examine those factors that promote or hinder the growth of teledensity in LDCs, and strategies to overcome such obstacles. The next sections will discuss the factors that influence the growth of teledensity in LDCs and also some identified strategies to overcome obstacles to growth of teledensity in LDCs.

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The State of Teledensity Diffusion 273

Teledensity: A Precursor for Internet Diffusion Conventional wisdom declares that the Internet provides new ways of exchanging information and transacting business. The Internet has become increasingly important to organizations in many of their business affairs. In fact, the use of the Internet as a vehicle for electronic commerce (e-commerce) has become standard operating practice in a majority of today’s corporations. The world is rapidly moving toward Internet-based economic structures and information societies, which comprise networks of individuals, firms, and countries linked electronically in interdependent and interactive relationships. Speculation abounds on the potential of the Internet to diminish socioeconomic problems in least developed countries (LDCs) like those in Sub-Saharan Africa. Both academic and practitioner literature speak glowingly of the tremendous benefits that could accrue to these countries with the use of the Internet. For example, there have been reports on the impact of electronic communications on development in Zambia (Chifwepa, 1998). Other reports show how the Internet would be beneficial to both academic and research sectors in LDCs (Diop, 1997). Several studies argue persuasively that electronic communications can promote resource mobilization in Africa (Jensen, 1999; Mbarika, Byrd, Raymond, & McMullen, 2001). Given all the benefits the Internet brings to today’s world, the unresolved question is: Are Least Developed Countries (LDCs) ready to exploit the full potential of the Internet? Despite the phenomenal growth in both the technology and applications spheres of the Internet, there is a very real possibility that the benefits to LDCs will be severely limited. The harsh reality is that LDCs may not be in a position to take full advantage of the Internet because of serious shortcomings in their basic telecommunications infrastructures. The lack of basic telecommunications infrastructure is a severe hindrance to the growth of the Internet in any country (Jensen, 1999). The shortcomings in teledensity as the basic telecommunications infrastructure in LDCs makes it very likely that these countries will be pushed back even further in their attempts to compete with more developed countries in utilizing the Internet. With such low levels of teledensity, the question remains whether the focus should be on developing teledensity or rushing to Internet diffusion? While this may be possible for the more developed northern and southern regions of Africa, can the same apply to Africa’s LDCs? Are we placing the “cart before the horse?” Should we perceive telecommunications in general and the Internet in particular as a luxury rather than a necessity for LDCs? Should the Internet be limited to only the urban elite of LDCs, which would be a phenomenon reminiscent of the colonial era? In his paper “The Dream of E-Commerce: Reality in 1999,” Levine relates telephone penetration to Internet penetration (Levine, 1999). To bring more perspective to this, let us examine some recent data from the Telecommunications Union on Africa’s LDCs (ITU, 2001). Table 2 points to the evidence that even the more developed regions of Africa viz. North Africa (in this case, Egypt) and South Africa experienced growth in Internet penetration (measured by the number of Internet Hosts) as levels of Teledensity increased. Internet Hosts refer to the number of computers in the economy that are directly linked to the worldwide Internet network. The 1998 ITU report on African Telecommunications Indicators uses Internet Hosts as a measure for national Internet penetration (ITU, 1998). One of the oldest and most referenced sources of Internet diffusion, the Network Wizards, also uses Internet Hosts as a measure for national Internet penetration (Mbarika et al., 2001).

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274 Mbarika

Table 2: Data on Teledensity and Number of Internet Hosts for Egypt and South Africa Egypt

South Africa

Year

Teledensity

Internet Hosts

Teledensity

Internet Hosts

1993

3.96

10

8.91

4,356

1994

4.27

153

9.07

10,951

1995

4.63

561

9.34

27,040

1996

4.99

1,976

9.52

48,277

1997

5.57

1,805

10.12

99,284

While not claiming that teledensity is the only variable that accounts for the substantial growth in Internet Hosts, one can see a positive relationship between the two. Could this be a coincidence? The answer is of course a subject for further research before it can be generalized. However, the purpose here is to bring the debate to the table specifically for the case of LDCs, while arguing that LDCs must pay attention to their levels of teledensity if they envision wide Internet connectivity with Internet hosts at the intervening variable. Figure 1 illustrates this.

FACTORS THAT INFLUENCE GROWTH OF TELEDENSITY IN LDCS Bernt and Weiss group international telecommunications issues into four categories: regulatory, organizational, economic, and technical (as reported in Ryota, 1996). Regulatory issues include monopoly versus competition, deregulation, privatization, and tariff structures; organizational issues concern operating entities and international/regional telecommunications-related organizations; economic issues include accounting rates, pricing, and standards; and technical issues concern telecommunications technologies. Several studies have been conducted that examine the link between teledensity and socioeconomic factors. In particular, the International Telecommunications Union’s International Consultative Committee on Telephone and Telegraph (CCITT) has sponsored several studies that establish a strong correlation between teledensity and variables such as Gross Domestic Product (GDP), as well as a positive relationship between teledensity and economic development. Conversely, the same studies found a negative correlation between teledensity and population size. The results indicated that as GDP increases, telephone density increases more rapidly (Saunders et al., 1983), and that as the population size increases, telephone density decreases. Mbarika (1999), in an empirical study on the growth of teledensity in LDCs, established a close relationship between GDP per capita and teledensity in LDCs. One of the most noticeable observations was that the countries that were doing better than expected in terms

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The State of Teledensity Diffusion 275

of their income level had relatively small populations. This should be a major concern for LDCs that generally have a very low average per capita income of US $283 per year. This is just 7% of the global average of US $3,980 per year. Other studies that have examined the relationship between teledensity and socioeconomic factors suggest a strong correlation between changes in international telecommunications traffic over time, the number of tourists per year, and the volume of international trade. One such study, conducted by Yatrakis (1992), suggests that the volume of trade (measured as the dollar value of imports and exports) is an important determinant of the demand for international telegraph and telex services. The World Bank has conducted a number of telecommunications studies using structural economic analysis. These studies model teledensity as input into the production process and postulate that telecommunications services are not equally important to all sectors of the economy. Various country studies suggest that telecommunications services are more intensively used in the secondary and tertiary sectors, such as manufacturing and tourism industries respectively, than in the primary sector, such as agriculture. A 1995 CCITT comparison of employment and telecommunications in Germany suggested that although 25% of the economically active population was employed in agriculture, this sector accounted for only 7% of telephone lines and 4% of telephone revenues. Commerce and transport sectors (service sectors) employed 16% of the work force, but accounted for 39% of telephone lines and 41% of revenues. Other country studies confirm this result (CCITT, Blue Book, Vol. 2, Geneva: ITU, 1965, as reported in Saunders et al., 1983). A 1969 United Nations (UN) input-output study of communications patterns in 20 countries in the 1960s suggested that communications output is primarily used by service sector industries, followed by manufacturing and mining (UN, 1969). The results suggest that communications-intensive industries tend to be characterized by high added value relative to other industries. (Saunders et al., 1983). This therefore suggests that as the contribution of the service sector share to GDP in the economy of LDCs increases, so will the level of teledensity. Mbarika (1999) also established a close relationship between the contribution of the service sector share to GDP and teledensity. The service sector is one of the biggest customers of telephone services, typically accounting for over half of telecommunications operators’ revenues. Service sector customers include industries such as banking, trade, tourism, and administration. Given that the service sector is such a heavy user of telephone Figure 1: Teledensity: A Proposed Precursor to Internet Diffusion for LDCs

Growth of Teledensity for Africa’s LDCs

Growth of Internet Hosts for Africa’s LDCs

Wider Internet Connectivity for Africa’s LDCs

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276 Mbarika

services, one would intuitively expect a relationship between the importance of the service sector in a national economy and the level of teledensity. Although the size of the service sector’s contribution to GDP has been found to be highly correlated with teledensity, the unresolved question is whether services increase teledensity or whether telecommunications development leads to growth in the service sector? It is probably a bit of both. Since services are big users of communications, their demand will increase the telecommunications operators’ revenues, allowing further network investment to take place. At the same time, higher levels of teledensity will tend to lower costs for the service sector, triggering expansion and attraction of new service industries (Mbarika et al., 2001). This mutually beneficial relationship between the service sector and teledensity suggests that the LDCs may want to encourage development of their service sectors. The Maitland Commission (1984) analyzed several obstacles against the growth of teledensity. These obstacles concern economic, political, technological, and geographical issues. They are summarized as follows: 1. Funding • LDCs need more capital than they can raise themselves. • There is scarcity of the hard currency necessary for purchasing telecommunications equipment abroad. 2. Priority of telecommunications Other sectors such as agriculture, health, education and roads get a higher priority in national budgets than telecommunications due to the lack of understanding of the catalytic role of teledensity in development. 3. Imported equipment • The design of imported equipment is less suited to the environments and needs of LDCs. • Manufacturers abroad have stopped producing old systems that are still widely used in LDCs and, as a result, LDCs are forced to replace their equipment. • Various types of equipment installed over a number of years lead to difficulties in training, compatibility, and maintenance. 4. Service in remote areas Various geographical barriers to remote areas, as well as lower monetary returns from those areas, reduce the incentives to extend telecommunications services to those areas. Wellenius (1989) argued that LDCs had three obstacles to overcome. The first is the scarcity of foreign exchange, a financial obstacle. The second is the operating entities’ lack of internal organization and management, and the third is insufficient autonomy of the operating entity from government. The latter two obstacles are related to organizational and policy issues. Governments in many LDCs have been dependent on the telecommunications sector’s cash flow for use in other sectors. Furthermore, capital investment in teledensity has often been linked to the next available foreign aid package (Tabai, 1994). These problems are political obstacles to development of the teledensity. Parker (1992) identified another political obstacle. He pointed out that power holders in government tended to oppose development of teledensity, fearing that the development might weaken their positions. He argued that existing economic and political power holders needed to be persuaded that the growth of teledensity could be a “win-win” proposition.

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In the World Telecommunication Development Report, the ITU discussed some of the most common obstacles to growth of teledensity (1994). 1. Lack of re-investment Whereas rapid growth of teledensity was achieved in countries where at least 50% of telecommunications revenues were reinvested, the level of reinvestment is still low in many other LDCs. 2. Poor quality of service Outdated equipment and inadequate maintenance result in poor quality of service, leading to loss of revenues. 3. Foreign exchange scarcity • Hard currency is limited due to high external debt and limited export earnings. • Foreign exchange through the international accounting rate system tends to be transferred to the central bank instead of being directly used for telecommunications development. 4. Investment inefficiencies • In many LDCs, the cost of installing one telephone line is far beyond the widely used figure of around US $1,500. • Higher installation cost per line in rural areas hinders the extension of the network to those areas. • Such promising low cost technologies as cellular radio and Very Small Aperture Terminal (VSAT) suitable for rural areas tend to be provided primarily to urban areas. 5. Absence of universal access policy Many LDCs lack a universal access policy. 6. Inadequate private sector involvement Private sector involvement has not yet been adopted by many LDCs. 7. Insufficient regional cooperation Cooperation for regional links, pooled equipment purchases, shared training, and technical specifications on equipment has rarely been fully developed. 8. Organizational limitations • Because telephone services are provided by monopoly, i.e., government-run organizations in most LDCs, there are few incentives for better performance. • It is difficult to retain qualified staff due to low salaries. Regarding managerial constraints, Kyong (1995) suggests that experts in such fields as management consulting, legal issues on technology, finance, and policy in relation to information and communications are also in short supply. Moran (1994) stated that telecommunications administrations in LDCs are having difficulties making telephone service available to everyone in the country, keeping abreast in digital technology, and keeping up with an ever-changing environment. These problems come from the insufficient planning capabilities of the operator and the government. Kirunda-Kivenjinja (1995) pointed to obstacles such as inappropriate organizational and managerial ability, the loss of trained staff, the necessity to adapt training materials to advanced technologies, and the difficulty of keeping up with technology. He showed that there are organizational, managerial, human resources, and technology-related obstacles in LDCs. Furthermore, he shows that maintenance of existing equipment leaves much to be desired. In some countries, malfunctioning telephone equipment waits for months before a maintenance team comes to the rescue. The maintenance process is slow even after problems are identified, unless the team gets

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“benefits” (a spiced term used for bribes). Lack of management plans for maintenance and low salaries open the way to corruption and perpetuate the sluggish maintenance processes. Other external factors such as weather, roads, and sewerage tunnel building make maintenance much more difficult. The latter is a menace to the reliability of telecommunication networks. One of the key trends in the growth of teledensity during the past decade is the shift of control, i.e., deregulation, liberalization, and privatization of telecommunications entities worldwide. The divestiture of AT&T in the United States and the privatization movement in the United Kingdom in the early 1980s triggered this trend. Regardless of this prevailing trend and the notorious structural problems of government-operated telecommunications entities, many LDCs have not yet changed how they provide telecommunications services. Most of these reforms are opposed by the government departments providing telecommunication services in many LDCs (Chowdary, 1992). Such resistance to change can be an organizational hindrance to telecommunications development in LDCs. In addition, Pisciotta (1994) found that significant resistance to reform comes from national security concerns. This is a political obstacle to reform. The monopolistic and parochial culture of LDCs’ telecommunications operators is also reflected in the mounting tariff and awkward traffic situation in LDCs. The average telecommunications revenue per subscriber line in Europe is about US $770, while the average in LDCs is roughly double that at US $1,460 (Paltridge, 1994). Given the lower per capita income in LDCs, the ratio of revenue in LDCs to that of Europe is extremely high. Restrictions for private investors to provide telecommunications services further raise the high cost of telecommunications services. Statistics show that data transmission in Europe costs two to three times that of the US due to more restrictions in Europe (Paltridge, 1994). In LDCs, where restrictions are even higher, the costs are also exorbitantly high. Institutions and/or individuals are charged a rate of four to eight times that of Europe and four to twenty times that of the United States for the same volume of calls. An unanswered question here is whether complete privatization will bring down these costs. In some countries, the governments are the sole operator of telecommunications and ban the importation of telecommunications equipment. Consumers are denied the freedom to attach or own their preferred equipment for computing or communications to telephone networks. Telecommunications administrations in many LDCs lack basic knowledge of key global trends in the telecommunications sector (Jensen, 1995). Saunders (1982) presented the following constraints to teledensity growth in LDCs, addressing organizational, political, and policy obstacles: • Inadequate efforts by telecommunications entities to achieve a higher national priority for the telecommunications sector. • Lack of understanding among planning and finance ministers of the significant importance of higher levels of teledensity. • Telecommunications pricing and investment policy not analyzed together with national investment policies. • Incorrect perception that rural public telephone service is unprofitable. • Insufficient financial and management autonomy of the operating entities. While all the above obstacles exist in LDCs, Hudson (1983) presented one obstacle attributed to LDCs. She pointed out that international development institutions charged with

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assisting LDCs had not understood the role of teledensity for LDCs. She argued that those institutions were inclined to regard telecommunications in general as an urban luxury and their loan requirements tended to ignore services in rural areas. These obstacles are classified as financial, technological, managerial, economic, geographical, policy, and organizational in nature. A summary of the discussions above is presented in Table 3.

STRATEGIES TO OVERCOMING THE OBSTACLES Equally important to an analysis of the obstacles to the growth of teledensity is an analysis of strategies to overcome them. The discussion that follows will examine some fundamental strategies that LDCs must consider as a panacea for the obstacles to the growth of teledensity. This discussion will also include several success stories of countries that have graduated from the LDC status and the strategies they implemented. Table 4 summarizes some of the strategies to overcoming the obstacles. Regarding policy and regulation related strategies, Ras-Work (1995) advocated the Build Operate Transfer (BOT) scheme as an alternative to privatization of the government operator in LDCs (as reported in Ryota, 1996). Kelly (1995) regarded the new licensing policy for cellular operators and international gateways in the Philippines as the primary factor that brought the dramatic increase of main lines in 1993. Gatica (1994) attributed the growth of teledensity in Chile to a new legal framework adopted by the government. In order to promote investment from the private sector and alleviate risks born by private operators, Sekizawa (1995) suggested policies such as the establishment of an independent regulatory body, securing fair interconnection among operators, and securing a minimum return for private operators. In Tanzania, Kiula (1994) suggested that sector restructuring and commercialization should first be implemented and privatization should be introduced where feasible. Regarding the reform of policy and regulation, Harrington (1995) surveyed a number of telecommunications reforms taking place in the Asia Pacific region and argued that the restructuring of the telecommunications sector in LDCs should be a way to attract capital to promote the growth of teledensity. While admitting the importance of restructuring the telecommunications sector, Ure (1993) added that reform should proceed with a clear vision of national economic development. As to technology related strategies, Harrington (1995) discussed the advantages of a wireless access network. Cutler (1994) also advocated the use of wireless technologies in the local loop. Kiula (1994) warned that LDCs should avoid the use of obsolete technologies and non-standardized equipment from DCs. Regarding local manufacturing, Olanrewaju (1995) argued that local manufacturing capability would ensure rapid development of telecommunications services in LDCs.

Strategies Implemented by Other African Countries — Lessons Learned Researchers have shown the fundamental importance of looking at telecommunications strategies implemented by other countries as benchmarks for strategies other countries can adopt to improve on their telecommunications infrastructures (Cole, 1991; Temin, 1987;

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Table 3: Factors that Promote/Hinder Growth of Teledensity in LDCs

Factor Economic

Financial

Technological

Managerial

Organizational

Policy

Political

Geographical

Summary Gross Domestic Product Gross Domestic Product per capita telecommunications traffic over time, number of tourists per year, volume of international trade. scarcity of foreign exchange investment inefficiencies (high installation cost per line) outdated equipment inadequate maintenance

Reference Saunders et al., (1983) Mbarika (1999); Mbarika et al. (2001) Yatrakis, (1992)

lack of internal organization and management shortage of managerial consultants/ experts inappropriate organizational and managerial ability and loss of trained staff international development institutions charged with assisting LDCs had not understood the role of teledensity for LDCs. insufficient financial and management autonomy of the operating entities telephone services are provided by monopoly, government-run organizations absence of universal access policy inadequate private sector involvement incorrect perception that rural public telephone service is unprofitable the next available aid package power holders in government tend to oppose development of teledensity fearing that the development would weaken their positions government resistance due to national security concerns insufficient regional cooperation

Wellenius (1989)

ITU World Telecommunication Development Report (1998) Wellenius (1989) Kyong (1995) Kirunda-Kivenjinja (1995)

Hudson (1983)

Saunders (1982)

ITU World Telecommunication Development Report (1998) ITU World Telecommunication Development Report (1998) Saunders (1982) Tabai (1994) Parker (1992), Chowdary, (1992)

Pisciotta (1994) ITU World Telecommunication Development Report (1998)

ITU World Telecommunication Development Report (1998)

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Table 4: Summary of Strategies to Overcoming the Obstacles and Countries that Have Adopted the Given Strategies Obstacle Government regulations/ control

Policy

Technological

Strategy to overcome obstacle privatization / corporatization of the government operator

Strategy adopted by Botswana, Gambia, Egypt, Zimbabwe

Reference Mbarika et al., 2002; RasWork (1995); Kiula (1994)

encourage competition for the provision of telecommunications services

Bostwana, Gambia, Zimbabwe

Jensen (1999)

establishment of an independent regulatory body make telecommunications a national priority

Egypt, Zimbabwe, Tunisia

Sekizawa (1995)

Botswana, Gambia, Mozambique

Jensen (1999)

involve both governmental and nongovernmental stakeholders in the development process establish wireless access networks

Mauritius, Ghana

Gambia, Egypt, Zimbabwe, Ghana

avoid use of obsolete technologies

Harrington (1995); Cutler (1994) Kiula (1994)

promote local manufacturing encourage research and development of telecommunications infrastructures

UN-ECA (1999)

Zimbabwe, Tunisia

Mbarika et al., 2002; Olanrewaju (1995) UN-ECA (1999)

Weinhaus & Oettinger, 1988). A given country’s approach can help determine the speed and direction of structural changes in other countries. The purpose is to ascertain the lessons that African LDCs can learn from other countries that “graduated” from the list of LDCs. Based on this, we will, therefore, use several countries as examples to justify the suggested strategies from the literature. It has not been all bad for LDCs. There have been several success stories of countries that have graduated from the LDC status. The ITU World Telecommunication Development Report (1998) used the case of Botswana and The Gambia as “graduates” from the list of Least Developed Countries.

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Table 4: Summary of Strategies to Overcoming the Obstacles and Countries that have Adopted the Given Strategies (Continued) Obstacle Managerial

Strategy to overcome obstacle human resource development

Strategy adopted by Uganda, Mauritius, Ghana

educate the stakeholders

Ghana, Mozambique, Mauritius

restructuring of the telecommunications sector

Gambia, Botswana, Tunisia

reform should proceed with a clear vision of national economic development attract capital by restructuring of the telecommunications sector

Mozambique, Tunisia

Reference Jensen (1999) UN-ECA (1999) Harrington (1995) Ure (1993)

Financial

encourage private investments in telecommunications services attract capital by encouraging growth of the service sector (tourism, transportation, etc.) Geographical

promote universal service, e.g., establish payphone services or telecenters in every village

adopt wireless technologies, e.g., cellular and VSAT technologies

Tunisia, Egypt, Gambia

Harrington (1995)

Botswana, Gambia, Tunisia

Panos (1998)

Mauritius

Jensen (1999); Mbarika (1999)

Botswana, Egypt, Tunisia, Ghana, Uganda

ITU World Telecommu nication Development Report (1998)

Gambia, Egypt, Zimbabwe, Ghana.

Harrington (1995); Cutler (1994)

Botswana The case of Botswana is in line with the fact that its telecommunications infrastructure is one of the most modern and extensive in Africa (Ogden, 1995). The same 1998 ITU report showed that some 43,500 subscriber lines are in operation, and all are connected to digital exchanges. That gives a teledensity of 3.1 lines per 100 population, which is the third highest in Sub-Saharan Africa. The network has grown at a rate of 20% per year since 1987. The national operator, Botswana Telecommunications Corporation (BTC), completed a fiberoptic backbone network in 1994. This links the main cities and is intended to supplement the existing microwave inter-exchange network. The focus of investment is now shifting to customer networks, particularly in rural areas. Investment in new technology has enabled the BTC to

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offer packet-switching services since June 1992 and radio-paging since May 1992. A mobile cellular service is under development. Clearly Botswana is not representative of LDCs as a whole. Its economy is based on diamonds and other natural resources, and it has a growing income from tourism. It also has a small population, 1.4 million, spread over a very wide area. Nevertheless, there are certain steps that Botswana has taken since independence that could be emulated by the LDCs. These steps include: • Separation of the Public Telecommunication Operator (PTO) from the State. Even though BTC is government-owned, it was formally separated from the state in 1980 and is managed by the British-based company, Cable & Wireless. • BTC maintains a high quality of service with some 80% of all faults repaired by the next working day. It recently launched a Total Quality Management strategy and has been sampling customer satisfaction levels on a monthly basis. • While concentrating initially on providing services to the business community, BTC is now widening its reach. In 1992, for the first time, 50% of all lines served residential subscribers and the number of payphones installed grew by 10%. BTC has publicly announced a policy of providing at least one pay phone in every village of the country with population over 500.

The Gambia The case of The Gambia (“small can be beautiful”) is also a major success story. The Gambia is one of the smallest countries in Africa, a narrow return strip of land astride the River Gambia covering some 11,300 square kilometers, with a population or less than one million. It is also one of the most developed nations in Africa from a telecommunications perspective. It stands among the top five fastest growing African telecommunication economies over the last decade. The Gambia Telecommunications Company (GAMTEL) has a somewhat unusual structure in that it is owned by the Ministry of Finance and Economic Affairs (99%) and by the Gambia National Insurance Company Ltd. (1%). One of the reasons for its success is that the process of “corporatization,” or separation of the operator from the state, took place relatively early. In March 1984, GAMTEL was established as a private limited company under the Companies Act. As such, it has found it easier than other telecommunications operators in Africa to attract funds for investment. In addition to upgrading its basic telephone network through the installation of fiberoptic links in the inter-exchange network, GAMTEL has also introduced new telecommunication services, often setting the pace among other African nations in this regard. Its mobile cellular service (GAMCEL) had a subscriber base of 450 at the end of March 1994. During that year, a packet-switching service was introduced to complement the leased line service already offered to customers. Other African countries that have moved off of the list of LDCs include Mozambique, Mauritius, Ghana, and Uganda. These countries have also implemented several strategies to improve growth of teledensity (Jensen, 1999; UN-ECA, 1999).

Mozambique The Mozambique government has made information and telecommunications technology a major national priority and has placed a particular focus on educating the telecommu-

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nications stakeholders. To this end, the participation of both the public and private telecommunications sectors has been encouraged. The “Commissao para a Politica de Informatica da Republica” was formed, consisting of the Prime Minister, the Ministers of Education, Planning and Finance, Transport and Communications, the Vice Rector of the University, the commercial director of the public telephone operator (PTO) (TDM), and an executive secretary. Various workshops have been held with participation from the major public institutions and the private sector to develop the draft document. Major areas of focus include (but are not limited to) telecommunication infrastructure, private/public sector partnerships, research and education networks, electronic commerce, and especially universal access to information and international co-operation. The International Development Research Center’s (IDRC) Acacia program is assisting with the process.

Egypt The Egyptian approach has been that of corporatization. The public telecommunications operator converted from a government department to corporation when the Arab Republic of Egypt Telecommunication Organization (ARENTO) was incorporated in 1980. ARENTO changed its name to Egypt Telecom in 1997. It has a board of 11, which is appointed by the government. Egypt Telecom is wholly owned by the government and is under the day-to-day supervision of the Ministry of Transport and Telecommunications. Egypt Telecom has procurement autonomy. However, international loans and grants are accepted by the government and passed on to Egypt Telecom, sometimes with an interest mark-up. Egypt Telecom pays 42% corporate income tax on profits, and there are no subsidies received or paid. The government has also announced that Egypt Telecom will be gradually privatized. The new Telecommunications Regulatory Board (TRB) was formally established in 1996. Egypt has also adopted a strategy to improve telecommunications services for niche markets. Providing licenses for value-added services and services targeting niche markets are becoming increasingly acceptable as the core perception for Egypt Telecom as a basic service provider crystallizes. Egypt Telecom was given exclusive concession to provide basic national and international telecommunication service and infrastructure, with an exception for private VSAT networking. Egypt Telecom also has a manufacturing arm, the Egyptian Telephone Company (ETC), which has entered into joint venture agreements with Siemens, Alcatel, and Ericsson for the manufacture and assembly of digital switches, PBXs, and telephone sets. In addition, limited competition has been allowed in the mobile telephone industry since 1997. An offer of a 30% stake in the state-run Egyptian Mobile Phone Service Company was more than 50 times oversubscribed. The National Bank of Egypt stated that the offer had closed after 10 days because of the intense demand for the 18 million shares being sold.

Zimbabwe There is no formal government policy process for developing a national information infrastructure in Zimbabwe. However, national academic and research networking is being supported by the Research Council of Zimbabwe (RCZ), which has recently begun receiving assistance under the Sustainable Development Networking Program (SDNP) of the UN Development Program (UNDP). There is currently no separate telecommunications regulator, and the sector is the responsibility of the Ministry of Information, Posts, and Telecommu-

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nications. Zimbabwe is one of the few remaining countries in the Southern African region that still maintains posts and telecommunications functions within one organization. The government-run department of post and telecommunications was converted to a corporation in 1972. The government recently published a draft Communications Bill, which is to establish a separate regulatory authority. The Communications Bill also seeks to remove the monopolies held by Zimbabwe Broadcasting Corporation (ZBC) and PTC in the broadcasting and telecommunications sectors, respectively. There is a monopoly of basic services and basic infrastructure but competition in value-added network services and cellular/mobile services. Recently, a second cellular provider was licensed after protracted court battles for approval. The Zimbabwean government has agreed to partially privatize Net One after the amendment of the existing act. In February 1998, the government decided to grant an operating license for a Group System Mobile (GSM) network to Telecel Zimbabwe, while at the same time requesting Telecel to drop court cases. Telecel Zimbabwe has accepted the government’s proposal.

Tunisia The Ministry of Communication regulates the telecommunications sector. Reform in telecommunications is a key government consideration, and the government aims to support private initiatives and enhance investment and enterprise in general. Part of the commercialization policy is diversification of access network technologies to include Group System Mobile (GSM), and rural telephony. To this end, the gradual restructuring of Tunisia Telecom is taking place to create room for new services and networks under an independent regulator. The process of functional separation of operational and regulatory activities began with the 1997-2001 plan. It involves structural adjustment and separation of responsibilities into Tunisia Telecom as the public network operator and CERT (Telecommunications Study and Research Center) as the regulator. Telecom’s investment in the current five-year plan (1997-2001) is expected to be $1.5 billion, which is 4% of the national gross domestic fixed investment. This will be directed to the following areas: • Extension and modernization of the national network; • Promotion of international telecommunications to unlock the national economy; • Development of new services and promotion of value-added services; • Initiation of the demarcation of regulatory and network operations through restructuring and adjustment of the institutional environment; • Development and promotion of partnerships in international telecommunications through technology transfer; implementing productivity standards, and stimulating exchanges; and • Exploring participation in the Africa One and TransMaghreb cable projects with a view to turning Tunisia into a hub and platform for regional and international telecommunication.

Mauritius One major strategy examined earlier is to encourage the growth of the service sector (tourism, transportation, etc.) in a bid to improve the growth of teledensity. The National Computer Board (NCB) manages a national information and telecommunications strategy plan which is currently under active development as part of the Mauritius’ government’s

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strategic objectives to move the country toward an information age economy. The Phase 1 study was carried out in 1997 with assistance from National Computer Systems (NCS), Singapore, and following an innovative “gap analysis” that compared the current status of the “infrastructure” to the visions of Mauritian leaders, five medium-term objectives have been adopted for the proposed Phase II of the plan: • To enable the service sector to grow; • To develop into a business hub; • To improve efficiency and effectiveness of public services; • To bring the Government closer to its people; and • To enhance the education system and services.

Ghana A draft national information and communications policy has been developed by the Ghanaian National Information and Communications Committee (GNICC) that is comprised of representatives from the academic, research, government and private sectors and coordinated by the University of Ghana, Legon, Balme Library. Support for the GNICC has been widespread, including governmental, with participation from the Ministry of Environment, Science and Technology, with the Ministry of Transport and Communication . The Ghana Government has indicated its support for promoting access to ICTs in all segments of society, particularly in the educational system.

Uganda Based on a quasi-official process coordinated by the Uganda National Council on Science and Technology, stakeholder groups are aiming to develop a national information and telecommunications policy. Areas of initial focus are: • Universal access, • Human resource development, • Support for good governance, and • Appropriate infrastructure development.

CONCLUSION AND IMPLICATIONS FOR FURTHER RESEARCH This study has explored academic and organizational literature to examine those factors that promote or hinder the growth of teledensity in LDCs. The study suggests that various policy, economic, financial, managerial, organizational, technological, political, and geographical factors are important determinants for the growth of teledensity in LDCs. This is a step further than the Bernt and Weiss (1993) general framework for determinants for growth in teledensity that had four factors: regulatory, economic, organizational, and technical. Therefore, a major contribution of the study is the extension of our knowledge in four important areas: • the importance of high levels of teledensity for LDCs; • the nature of the underdevelopment of teledensity in LDCs;

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• •

the obstacles that have slowed the expected advancement of teledensity development; and possible future strategies that may be effective in overcoming the obstacles.

Considering the obstacles to the growth of teledensity for LDCs, another major contribution of this study is linking those obstacles with specific strategies to overcome these obstacles. Past literature has established several individual factors that are obstacles to growth of teledensity; however, the link between obstacles and strategies was never explicitly examined in those studies. Those studies proposed strategies without clarifying the targeted obstacles. The findings of this study can be used to provide prescriptive directions to the policymakers of LDCs and the development agencies that are in charge of improving the teledensity of the countries. These policy-makers and development agencies can look at some the strategies mentioned above, as well as examples of countries that have used similar strategies to improve on their levels of teledensity. We believe this can be done considering that certain LDCs, both large and small in size, have been able to establish high-quality telecommunication services at least as good as some developed countries, in spite of low levels or GDP per capita. This demonstrates that with a well-managed telecommunication organization, even the poorest country can have an efficient telecommunication network and services and, hence, high levels of teledensity. Further research is still needed in this area. Most of the research on factors that influence growth of teledensity globally have been qualitative. The factors identified in this study can be used to develop a set of hypotheses that can be empirically tested so as to make the findings more generalizable. Furthermore, from a theoretical point of view, this study can be expanded to focus on those countries at a similar stage of telecommunications infrastructure and service development. Toffler (1990) identifies three distinct groupings among LDCs according to their economic development. Similarly, Jamison (1991) claims that in many domains of modern intellectual life, implicit assumptions of uniformity or homogeneity have been discredited and largely abandoned. The discovery of an unexpected degree of variability in systems being studied has led to a revision of theory and practice in fields. Thus, a study that does not see LDCs as one coherent group of countries in the world but, rather, takes into account their heterogeneity will be necessary to diagnose their unique problems and prescribe the most appropriate solutions. While it is true that there are existing factors that hinder growth of teledensity in LDCs, it must be noted that, in recent years, most of these countries have exerted great effort to improve on the state of teledensity and other telecommunications infrastructure. An example here is that of the continent of Africa, which finally reached a plateau teledensity of one in the year 2000 (ITU, 2001). Other reports show that Africa is growing faster than the world average in mobile cellular (GSM) penetration (Telegeography, 2002). This could be an indicator of a bright future for the LDCs’ levels of teledensity in particular and other telecommunications infrastructure in general.

ENDNOTES 1

APQLI comprises four indicators: life expectancy at birth, per capita calorie supply, school enrollment ratio, and adult literacy rate.

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288 Mbarika 2

EDI comprises the share of manufacturing in GDP, the share of employment in industry, per capita electricity consumption, and the export concentration ratio.

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Mbarika, V., Musa, P., Byrd, T. A., & McMullen, P. (2002). Teledensity growth constraints and strategies for Africa’s LDCs: “Viagra” prescription or sustainable development strategy? Journal of Global Information Technology Management, 5(1): 25-42. McClelland, P. (1998). Causal explanation and model building in history, economics, and the new economic history. Ithica, NY: Cornell University Press. Minges, M. (1995). Towards an African information infrastructure, African Regional Symposium on Telematics for Development, Addis Ababa. Montealegre, R. (1996). Implications of electronic commerce for managers in less-developed countries. Information Technology for Development, 7(3): 145-152. Moran, W. M. (1994). Telecommunications in transition. IEEE Communications Magazine, 32(11): 26. Ogbe, O. (1990). Introductory Remarks. In Proceedings of Africa Telecom ‘90, ITU, Harare. Geneva: ITU. Ogden, M. R. (1995). Widening the chasm or closing the gap? Converging information & Pacific Island microstates. In R. Nickelson & D. J. Wedemeyer (Eds.), Proceedings of PTC ’95, (pp. 592-599). Honolulu: Pacific Telecommunications Council. Olanrewaju, A. T. (1995). Investment needs: Resourcing for growth-capital formation, human resources. Telcom95. 7th World Telecommunication Forum. Strategies Summit Speakers’ Papers: Vol. 1. Breaking down barriers toward the global information society (Session 14-2). Geneva: ITU. Paltridge, S. (1994). A survey of tariff structures in Africa - Comparison to the rest of the world. Africa Telecom ’94, Cairo. Panos Institute, The (1998). The Internet and poverty: Real help or real hype? London: The Panos Institute. Parker, E. B. (1992). Developing third world telecommunications markets. The Information Society, 8: 147-167. Peirce, W. B. & Je’quier, N. (1983). Telecommunications for development. Geneva: ITU. Pisciotta, A. A. (1994). Telecommunications reforms: Options, models, and global challenges. IEEE Communications Magazine, 32(11): 28-31. Ras-Work. T. (1995). Are there Alternatives to Privatization?. Telecom 95, 7th World Telecommunication Forum, Strategies Summit Speakers’ Papers Vol. 1. Breaking down barriers towards the global information society (Session 12-6). Geneva: ITU. Rorissa, A. (1996). The impact of introduction of electronic communication in Ethiopia: A survey. Ethiopian Scientific Society Conference. Ryota, O. (1996). Worldwide probe of the telecommunications gap from developing country and developed country perspectives. Hawaii: University of Hawaii. Saunders, R. J. (1982). Telecommunications in developing countries: Constraints on development. In M. Jussawall & D.M. Lamberton (Eds.), Communication economics and development, (pp. 190-210). Honolulu: The East-West Center. Saunders, R. J., Warford, J., & Wellinius, B. (1983). Telecommunications and economic development. Washington DC: The World Bank. Saunders, R. J., Warford, J. I., & Wellenius, B. (1994). Telecommunications and economic development (2nd ed.). Baltimore, MD: John Hopkins University Press. Sekizawa. T. (1995). Critical formation for building telecomm infrastructure in developing countries: Utilization of private funds and mission of suppliers. Telecomm 95, 7th World Telecommunication Forum, Strategies Summit Speakers’ Papers Vol. 1. Breaking down barriers toward the global information society (Session 13-6). Geneva: ITU.

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Chapter XV

Information and Communication Technology in Singapore: Lessons for Developing Nations on the Role of Government Leo Tan Wee Hin Nanyang Technological University and Singapore National Academy of Science, Singapore R. Subramaniam Nanyang Technological University and Singapore National Academy of Science, Singapore

ABSTRACT Information and Communication Technologies (ICT) hold great potential for promoting socioeconomic development in many developing countries. ICT has not significantly percolated down the economic value chain in these countries for various reasons. The example of Singapore is used to show how governments can make a difference in entrenching a vibrant ICT sector through appropriate policies, programs, and other intervention instruments. It is suggested that aspects of the Singapore experience would be useful for other developing countries.

INTRODUCTION Information and Communication Technologies (ICT) are increasingly pervading various aspects of societal endeavors and economic activities. Referring to the agglomeration Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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of telecommunication, computer, and broadcast technologies, it is giving rise to what is commonly referred to as the information economy or knowledge-based economy. The relentless pace at which globalization and the Internet are shaping the contours of the politico-economic landscape makes it imperative that nations address the oncoming challenges. Though ICT is well entrenched in the developed world, it has not diffused sufficiently in many countries in the developing world, thus contributing to the digital divide. There are a number of reasons for this state of affairs. One reason is the low emphasis being placed on science and technology for national development in these countries (Tan & Subramaniam, 1998,1999). Another reason could be that ICT is perceived as a trivial public utility, mainly for high officials (Adam, 1996). Though ICT is prevalent in some sectors such as airlines and banking in these countries, it has got to do more with the need to comply with international standards and regulations rather than to national initiatives. The relatively modest pervasiveness of ICT in capital cities in a number of developing countries is a reflection of the need to cater to the presence of foreign embassies, big businesses, and multinational companies operating there. The fact that ICT has not percolated down the economic value chain in most developing nations means that they would not be able to participate effectively in the emerging information economy. Even though the value and role of ICT in promoting socioeconomic development is not clear, owing to the absence of concrete quantitative measures that can correlate explicitly the extent to which ICT can accelerate such development, it is a given that it is a major determinant. The example of Singapore is often quoted to advance the view that ICT has enormous potential to stimulate growth in all sectors of the economy (Avgerou, 1998). As an advanced developing nation, Singapore has realized the benefits of ICT to a significant extent, so much so that it now contributes to about 20% of the Gross Domestic Product. A lot has got to do with the role of government in formulating the necessary policy frameworks, creating the necessary enabling environments, and chalking an effective implementation strategy with well-defined milestones to engender this state of development. The principal objective of this chapter is to share details of important policies, incentives, and programs initiated by the Singapore government to fuel the development of ICT, and to suggest that aspects of the Singapore experience would be relevant for other developing nations. Significant emphasis is placed in this chapter on the role of telecommunications, as it is a key infrastructure for realizing efficient and affordable communication as well as accessing information. The following is a roadmap for this chapter. The first section provides brief details of Singapore. The second section reviews the literature on the development of ICT in Singapore. Some of the more important policy instruments, incentives, and programs initiated by the Singapore government to promote ICT are presented in the third section. A discussion of the thrust of this chapter in the context of developing nations is done in the fourth section. The chapter completes with the fifth section, the conclusion.

SINGAPORE As an island state located in Southeast Asia, Singapore is a tiny country with a land area of 683 sq. km. and a population density of about 6,000 persons per sq. km. It is an immigrant society with a multiracial background. Its per capita income in the year 2000 was S$42,212.

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With no natural resources, Singapore places great emphasis on the development of its human resource potential and the judicious harnessing of science and technology to circumvent various constraints and limitations. Singapore is basically an industrial society, with an export-driven economy, the value of which is thrice that of the domestic economy.

Review of Literature on ICT Development in Singapore The development of ICT in Singapore is well documented in the popular press and in IT magazines. However, it has been addressed in only a limited way in the international journal literature and in scholarly treatises. We review the pertinent references here insofar as these are relevant to this chapter. Chia, Lee and Yeo (1998) summarize the ICT experiences in Singapore in the 1980s and review the ICT plan for the 1990s. The initiatives and incentives taken by the government to build and promote the National Information Highway (NII) are discussed. Also, the paper traces the origins of the Internet in Singapore and how it has spurred the development of the necessary infrastructure as well as related services and applications. Wong (1996) traces the implementation of the NII in greater detail. He analyzes the context in which the IT 2000 initiative was formulated in 1991, its specific goals and strategic thrusts, and the institutional frameworks for its implementation. The article also provides an assessment of how the implementation framework has evolved, some of the major policy decisions made, the institutional reforms undertaken, and the development projects initiated. Tan and Subramaniam (2000, 2001a) focus on issues leading to the establishment of the world’s first nationwide broadband network in Singapore and emphasize how it has helped to drive Internet penetration rates. They also discuss some of the key telecommunication policy instruments in the context of the liberalization and deregulation of the telecommunications sector in Singapore (2001b) While these articles are useful in comprehensively surveying the ICT scene in Singapore, they do not address those aspects in significant depth that would be useful for replication by other developing nations. Therein lies the axis of digression for this chapter.

Role of Government In Singapore, the vibrancy of the ICT sector is mainly due to the efforts and foresight of the government in putting in place a series of policies, incentives, and implementation programs to fuel its development. As it is not the objective of this chapter to review all the policies with respect to the ICT sector in Singapore, we are focusing on eight key aspects that were initiated by the government and the spirit of which can be replicated by other developing nations. The aspects are not presented in any particular order of importance.

Privatization of National Telecommunications Carrier State-owned telecommunication behemoths, by virtue of their monopolistic hold and insulation from competition, are generally ineffective. Not exposed to the rigors of the free market enterprise, they are slow in responding to market developments. Inefficiency steeps in, and this is generally reflected in the inadequate level of service to consumers as well as the high tariffs. Freeing telecommunication companies from state control would help to make them more efficient and force them to be market-responsive. In fact, the trend towards liberalization and deregulation in the telecommunications industry in the late 1980s and early 1990s has got a lot to do with the inefficiency of state-owned carriers. Copyright © 2003, Idea Group Inc. Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited.

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Compared to state-owned telecommunication carriers in other countries, Singapore’s national telecommunications carrier, Singtel, is remarkably well run. Even before deregulation and liberalization, it has put in place a modern telecommunications network with good service levels. There is, in fact, very little justification for privatizing Singtel — after all, the aim of privatization is to make the company operate more efficiently and profitably. In the early 1990s, the government recognized that the pace at which developments in the ICT industry are occurring is likely to impact on various aspects of society and industry in a profound manner. It rationalized that competition in the provision of various telecommunication services would help to diffuse the benefits of ICT down the economic value chain in a more cost-effective manner than if it were to be undertaken solely by the national telecommunications carrier. This led to the privatization of Singtel in 1993. In the process, the government divested 11% of its equity to the public through a massive initial public offering, which offered citizens discounted shares. It also gave Singtel a 15-year time horizon until 2007 to prepare for competition. However, three years later in 1996, the government realized that the unprecedented rate at which developments in the ICT industry are occurring globally made the 2007 timeframe rather impractical. This led to the curtailing of Singtel’s exclusivity in fixed-line telephony by seven years to 2000, when it began to compete with Starhub, a consortium in which Nippon Telegraph & Telephone and British Telecom have significant equity stakes, in the provision of basic telecommunication services. The privatization of Singtel was a wise move. Freed from government control in its management, Singtel has been able to operate independently and seek growth opportunities without being constrained by bureaucratic hurdles. More importantly, privatization allowed Singtel a great opportunity to raise funds for expansion and upgrading from the initial public offering. If these funds had to be raised from the capital markets, the hefty interest rates would have been a drag on its profitability. The government later hived off a further 22% of its equity in Singtel to the public through another public offering. Privatization has transformed Singtel into a giant multinational corporation, with a market capitalization in excess of US$25 billion and investments of over US$2.9 billion in over 100 ventures in more than 20 countries in Europe and Asia. In the year 2000, more than 27% of its revenue came from its foreign subsidiaries. It now spends about US$0.5 billion each year on upgrading its network infrastructure. Though Singtel is run as a private company, it is generally perceived to be a governmentlinked company as the latter still holds majority equity (67%). It is not clear why the government is not divesting its entire shareholdings to transform Singtel into a truly private corporation, but we believe that the following are some of the reasons: a. In Singapore, Government-Linked Companies (GLCs) have a reputation of being very efficiently run and of being highly profitable. They contribute to about 11% of the GDP annually. It therefore made sense for the government to retain some equity and perpetuate the image of Singtel as an efficient GLC, even though the management is independent. b. It is an insurance to forestall against any adverse developments precipitated by privatization and to cushion against uncertainties in the fast developing ICT industry. c. The national telecommunications carrier is important from the strategic viewpoint of security, especially as Singapore is a small country.

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Attracting Multinational Corporations In the face of competing demands from various sectors of the economy, there is a limit to the amount of funds that a government can commit to any sector. Too often, the fiscal allocation for a particular sector is barely sufficient — more so in the case of growth sectors such as ICT that need a constant influx of funds in order to fuel development. The challenge is to see how foreign investments can be drawn into growth sectors to complement government efforts It makes good economic sense to attract multinational corporations into growth sectors for the following reasons: • they bring in foreign investments; • they bring in new technologies; • they create jobs for locals; • they bring in rich management experience and expertise; • they help to jump-start growth in a sector; and • they create downstream activities for other local companies in the economic supply chain. Singapore has recognized the utility and value of having multinational corporations (MNCs) as partners in nation-building. There are now over 7,000 MNCs operating in Singapore, and they contribute over 50% toward the GDP. Some of the more important companies operating in the telecommunications sector, where MNCs have significant equity stakes, include: a. Singapore Cable Vision, a consortium in which US-based Continental Cable Vision had an equity stake. This consortium has invested over S$500 million in wiring up all homes and offices in Singapore for broadband access via Hybrid Fibre Co-axial technology without any guarantee of subscription income. b. Starhub, a telecommunications consortium in which Nippon Telegraph & Telephone and British Telecom have significant equity stakes. This consortium competes with Singtel in the provision of basic telecommunication services. c. MobileONE, a consortium in which Cable & Wireless of USA and Pacific Century Cyberworks of Hong Kong have significant equity stakes. This consortium is Singapore’s second cellular phone operator. d. Virgin Mobile, a consortium in which the Virgin Group of UK has an equity stake. This consortium is Singapore’s third mobile phone operator. e. UUNet of USA, which is the first foreign company to get an Internet Access Service Provider’s license in Singapore. The company also offers broadband services. While MNCs are always looking for growth opportunities, they also seek to minimize risks to their investments. Thus a proactive business policy is needed to incentivize them to invest in a country. While no national agency can guarantee MNCs profits, governments can create a favorable environment for them. In this context, a slew of tax incentives are in place for MNCs to invest in Singapore. Where possible, the government has also taken the lead in sharing the risks associated with the entry of MNCs into new markets by taking minority equity stakes through one of its GLCs. This is a strategic initiative, as the perception that the government is a stakeholder in the joint venture helps to overcome set-up hurdles and

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minimizes uncertainties for MNCs. Some of the GLCs that have partnered with MNCs in the telecommunications sector include: a. Singtel, in Virgin Mobile; b. Media Corporation of Singapore, Singapore Press Holdings and STT Communications, in Singapore Cable Vision; c. ST Telemedia, in Starhub; and d. Keppel Group and Singapore Press Holdings, in MobileONE. Of interest to note is that the joint ventures have helped dramatically to fuel the penetration rates of the various telecommunication services in Singapore as well as make the consortiums profitable.

Facilities-Based Operators vs. Services-Based Operators In Singapore, deregulation and liberalization was introduced in a phased manner. Table 1 summarizes some of the important milestones in the liberalization of the telecommunications market in Singapore. During the early stages, the emphasis was more on getting Facilities-Based Operators (FBOs) to set up operations. This is very important in laying the foundations for an advanced telecommunications infrastructure. FBOs wishing to enter the market were required to invest in advanced telecommunications infrastructure so that it could support a plethora of services. Also, nationwide deployment of network infrastructure was mandated in order to have the potential to enlarge the subscriber base as well as serve communitarian objectives. The emphasis on attracting the right FBOs ensures that the operators will stay in the market for a good length of time. For example, all mobile phone carriers, paging operators, and broadband players have set up their own networks. Interoperability was instituted as a proviso, otherwise systemspecific subscriber bases would evolve, with its attendant disadvantages In encouraging FBOs to set up operations, a reasonable moratorium period was instituted, after which they would have to face competition. The intervening period provides operators a measure of certainty to draw up marketing plans, with a view towards increasing their subscriber base as well as generating a steady revenue stream. Once the objectives of having FBOs were realized, the concept of Services-Based Operators (SBOs) was instituted. The intent was to further enhance the value and utility of the various operators’ networks. SBOs typically lease out elements of a telecommunication operator’s network (e.g., switching services, transmission capacity, etc.) and then repackage them for selling to third parties. This is a win-win proposition for both FBOs and SBOs as each of them have their own niche strengths and contribute toward enhancing the effectiveness of the network further. To ensure that new players are not disadvantaged when accessing the incumbent operators’ networks and to ensure an equitable sharing of revenue from interconnection costs, the telecommunications regulator has drawn up a Code of Practice for all operators to follow. The distinction between carriers (FBOs) and service providers (SBOs) is not readily apparent as it is a new concept, but it does play an important role in enhancing the value and utility of a network.

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Deployment of Multiplicity of Platforms Advances in technology have spawned a diversity of platforms for various telecommunication services. Each of the platforms has its own unique advantages and limitations, and it is for the market to adjudicate on their relative merits. Therein lies the scope for operators to pitch their services to niche segments of the market. Multiplicity of platforms has the advantage of mitigating against the risk of a platform becoming obsolete. More importantly, trialling the various platforms provides a test bed for the operators to espouse the advantages of their technologies to consumers. In Singapore, there is recognition that in the roll-out of services to the mass market, multiple technology platforms are very important. This technology-neutral approach provides major international players with an opportunity to participate in national development. For example, in setting up the nationwide broadband network, two competing platforms were encouraged: • the Asymmetric Digital Subscriber Line (ADSL) of Singtel, which leverages on the existing fixed line telecommunications network, and Table 1: Key Liberalization Moves in Singapore Year 1993

Liberalisation Move Privatization of national telecommunications company Liberalization of mobile phone industry

1994

Licensing of second mobile data services operator Parallel import of telecommunications equipment by licensed telecommunications equipment dealers

1995

Licensing of one more public cellular phone operator and three more public mobile radio paging operators to commence services in April 1997 in competition with Singtel Licensing of two Internet access service providers, in competition with Singtel

1996

Regulator advances expiration of Singtel’s exclusive license for basic telecommunications services from 1 April 2000

1997

New paging operators, MobileONE, ST Messaging, and Hutchison Intrapage and mobile phone operator, MobileONE commence operations

1998

Starhub wins Public Basic Telecommunication Services and Public Cellular Telephone Services licenses

1999

Provision of International Internet Exchange Services is liberalized Foreign equity limit on Internet Access Service Providers lifted

2000

Announcement of full competition in the telecommunications sector being brought forward from 1 April 2002 to 1 April 2000

Source: http://www.ida.gov.sg

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•

the Hybrid Fibre Coaxial (HFC) technology of Singapore Cable Vision, which leverages on the cable television network.

For the choice of switching network, two options were available: Frame Relay (FR) and Asynchronous Transfer Mode (ATM). The latter was chosen because of its guarantee of Quality of Service, even though the former has its merits. The provision of more than one technology platform has been the singular reason why broadband penetration rates in Singapore have increased dramatically following its introduction in 1999 (Table 2). Allowing various technology platforms to co-exist encourages operators to compete on the basis of service levels as well as innovation in their range of offerings. Other technology platforms for broadband access are currently being tested in Singapore, with a view towards entrenching their operations in due course. These include: • Powerline Technology, which leverages on ordinary electric cables to deliver Internet access. In effect, it transforms an electrical socket in the house or office into a network point. • Local Multipoint Distribution Service, which is a wireless broadband service. It is a particularly potent technology for new entrants as there is no necessity to lease optical fibers from incumbent telecommunication comapines (telcos) or dig up roads to lay cables. The network can be set up within weeks using low-cost equipment. Buildings in the central business district are particularly suited for this platform, which transmits data from base stations located atop tall buildings to receiving units in the vicinity using a line-of-sight configuration. • Cisco Internet Mobile Office Initiative Technology, which is Asia’s first broadband wireless network. It offers high-speed Internet access to professionals on the move, as long as they are in the vicinity of any one of 48 “hot spots” in the country. These hot spots include areas of high population density such as the central business district and big shopping centers. The intent in allowing the foregoing experimental platforms to enter the broadband market is not only to offer the MNC vendors a test-bed for piloting their technologies, but also to use these as an instrument to enlarge the broadband subscriber base when the technologies mature. It also helps to guard against technological obsolescence of a platform and lack of upgrading of existing networks by carriers. The strategy also encourages incumbent operators to further improve service levels in the face of competition.

Promotion of Competition Because of the dynamics of the free market, competition remains the most powerful tool to realize the benefits of ICT. It helps to enhance service levels, reduce prices, and encourage innovation in the range of offerings by the various operators. In Singapore, the government recognizes this through the licensing of multiple vendors to offer telecommunications and other related services, as well as through the promotion of multiple technology platforms. A level playing field has been entrenched for all players so that these objectives can be better realized. The first step, of course, was taken when the government abolished Singtel’s monopoly status and forced it to compete with other operators in the provision of fixed-line telephony, broadband access, paging, mobile telephony, and Internet access service.

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There is a general perception in the developing world that competition may not be in the interest of the national telecommunications carrier and that it is a zero sum game. However, the experience of Singapore shows that competition is an effective instrument to achieve various policy objectives. Competition has helped to enhance the penetration rates of all services, brought down their cost, and increased the profit margins of all operators. The biggest difference can be seen in the mobile phone and Internet markets, where competition has been acknowledged to be the contributing factor in driving up penetration rates (Figures 1 and 2 and Tables 2 and 3).

Presence of Independent Regulator It has been the experience of Singapore that the benefits of deregulation and liberalization can be met only through an independent regulator. It is unlikely that a free market can foster the requisite regulatory objectives that would benefit society and the economy. The government has vested the Telecommunications Authority of Singapore, now known as the Infocommunications Development Authority of Singapore, with the powers of regulation and has mandated the Authority to enforce its responsibilities without any fear. Among its regulatory functions are: • maintaining a level playing field for all operators so that there is fair competition; • adopting a technology-neutral approach in the licensing of operators; in fact, with the pace at which technology is developing in the infocommunications field, it is difficult to justify the merits of any one technology over another; • issuing a Code of Practice for interconnection, access and infrastructure sharing, with which all players are required to comply; • ensuring that competitive pricing, based on international benchmarks, exists for the various telecommunication services. This is important in ensuring that competitors do not undercut each other and erode the viability of their fiscal operations. No tariffs are set for operators to follow, and the prices are left to the discretion of the players;

Figure 1: Comparison Data on Mobile Phone Penetration Rates in Different Countries

Source: http://www.itu.int

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Figure 2: Trend in Penetration Rates for Mobile and Fixed-Line Telephony

Source: http://www.itu.int •

• •

regulating standards for telecommunications equipment. There is recognition that proprietary systems and incompatible technologies do not help to realize the benefits of liberalization; instituting the necessary legal frameworks for promoting the diffusion of ICT; instituting Quality of Service levels to which operators must comply (Table 4). Failure to achieve the necessary service levels invites punitive fines. The availability of such quantitative indicators helps to ensure that operators do not compete at the expense of service levels.

The openness of the regulatory environment has been a key factor that has helped Singapore to attract MNCs to invest in the ICT industry as well as foster a vibrant infocomm industry.

Incentives While investments in ICT infrastructure are important for a nation, it helps tremendously if incentives are also provided to promote their use. Though it is desirable to let the free market mechanism ride its course for the uptake of services on the network, there is recognition that, with prudent intervention strategies on the part of the government, it is possible to accelerate the rate of diffusion of ICT. In this context, a slew of incentives are in place. A key feature of the incentives is the element of co-payment. This is especially imperative to ensure that those who avail themselves of the incentives are not frivolous in their applications. By way of example, we focus on four of the many incentives used by the government to promote ICT. a. Infocomm Competency Program This is targeted at enhancing the competencies of general workers in areas such as PC skills, office applications, workgroup computing, etc. The aim is to ensure that by the year 2010, 75% of the workforce are infocomm-competent.

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Table 2: Evolution of Broadband Subscriber Base in Singapore

Year

March 1999 March 2000 April 2000 June 2000 Sep 2000 Dec 2000 Jan 2001 Feb 2001 March 2001 April 2001 June 2001 August 2001

ADSL subscribers (Singtel) 15000 25000 26000 34000 35000 37000 40000 45000 -

Cable Modem subscribers (SCV) 8000 16500 22000 33000 40000 43000 50000 65000

Source: http://www.singtel.com.sg and http://www.scv.com.sg

b.

For employees sponsored by companies, 90% of the course and exam fees are borne by the government. For self-sponsored persons, the quantum of support is 80%. Critical Infocomm Technology Resource Program The pace at which ICT is progressing makes it incumbent for ICT professionals to keep abreast of contemporary developments so that they can contribute to the domain expertise of their organizations. In this context, this program seeks to equip ICT professionals with the necessary skills in new areas, with a view towards enhancing their employability in a fast changing market.

Table 3: Penetration Rates for Internet Access in Singapore

Year 1995 1997 1998 1999 2000 2001

Numbers for dial-up Internet access 3,100 267,400 393,600 582,600 1,940,300 1,917,900

Source: http://www.ida.gov.sg

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Table 4: Quality of Service Standards for Selected Services

1)

Public Cellular Mobile Phone Services % of time network operating % of calls lost due to busy channels % of calls successfully connected Average time taken for calls to be connected % of calls dropped or terminated abnormally Extent of service coverage on street level Extent of service coverage in buildings

2)

Public Radio Paging Services % of time network is operating successfully % of paging attempts successfully sent Extent of service coverage

3)

over 99% below 5% over 95% below 5 seconds below 5% over 95% over 85%

over 99% over 97% over 95%

Internet Access Services Network availability System accessibility for dial-up access System accessibility for leased line access

over 99.5% over 95% over 99%

Source: http://www.ida.gov.sg

c.

The training programs impart instruction in a number of cutting-edge technologies such as grid computing, wireless local area network, infocomm security, etc. For company-sponsored employees, the government absorbs 70% of the course and exam fees. The availability of trained ICT manpower is a very important aspect of entrenching ICT in society and the economy. It has been recognized in Singapore that suitable training institutes are imperative for ICT diffusion. Incentives for Purchase of PCs To make the transition into an infocomm society, personal computers are as indispensable as telecommunication networks. To encourage people and businesses to purchase and use PCs, tax incentives are given. For example, the cost of a PC can be offset against taxable income in Singapore. A four-year depreciation period is allowed for PCs so that businesses can take advantage of hardware upgrades. Low interest loans are available for civil servants to purchase PCs. These are among the reasons why the PC ownership rate in Singapore is about 60%.

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Table 5: ICT Statistics for Some Countries in Africa Country

Telephone lines per 100 subscriber in 1995

Telephone lines per 100 subscriber in 2001

Mobile phone subscribers per 100 people in 2001

Internet users per 10,000 people in 2001

PCs per 100 people in 2001

Burkino Faso

0.29

0.47

0.61

17.18

0.14

Cameroon

0.49

0.67

2.04

29.60

0.39

Central African Republic

0.25

0.26

0.29

5.29

0.19

Ethiopia

0.25

0.48

0.04

3.88

0.12

Mozambique

0.34

0.44

0.84

7.43

0.35

Namibia

5.06

6.57

5.59

251.68

3.64

Senegal

0.98

2.45

4.04

103.50

1.86

Zambia

0.95

0.80

0.92

23.48

0.70

Madagascar

0.25

0.36

0.90

21.29

0.24

Malawi

0.37

0.47

0.48

17.28

0.11

South Africa

10.14

11.35

21.00

700.58

6.85

Source: http://www.itu.int d.

Subsidy for Internet access charges The principal direction for Internet traffic is the United States. There are large numbers of websites catering more to varied interests in the U.S. than in any other country. It has been estimated that 80% of Internet traffic from Singapore goes to the U.S. Singapore’s Internet bandwidth to the world has increased phenomenally over the years — 8 Mbps in 1996, 400 Mbps in May 2000, 800 Mbps in June 2000, and 1.2 Gbps in May 2001. The major reason why tariffs for broadband access are still relatively high in Singapore, despite the reduction of costs with the entry of more players, is that the cost of international bandwidth is still very expensive. Telecommunication costs to the U.S. is borne solely by Singapore, despite the need for an equitable sharing of costs. There is official recognition that such high bandwidth pricing is not conducive for the growth of a vibrant Internet market. To lower the cost of Internet access, the government has been sharing the cost of leased circuits to the U.S. with various operators. It has also injected subsidies towards the cost of access equipment such as modems and switches so that the savings realized by the operators can be passed on to subscribers, thus helping to increase the subscriber base further.

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Programs In Singapore, there is recognition that to diffuse ICT among people, there needs to be suitable programs structured to attain policy objectives. This will help to address social inequities in access, as well as ensure that the benefits do not just gravitate to the top layers of the social pyramid. There are several key programs that have helped to fuel the evolution of an ICT culture among Singaporeans. One of these is the emphasis placed on the education system on ICT. Computer learning in schools is compulsory, and there is one PC for every four students in schools. Currently, 30% of curriculum time in schools is devoted to computer instruction. The cost of providing PCs and of installing high bandwidth capacity lines for schools is borne by the government. Another key program is the emphasis on e-Government, the objective of which is to move most public services onto the Internet platform. This is to make it easier for the public to interact with the government. A recent survey by Andersen Consulting placed the Singapore government a close second to the U.S. government in the number of services being offered online. Grassroots training institutions also offer Internet and email courses to the general public at highly subsidized rates.

DISCUSSION ICT is widely regarded as the engine of growth for the next stage of global industrial development, which would focus more on knowledge-intensive industries. Effective hyperlinking of developing nations with the rest of the world would be indispensable for enhancing their integration with the global economy. In fact, with global trade transactions migrating onto the e-commerce platform, “snail mail” giving way to email as the preferred form of communication, industrial operations increasingly being e-enabled, and educational initiatives moving onto the e-environment, developing countries will lag behind if cognizance is not taken of the new evolving realities. They can no longer afford to insulate themselves from the new contours of the politico-economic landscape that is being etched on the world if they are to become meaningful participants in the new economy. Developing nations face several hurdles in their economic development. However, they cannot afford to ignore ICT in their strategic plans as it holds great potential for their socioeconomic development (Adam, 1996; Avgerou, 1998; Bowonder, Miyqake & Singh, 1993; Moyo, 1996). A working group of the United Nations Commission on Science and Technology for Development concluded that while the cost of rolling out new ICT infrastructure in developing nations is high, the cost of not doing so is likely to be higher (Mansell, 1999). In fact, the World Bank is rather concerned that Africa would be overwhelmed by the ICT tornado that is being unleashed in today’s society (World Bank, 1995). Morales-Gomez and Melese (1998) have cautioned that while the potential of ICT for promoting socio-economic development in third world nations is great, there may be a tendency for nations to catch up with the rapidly evolving technologies without sufficiently assessing the risks to social and human development in their societies. While there are merits in such an argument, it is important to bear in mind that a flaw in the reasoning is that it overlooks the developmental potential and other benefits that ICT can confer on societies. In fact, there can be any number of reasons to mitigate against the deployment of ICT in developing nations, and such arguments will only serve to exacerbate the digital divide. While priority needs to be given to improving the socioeconomic status of the people,

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promoting ICT need not be at variance with this objective. One way around this is to phase in the information highway over a period of time at a pace that takes into consideration the need for capacity building in the ICT industry, as has been the case in Singapore. In a study of the pervasiveness of ICT in six developing nations: Bangladesh, Costa Rica, Ethiopia, Peru, Zimbabwe and Burkina Faso, De Boer and Walbeek (1999) cite weak telecommunications infrastructure, restrictive laws and regulations, high Internet charges, and presence of small players among the reasons for the poor development of ICT in these countries. Some ICT statistics for countries in Africa are presented in Table 5. It can be seen that South Africa is far ahead of others in all aspects of ICT development. A few developing countries have, however, started to realize the benefits of deregulation and liberalization, for example, Ghana, which liberalized its telecommunications sector in the early 1990s and brought in private sector participation (Trempong, 2001) and Botswana (McCormick, 2001). However, such cases are rather few and limited. For effective implementation of ICT, a conducive political climate, a pro-business environment, a reliable national power supply, proper training facilities, and an effective bureaucracy are needed. ICT initiatives cannot come to fruition without governments taking the lead in introducing a national ICT policy and the necessary implementation plans. As the Singapore experience shows, a diverse toolkit of policies can be a powerful instrument for governments to intervene judiciously to realize national objectives with respect to ICT. The lessons from the Singapore experience for developing nations can be summarized broadly as follows: a. Capacity building in ICT needs to be accelerated through manpower training programs and other incentives. It is often a neglected aspect of ICT promotion in developing nations, probably because there is a tendency to see the technology as being more important. Adequate manpower training will ensure that ICT does not get transplanted per se but is instead adapted according to the needs of the country. It has to be borne in mind that Singapore reached its present position over a period of time, during which the government invested substantial funds, efforts, and resources in raising literacy levels, infusing a science and technology culture among the people, and providing decent civic amenities and facilities to take care of the accommodation, health and education of her people. There are reasons to believe that with the current global economic slowdown, foreign investments in developing countries will start to decrease. For example, over the period 1992-1996, while foreign investments in Africa stagnated at about US$2-3 billion per annum, investments in Latin America and Asia grew by 8% and 17%, respectively (Moyo, 1996). Capacity building is thus very important in nurturing an indigenous pool of trained science and technology (including ICT) manpower in developing countries, which would, in turn, lead to less reliance on others in addition to promoting greater economic independence. b. There is a dire need for state-owned telecommunication carriers in developing nations to be privatized. Monopolistic operators are seldom well positioned to roll out infrastructure fast enough to meet the increasing and varied needs of users and foster innovation in their range of offerings in a cost-effective manner. Privatization would speed up network deployment as well as make telecommunication carriers more marketresponsive. According to a report by the International Telecommunications Union for

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c.

d.

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the year 2000 (http://www.itu.int), 19 countries have fully privatized their state-owned telecommunication carriers, 74 others have partially privatized their erstwhile monopolies, while 90 nations have still not privatized their telecommunication companies. Invariably, all these 90 countries are in the developing world! Though Singapore has been able to achieve ubiquity in deployment of a fixed-line telecommunications network through a monopolistic operator even before deregulation and liberalization, it is an exception as explained earlier. In other developing countries such as China and South Korea, monopolistic operators have been able to roll out networks rapidly, but closer scrutiny would reveal some shortcomings with respect to quality of service, propensity to innovate, and affordability to the public (Samarajiva, 2001). Privatization presents an opportunity for developing nations to raise funds for modernization and expansion. If these funds are to be raised in the international capital markets, the cost of borrowing would be hefty. Even hiving off a small stake in the national carrier through partial privatization would be a step in the right direction, as has been the case in Singapore. The Singapore experience also shows that privatization of the national telecommunications carrier should precede deregulation and liberalization, as otherwise there is a possibility that equity holdings in the carrier could be diluted when the market opens up. This has also been the case in other countries such as Mexico, Venezuela, and South Africa (Samarajiva, 2001). An exception is Sri Lanka, where pressure from the union movement caused primacy to veer more towards deregulation and liberalization than to reform of the state-owned carrier (Samarajiva, 2001). State-owned telecommunication carriers represent a substantial investment on the part of governments. Their monopolistic tendencies get in the way of promoting effective network deployment, besides engendering a lackadaisical attitude towards affordability, innovation, and range of service offerings. Privatization, either fully or partially, presents a golden opportunity for state-owned companies in developing countries to reengineer their operations and revamp their corporate ethos to better address the new global realities! A stable political climate and a slew of incentives need to be put in place in order to attract a limited number of MNCs as facilities-based operators in fixed line and mobile telephony in these nations. This will help to weed out obsolete equipment, address inequities in intra-national connectivity, speed up network deployment, and diffuse the benefits of ICT to society. A moratorium period needs to be provided to these MNCs, as has been the case in Singapore, to incentivize the roll-out of a comprehensive network before introducing further competition, The intervening period of exclusivity would provide an opportunity for them to earn a decent return on their investments. Constraining MNCs from participating in national development does not make good business sense in this age of globalization. Indeed, it would be good to allow an MNC to take an equity stake in the national carriers of developing nations as this can be an avenue to jump-start the modernizing of networks. Regulatory barriers and obsolete policies need to be removed. An independent regulatory authority, insulated from political compulsions and other extraneous considerations, needs to be instituted. The openness of the regulatory regime is an important consideration in drawing MNCs and private sector participation. A technol-

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f.

309

ogy-neutral stance needs to be adopted and measures must be instituted to foster fair competition. Currently, a key barrier to the growth of personal computer ownership is their relatively high cost (typically US$1000). In many developing nations, personal computers, mobile phones, and network equipment are treated as luxury items, and thus attract hefty tariffs. PCs have to be imported as indigenous capabilities to produce PCs are lacking This is yet another obstacle to stimulating the diffusion of ICT technologies. In Singapore, the cost of ownership of PCs has come down dramatically owing to a number of factors – absence of import duties, promotion of multi-vendor environment so that various international manufacturers can ply their trade through subsidiaries or local distributors, low-interest loans to buy PCs, manufacturing and assembly of PCs locally, and a conscious scanning of the technology horizon to sieve cost-effective buys. The spirit of competition needs to be entrenched in the ICT arena. Schemes to steer private capital into development efforts must be instituted. In fact, the World Bank and other major international lending institutions have curtailed the practice of providing concessionary loans to developing countries where the state-owned telecommunication carriers are inefficient and where the market is not open to private sector participation. Indeed, with the limitations on what a government can do in terms of injection of funds, it makes sense to open up the market to private sector participation, as has been the case in Singapore. A national ICT plan needs to be drawn up, with prioritized objectives and timelines for achieving designated milestones. An efficient civil service is indispensable for realizing this, as has been the case in Singapore. For example, Quereshi (1998) mentions that the state of public administration in Africa is symptomatic of structural inefficiencies, and this gets in the way of effective implementation of various policies. Developing nations are now in a better position to realize the benefits of ICT than they were several years ago. Technological advances across the value chain have lowered the prices of ICT products and other peripherals dramatically, so that the entry barrier is eased. An array of technologies are now available for deployment, and the experiences of these technologies in other nations can offer useful pointers for their deployment according to their particular needs and requirements.

CONCLUSION ICT presents possibilities and opportunities for stimulating growth in developing nations. The Singapore experience has some lessons to offer developing countries. In particular, it shows that governments can make a difference in accelerating the diffusion of ICT so as to confer benefits to society and the economy. While we have suggested that effective policy instruments initiated by the government would be helpful, it has to be borne in mind that the final outcome depends very much on the socio-political and culturo-economic environment of other nations. Thus, any recommendations for replicating the Singapore experience would have to be qualified accordingly. However, the success of the important policies can serve as signposts for consideration. Appropriate frameworks can thus be evolved by nucleating around the approaches undertaken in Singapore.

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As it is, most developing nations have missed the boat on the benefits of globalization. They should not make the mistake of being marginalized with the Internet economy as well!

REFERENCES Adam, L. (1996). Electronic communication technology and development of Internet in Africa. Information Technology for Development, 7:133-144. The African Internet – A status report. Available at: http://www3.wn.apc.org/africa/ afstat.htm. Accessed July 20, 2002. Avgerou, C. (1998). How can IT enable economic growth in developing countries. Information Technology for Development, 8:15-28. Bowonder, T., Miyqake, T., & Singh, T. M. (1993). Emerging trends in information technology: Implications for developing nations, International Journal of Information Management, 13:183-204. Chia, L.T., Lee, S. L., &Yeo, C.K. (1998). Information technology and the Internet: the Singapore experience, Information Technology for Development, 8:101-120. De Boer, S.J. & Walbeek, M.M. (1999). Information technology in developing countries: A study to guide policy formulation. International Journal of Information Management, 19:207-218. Lu, M.T. & Farrell, C. (1990). Information systems development in developing countries: An evaluation and recommendations. International Journal of Information Management, 10:288-296. Mansell, R. (1999). Information and communication technologies for development: assessing the potential and the risks. Telecommunications Policy, 23:35-50. McCormick, P.K. (2001). Telecommunications reform in Botswana: A policy model for African states. Telecommunications Policy, 25:409-420. Morales-Gomez, D. & Melese, M. (1998). Utilizing information and communication technologies for development: the social dimensions. Information Technology for Development, 8:3-13. Moyo, L.M. (1996). Information technology strategies for Africa’s survival in the twenty-first century: IT is all pervasive. Information Technology for Development, 7:17-27. Quereshi, S. (1998). Fostering civil associations in Africa through GOVERNET: An administrative reform network. Information Technology for Development, 8:121-136. Samarajiva, R. (2001). The role of competition in institutional reform of telecommunications: lessons from Sri Lanka. Telecommunications Policy 24:699-717. Tan, W.H.L. & Subramaniam, R. (1998). Developing countries need to popularize science. New Scientist, 2139:52. Tan, W.H.L. & Subramaniam, R. (1999). Scientific societies build better nations. Nature, 399:633. Tan, W.H.L. & Subramaniam, R. (2000). Wiring up the island state. Science, 288:621-623. Tan, W.H.L. & Subramaniam, R. (2001a). ADSL, HFC and ATM technologies for a nationwide broadband network. In N. Barr (Ed.), Global Communications, (pp. 97-102). London: Hanson Cooke Publishers.

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Tan, W.H.L.& Subramaniam, R. (2001b). Telecommunication policies in Singapore. In N. Barr (Ed.), Global Communications Asia 2001, (pp. 28-33). London: Hanson Cooke Publishers. Trempong, G.K. (2001). Liberalization of telecoms: The Ghanaian experience. Telecommunications Policy, 25:197-210. Wong, P.K. (1996). Implementing the NII Vision: Singapore’s experience and future challenges. Information Infrastructure and Policy, 5(2), 95-117. World Bank. (1995). Increasing Internet connectivity in sub-Saharan Africa: Issues, options and World Bank Group role. Available at: http://www.uneca.org/eca_resources/ Major_ECA_Websites/padis/telemat/africa03.htm. Accessed July 26, 2002.

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312 About the Authors

About the Authors Felix B. Tan is a Senior Lecturer in Information Systems at The University of Auckland, New Zealand. He serves as the Editor-in-Chief of the Journal of Global Information Management. He is also the Vice President of Research for the Information Resources Management Association and the Editor of the ISWorld Net’s EndNote Resources page. He has held visiting positions with the Department of Information Systems at the National University of Singapore and the Richard Ivey School of Business at The University of Western Ontario. Dr. Tan’s current research interests are in business-IT alignment, electronic commerce, global information management, management of IT, national information policy issues and cognitive mapping methods. His research has been published in MIS Quarterly, the Journal of Global Information Management, the Journal of Information Technology as well as other journals and refereed conference proceedings. Dr. Tan has over 20 years experience in information systems management and consulting with large multinationals, as well as University teaching and research in Singapore, Canada and New Zealand. *

*

*

Ana R. del Águila is a Lecturer on Management in the Faculty of Economics and Business at the University of Malaga (Spain). Her main research interests are IT and Management, ebusiness, and Internet-based electronic commerce. She has published articles in Technovation, Facilities, Internet Research and in the International Journal of Business and Economics and has several articles and books published in Spanish. She has been a Visiting Lecturer in Venezuela, Cuba, and México, and a Visiting Researcher in the United Kingdom. Her e-mail address is [email protected]. Davood Askarany is currently working as a Management Accounting Consultant and undertaking research at University of South Australia. Davood was former Lecturer of Accounting at the University of Isfahan and former Head of Auditing Department of the biggest Silo builder (Tosehe Silooha) in Iran. His current research project is about diffusion of cost and management accounting innovations. His research interests are in diffusion, innovation, advanced techniques, and, recently, developed cost and management accounting practices.

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About the Authors 313

Sebastián Bruque is an Associate Professor in Business Administration in technological firms. He is currently working at the Department of Business Administration, Accountability and Sociology at the University of Jaen (Spain). His main research interests are IT use and competitive advantage, IT productivity paradox and cultural differences impact on IT management. He has published articles in the International Journal of Information Technology, the Journal of High Technology Management Research, Technovation, Facilities and in the Internet Research Journal. He has been a Visitor Researcher at the Nijmegen School of Management in the Netherlands. His e-mail address is [email protected]. Peter Carr is Director of Athabasca University’s Centre for Innovative Management, its post-graduate business school, which is home to the world’s first online MBA — now educating 25% of Canada’s part-time MBA students. In September 1999, he managed the development and launch of the online MBA in Information Technology Management, Canada’s largest in that field. He leads the research team that conducts the annual Canadian Survey of Information Technology Management, supported by CIO Canada magazine. Peter recently commenced work on the construction a $2.5m online research laboratory that will study online supply chain collaboration. Amira El Guindi is a graduate of Ain-Shams University in Egypt with a Bachelor of Arts in 1997. She also received an MBA in International Business from Maastricht School of Management in The Netherlands in 2001. Ms. El Guindi works for Coca-Cola Egypt. Her research interests relate to organizational development, multicultural teams conflicts and corporate culture, and she has published a number of articles in these research areas. Roberto Evaristo is an Assistant Professor at the University of Illinois, Chicago, USA. He is currently involved in several projects related to the management of distributed projects in virtual organizations, with work done in Japan, the U.S., and Europe. He has published in outlets such as the Communications of the ACM, International Journal of Project Management, Database, Journal of Global Information Management, Journal of International Information Management, International Information Systems, and elsewhere. Tom G. Gough is a Senior Fellow and a PhD Supervisor in the School of Computing at the University of Leeds, United Kingdom. Carole E. Hill is a Professor Emeritus of Anthropology at Georgia State University, USA. Carole has published research in the areas of health care policy, health behavior, and cultural knowledge in Costa Rica, the U.S. South, and the Middle East. She holds a PhD from the University of Georgia and a post-doctorate from the University of California at Berkeley. She has published eight books and over 60 articles in journals such as American Anthropologist, Social Science and Medicine, Human Organization, and Anthropological Quarterly. She has served as President of the Society of Applied Anthropology. M. Gordon Hunter is currently an Associate Professor in Information Systems in the Faculty of Management at the University of Lethbridge, Alberta, Canada. Gordon has previously held academic positions at universities in Canada, Hong Kong, and Singapore. He has held visiting positions at universities in Germany, U.S., and New Zealand. He has a Bachelor of Commerce degree from the University of Saskatchewan in Saskatoon, Saskatchewan,

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314 About the Authors

Canada. He received his doctorate from Strathclyde Business School, University of Strathclyde in Glasgow, Scotland. He is an Associate Editor of the Journal of Global Information Management. He serves on the editorial board of the Journal of Global Information Technology Management, and the Journal of Information Technology Cases and Application. He has conducted seminar presentations in Canada, U.S., Asia, New Zealand, Australia, and Europe. His current research interests relate to the productivity of systems analysts with emphasis upon the personnel component, including cross-cultural aspects, and the effective use of information systems by small business. Lech J. Janczewski, MEng (Warsaw), MSc (Toronto), DEng (Warsaw), has over 30 years’ experience in Information Technology. He was the Managing Director of the largest IBM installation in Poland, and Project Manager of the first computing center in the Niger State of Nigeria. He is currently an Associate Professor at the Department of Management Science and Information Systems of the University of Auckland, New Zealand. His area of research includes management of IS resources, with special emphasis on data security and information systems investments in under-developed countries. Dr. Janczewski has published over 60 articles in scientific journals, conference proceedings, and chapters in books. He is the Chairperson of the New Zealand Information Security Forum, as well as a Fellow and National Counsellor of the New Zealand Computer Society. Sherif Kamel is an Assistant Professor of Management Information Systems at the School of Business, Economics and Communication of the American University in Cairo and is currently the Associate Director of the Management Center of the university. He was the Director of the Regional IT Institute during the period 1992-2001. From 1987 to 1992, he worked at the Cabinet of Egypt Information and Decision Support Center, where he co-established and managed its training department. In 1996, he was one of the co-founding members of the Internet Society of Egypt. Dr. Kamel has published over 60 articles in IT transfer to developing countries, electronic commerce, human resources development, decision support applications, and knowledge management. He serves on the editorial and review boards of a number of information systems and management journals and is the Associate Editor of the Annals of Cases on Information Technology Applications and Management in Organizations. Dr. Kamel is currently the VP for Communications for the Information Resources Management Association (IRMA). He is a graduate of the London School of Economics and Political Science (UK) and the American University in Cairo (Egypt). Elena Karahanna is an Associate Professor of MIS at the Terry College of Business, University of Georgia, USA. Her current research interests include the adoption, mandatory adoption, implementation, use, and infusion of information technologies, the effect of media choice and use on individuals and organizations, and cross-cultural issues. Her work has been published in Management Science, Organization Science, MIS Quarterly, Database, The Journal of Organizational Computing, Electronic Commerce, Information & Management, and elsewhere. Abdulwahed Moh. Khalfan is an Assistant Professor in the Computing and Information Systems Department at the College of Business Studies in Kuwait. He holds a PhD in IS from the University of Leeds, UK. He has published numerous papers in leading IT journals as well as in international conferences. Dr. Khalfan has served as a reviewer for a number of journals

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About the Authors 315

and prestigious IT conferences. He is also an IT consultant for a number of organizations in Kuwait. He has interests in IT outsourcing, e-commerce adoption, knowledge management, and IT strategic planning. Chung S. Kim is a Professor in the Department of Computer Information Systems at Southwest Missouri State University, USA. She received her PhD in MIS from Texas Tech University. Her current research interests include system development methodologies, business reengineering, and cultural issues in system development practices. She has published in numerous journals, including Information & Management, Journal of Global Information Management, Journal of International Information Management, Journal of Computer Information Systems, Journal of Global Information Technology Management, and the International Journal of Information Management. Karen D. Loch is an Associate Professor and Director of the Institute of International Business in the J. Mack Robinson College of Business at Georgia State University, USA, Karen’s current research interests span international IT studies, security and ethical concerns, and global e-commerce. She holds a Ph.D. in MIS from the University of Nebraska. Loch has published in journals such as Journal of Global Information Management, Communications of the ACM, MIS Quarterly, Information Systems Journal, Academy of Management Executive, Data Base, and Journal of Informatics and Education. She is a coeditor and contributor of Global Information Technology Education: Issues and Trends. She serves as Associate Editor for Journal of Global Information Management, The Journal of Global Information Technology Management, and as review board member for Information Resources Management Journal. M. Lynne Markus is Professor (Chair) of Electronic Business at the City University of Hong Kong. She is on leave from the Peter F. Drucker Graduate School of Management, Claremont Graduate University, where she is Professor of Management and Information Science. Professor Markus’ research focuses on electronic commerce, enterprise systems integration, and knowledge management. She is the author of three books and numerous articles in journals such as MIS Quarterly, Management Science, Organization Science, Communications of the ACM, and Sloan Management Review. Markus holds a BS in Industrial Engineering from the University of Pittsburgh and a PhD in Organizational Behavior from Case Western Reserve University. Victor W. A. Mbarika is Assistant Professor of Information Systems and Decision Sciences at the E. J. Ourso College of Business, Louisiana State University, USA. He holds a BS in Management Information Systems from the U.S. International University in Nairobi, an MS in MIS from the University of Illinois at Chicago, and a PhD in MIS from Auburn University. His research in Telecommunications Diffusion in Developing Countries and his research in Multimedia Learning has been published in several academic journals. He has also presented his research at several national and international conferences on Information Systems. He is author of one book: Africa’s Least Developed Countries’ Teledensity Problems and Strategies Michael D. Myers is Professor of Information Systems in the Department of Management Science and Information Systems at the University of Auckland, New Zealand. He currently

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316 About the Authors

serves as Senior Editor of MIS Quarterly, Editor of the ISWorld Section on Qualitative Research, Editor of the University of Auckland Business Review, and Associate Editor of Information Systems Research. His research articles have been published in many journals and books. He won the Best Paper Award (with Heinz Klein) for the most outstanding paper published in MIS Quarterly in 1999. Antonio Padilla is a Lecturer on Management and Management Control Systems in the Faculty of Economics and Business at the University of Malaga (Spain) and is the main researcher in an e-business research project. His main research interests are IT and Management, e-business, teleworking, and telecentres. He has published articles in Technovation, Facilities, Internet Research and in the International Journal of Business and Economics, and has several articles and books published in Spanish. He has been Visiting Lecturer in Venezuela, Cuba, and México, and Visiting Researcher in the United Kingdom. His e-mail address is [email protected]. Dane K. Peterson is a Professor of Quantitative Business Analysis at Southwest Missouri State University, USA. He has a PhD in Quantitative and Applied Psychology from Southern Illinois University. His research interests include issues related to global information management and business and computer ethics. He has published in numerous journals, including the Journal of Applied Psychology, Journal of Global Information Management, Organizational Behavior and Human Decision Processes, International Journal of Information Management, and the Journal of Business Ethics. Christina Soh is the Head of the IT and Operations Management Division and the Director of the Information Management Research Center in the Nanyang Business School, Nanyang Technological University, Singapore. Her current research includes e-strategy, B-to-B emarketplaces, and organizational fit and learning in the context of enterprise-wide package implementation. In the past ten years, she has consulted for both public and private sector organizations in Singapore and Malaysia in the areas of IT policy, IT use in government, IT investment and evaluation. She received her BAcc (Hons.) degree from the National University of Singapore, and a PhD in Management from the University of California, Los Angeles. Mark Srite is an Assistant Professor of MIS at the University of Wisconsin — Milwaukee, USA. His current research interests include the acceptance, adoption, and use of information technologies, cross-cultural IT issues, and group decision-making. His work has been published in Decision Support Systems, The Journal of Global Information Management, and elsewhere. Detmar Straub is the J. Mack Robinson Distinguished Professor of Information Systems at Georgia State University, Detmar has conducted research in the areas of Net-enhanced organizations, computer security, technological innovation, and international IT studies. He holds a DBA. in MIS from Indiana University and a PhD in English from the Pennsylvania State University. He has published over 100 papers in journals such as Journal of Global Information Management, Management Science, Information Systems Research, MIS Quarterly, Organization Science, Communications of the ACM, Journal of MIS, Informa-

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About the Authors 317

tion & Management, Communications of the AIS, Academy of Management Executive, and Sloan Management Review. R. Subramaniam has a PhD in Physical Chemistry. He is an Assistant Professor at the National Institute of Education in Nanyang Technological University and Honorary Secretary of the Singapore National Academy of Science. His research interests are in the fields of physical chemistry, science education, theoretical cosmophysics, museum science, telecommunications, and transportation He has published several research papers in international refereed journals. Leo Tan Wee Hin has a PhD degree in Marine Biology. He holds the concurrent appointments of Director of the National Institute of Education, Professor of Biological Sciences in Nanyang Technological University, and President of the Singapore National Academy of Science. Prior to this, he was Director of the Singapore Science Centre. His research interests are in the fields of marine biology, science education, museum science, telecommunications, and transportation. He has published numerous research papers in international refereed journals.

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318 Index

Index

A

C

acculturation 143, 145 acquisitive innovations 228 activity-based costing (ABC) 239 advanced technique 227 agency theory 96 anti-hacking law 127 Arab world 142 Asian offices 252 asymmetric digital subscriber line (ADSL) 299 asynchronous transfer mode (ATM) 300 autonomous distance education institutions 115

Central Tendering Committee (CTC) 193 Centre for Innovative Management (CIM) 121 change agents 237 collectivism 253 commitment to quality 193 communication channels 237 communication technologies 66 communications 262 compatibility 231, 235 competition 300 compulsory competitive tendering (CCT) 175 computer-aided design (CAD) 238 computer-based information systems (CBIS) 192 computer-integrated manufacturing (CIM) 238 computer supported learning (CSL) 119 conflict 213, 217 construct bias 52 contract 185 contracting out 175 core requirements 189 core values 36 corporate culture 68 corporate goals 256 cross fertilization 80 cross-cultural research 49 cultural fit 194

B Big Brother syndrome 131 Botswana Telecommunications Corporation (BTC) 282 build operate transfer (BOT) 279 business process re-engineering (BPR) 208, 256 business-to-business applications 91 business-to-business electronic commerce 6 business to consumer (B2C) 218 business-to-consumer electronic commerce 2

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Index 319

cultural influence modeling 146 cultural match 194 cultural symbol systems 33 culture 30, 144 culture-specific beliefs (CB) 146 culture-specific stance 42 cyber active transaction stations 5 cyberbanking 5

D Daelim Industrial Co., Ltd. 69 data security 184 demand factors 239 desired performance 195 developing country 176 development techniques 262 diffusion process 245 diffusion studies 232 distance education 114 distractor variables 41 downsizing 209 dynamic capabilities framework 97

E e-business 91 e-commerce business models 1 econometric analyses 209 economic theory 94 educational technology 114, 119 Egyptian Telephone Company (ETC) 284 electronic commerce (e-commerce) 273 email 306 e-marketplaces 7 ethnography 23 excess fees 183 existing relationships 194 explorative focus 89 extranet 91

F facilities-based operators (FBOs) 298 femininity 253 flexible manufacturing systems (FMS) 238 foreign aid package 276 formal methodology 257 frame relay (FR) 300

G Gambia Telecommunications Company (GAMTEL) 283 General Technological Index (TECHIND1) 215 Global Applied Technologies Holdings (GAT) 8 global information systems 22, 252 Global Technological Index (TECHIND1) 217 globalization 20, 63 government-linked companies (GLCs) 296 gross domestic product (GDP) 272, 274 gross national product (GNP) 269 group of eight (G-8) leader 271 groupware technology 218

H “hard” data 178 Health Information Privacy Code of 1994 131 hidden cost 192 historical-social models 18 Hofstede’s model 15 human variables 210 hybrid fibre coaxial (HFC) 300

I imitative innovations 228 in-bank kiosks 5 individualism 35, 253 influencing factors 234 infocomm-competency program 302 information and communication technologies (ICT) 293 information privacy 127 information systems (IS) 50 information systems/information technology (IS/IT) 174 information technology (IT) 88, 208 information technology (IT) development 1 information technology transfer (ITT) 141 ingroup 40 innovation 231 innovation-decision 236

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320 Index

inter-organizational networks framework 97 internal intangible variables 211 internal reliability measure 212 International Telecommunications Union (ITU) 269, 274 Internet Service Provider (ISP) 137 Intranet applications 91 IT development 141 IT diffusion 42 IT vendors 189 ITT/system outcomes 147 ITU report 273

K knowledge management 97

L late delivery 195 learned problem-solutions 38 learner-centered approach 112 learning theory 114 least developed countries (LDCs) 269 legitimation 97 linear structural relations modeling (LISREL) 156 local networks (IT7) 217 lock in 98 lock out 98 long range planning 149 Love Bug virus 132 Lucent Technologies 71

M Maitland Commission 276 management information systems (MIS) 181 management practices 253 managerial variables 210 marketplace 92 marketspace 92 masculinity 253 Master of Public Administration (MPA) 118 medical records 129 method bias 52

methodological issues 49 Ministry of Health 210 mobile phone banking 5 multicultural teams 67 multinational corporations (MNC) 297 multiple dimension models 18

N national culture 14, 150, 253 national information highway (NII) 295 national IT development (DEV) 147 new criteria 269 non-core requirements 189 null model 157

O old criteria 269 one-way communication 218 online learning technology 116 organizational integration 260, 262 outgroup 40 outsourcing 209

P paperless society 136 Patriot Act 135 perceptual measurements 215 policymaking 253 power distance 35, 253 PowerPhone 5 primitive culture 32 privacy 127 Privacy Act 130 problem solving 38 Procter and Gamble 73 project development techniques 260 project leader 260 project monitoring 256 project plan 256 project process 257 project team members 260 prototyping 257 public telecommunication operator (PTO) 283

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Index 321

R reality culture 33 referent informational influence (RII) 40 Regional IT Institute 75 Regulation of Investigatory Powers Act 133 relative advantage 231 replacement process 229 reputation/preference 193 request for proposal (RFP) 186 Research Council of Zimbabwe (RCZ) 284 resource dependence theory 94 resource-based view 97 risk factors 191 robotic technology 213

S sampling 54, 152 sampling adequacy 259 saturated model 157 scenario creation 151 Seavin 77 service level agreement (SLA) 185 services-based operators (SBOs) 298 Singapore 294 single dimension models 18 Singtel 296 snail mail 306 social development 233 social identity theory (SIT) 40 Social Science Citation Index (SSCI) 18 social system 237 “soft” data 178 Specific Technological Index (TECHIND2) 215, 217 strategic networks 98 structural focus 89 supply factors 239 Sustainable Development Networking Program (SDNP) 284 system development strategies 253

technical staff (TECHNIC) 217 Technip Group 78 technological culturation (TC) 145, 147 technological variables 210 technology-based delivery 116 telecommunications technology 213 teledensity 269 telephone banking 5 total cost 184 transaction cost economics 96 trialability 231 triangulation 178

U uncertainty avoidance (UA) 36, 253 uncertainty avoidance (UA) culture 254 United Nations (UN) 275 Universiti Putra Malaysia (UPM) 120

V value culture 33 value-orientation 33 value patterns 33 vendor-selection criteria 193 very small aperture terminal (VSAT) 277 video conferencing 118 virtual onion 40 virtual team 63

W War on Terror 131 “Web TV” banking 5 wireless LANs 129

Z Zimbabwe Broadcasting Corporation (ZBC) 285

T team member characteristics 262 team member experience 257

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