Graphical modeling analysis of how investment in ICT pays off: Evidence from nationwide survey data in Japan

The purpose of this study is to analyze how investment in information and communications technology (ICT) and related corporate reforms affect business performance depending on corporate size. To accomplish this, we implemented a nationwide questionnaire survey in Japanese workplaces. The questionnaire categories were the introduction of ICT, effective use of ICT, corporate reforms accompanying the investment in ICT, and resultant business performance in terms of changes in sales revenues, operating profits, and number of full time jobs. Based on the data from 4,016 valid responses, we conducted a graphical modeling analysis by corporate size to illustrate how each factor interacts with the others, and by what routes they exert their respective effects on business performance. Our study yields three observations. First, introduction of ICT, effective use of ICT, and related corporate reforms positively affect each other and improve business performance. Second, for larger firms whose organizational structures are complicated and sometimes redundant, corporate reforms have the most direct effect on the increase in sales revenues and operating profits, while introduction of ICT and effective use of ICT have direct effects on job creation. Third, for small and medium sized enterprises (SMEs) whose organizational structures are relatively simple, the most important factor is the effective use of ICT, because SMEs often have difficulty retaining highly skilled employees or experts in new technology when they invest in ICT.