Productivity and Performance Effects of IT-enabled Reengineering: A Firm-level Analysis

We investigate whether the reengineering efforts of companies to leverage potential benefits of using Information Technology (IT) in their business processes improve their productivity and overall firm performance. We analyze firm-level data that covers the period between 1984 and 2004 using a panel data model. We employ standard variables for measuring firm productivity and performance, including labour productivity, return on assets, return on equity, inventory turnover, profit margin, asset utilization, and Tobin’s q. Our regression estimations show that (i) firms’ performances remain unaffected during the implementation period of the reengineering projects, and (ii) on average, returns to reengineering seem to accrue two to three years after the end of implementation period.