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Usage of Information Technology in Construction Firms; Malaysian


Construction Industry

Article  in  European Journal of Scientific Research · March 2009

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The International
JOURNAL
of TECHNOLOGY,
KNOWLEDGE
& SOCIETY

Volume 4

The Effect of Information Technology Use on the


Performance of Companies: The Malaysian
Construction Industry

Farag Hussan Gaith Deryag, Abdul Khalim Abdul Rashid


and Amiruddin Ismail

www.technology-journal.com
THE INTERNATIONAL JOURNAL OF TECHNOLOGY, KNOWLEDGE AND SOCIETY
http://www.Technology-Journal.com

First published in 2008 in Melbourne, Australia by Common Ground Publishing Pty Ltd
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ISSN: 1832-3669
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Typeset in Common Ground Markup Language using CGCreator multichannel typesetting system
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The Effect of Information Technology Use on the Performance of
Companies: The Malaysian Construction Industry
Farag Hussan Gaith Deryag, Universiti Kebangsaan Malaysia, Malaysia
Abdul Khalim Abdul Rashid, Universiti Kebangsaan Malaysia, Malaysia
Amiruddin Ismail, Universiti Kebangsaan Malaysia, Malaysia

Abstract: The performance of Malaysian firms can be improved by increased information technology (IT) use. This study
sought to identify the factors that affect the performance of construction firms, with IT use as a major key factor. The exam-
ination was based on the respondents’ perceptions on how their firm’s performance had been improved. A survey was done
on 68 construction firms in Malaysia, and the data analysed using revealed reference (RP) techniques. Moreover, correlations
were done using Pearson’s 2-tailed test for better understanding of the attitudes and perceptions. Thirteen variables were
used, and those found most likely to improve construction firm performance were: IT Use, Better Financial Control and
Human Resources Annual Turnover. The highest correlations were between: Financial Performance vs. Business Resources
(r = 0.441**) and Business Resources vs. Human Resources (r = 0.603**). Finally, IT use and Technical Software Use
would have to increase greatly if the firm performance is to be substantially improved.

Keywords: Construction Industry, Firm Performance, IT Use, Construction Management

Introduction on hierarchical structures of ineffective and ineffi-


cient processes, not designed to greatly benefit from

W
ITHOUT AN UNDERSTANDING IT use. Simply put, IT has just been used to, say,
about how IT can be used to improve speed up archaic and inefficient processes. More of
company productivity and organizational the potential can be realized if, instead, new pro-
performance, managers would be hard cesses are developed around IT so that its full power
put to justify its use. To then increase their use in- can be harnessed.
stead, sufficient evidence has to be adduced for the To date, there have been few studies in the con-
top management to be convinced of the worth. struction industry on the impact of IT on perform-
The benefits of IT use by construction companies ance, focusing on individual projects as opposed to
have been difficult to assess because of the limited the general firm performance. Further, many of the
use by them (Mohammad et al., 2006). Thus, much studies are on specific technologies on the company
of the research in the area has been case studies of performance, for example, Back and Bell (1995),
the leading firms – the ones using IT more. While Griffis et al. (1995) and Koo and Fischer (2000). It
useful, the findings are often confounded. In particu- might have been more useful to have investigated
lar, is the performance improvement with increased using general IT on the performance of specific
technology use due to the technology or merely due projects. Some studies reviewed the current level of
to the heightened interest of the managers in the IT use (e.g., Rivard, 2000) and tactical strategies for
project because of their new ‘toys’? Practically all IT implementation (e.g., Betts, 1995). Kumar (2003).
construction firms have invested in some form of IT, The most detailed of these, O’Connor et al. (2000),
and it is simple enough to quantify their expenditure, evaluatedthe communication problems that exist.
at least those on hardware and software. But the ex- Secondly, IT is usually used in an ad hoc manner
penditure does not tell whether the technology is as the companies generally do not specifically apply
being fully/effectively made use of. It is presumptu- IT in individual projects. Only O’Connor and Yang
ous to assume IT expenditure = improved company (2003) and a few others have evaluated the impact
performance. To delve into the matter would require of IT use on the individual project cost and success.
statistical studies to link IT use with company per- The following discussion briefly reviews these
formance. studies. Valida et al. (1994) studied IT use in 230
Love and Gunasekaran (1997) suggested that the businesses in Malaysia, and concluded that the organ-
full potential of IT in company use is not being at- izations made strategic use of it to gain a competitive
tained for two reasons: Firstly, the companies have advantage. Thong and Yap (1995) developed an IT
merely reacted to change, simply superimposing IT adoption model to evaluate small businesses. They

THE INTERNATIONAL JOURNAL OF TECHNOLOGY, KNOWLEDGE AND SOCIETY,


VOLUME 4, 2008
http://www.Technology-Journal.com, ISSN 1832-3669
© Common Ground, Farag Hussan Gaith Deryag, Abdul Khalim Abdul Rashid, Amiruddin Ismail, All Rights Reserved, Permissions:
cg-support@commongroundpublishing.com
THE INTERNATIONAL JOURNAL OF TECHNOLOGY, KNOWLEDGE AND SOCIETY, VOLUME 4

concluded that the businesses with innovative CEOs were asked for how their availability of resources
possessed more positive attitudes toward IT adoption. affected their IT effectiveness and role of IT in their
In Singapore, Ang and Koh (1997) explored the rela- firms. The questionnaire took 25 – 30 minutes to
tionship between user information satisfaction and answer. A face-to-face approach was used. The re-
job satisfaction by developing two constructs to sponse rate was 62%.
measure the relationship, and found them to be well
correlated. In Hong Kong, Burn (1990) studied the
Results and Discussion
strategic use of IT in small- and medium-sized organ-
izations. She surveyed three medium-sized organiz- Descriptive Statistics
ations and found their IT strategy to be related to the
Porter and Miller (1985) model of competitive ad- Table (1) provides the Information Technology Per-
vantage. formance Index (ITP) descriptive statistics. The mean
is 14.779 with a standard deviation of 3.745, and
Methodology minimum and maximum values of 5.0 and 23.0, re-
spectively. The table also shows the 25 and 75 per-
This study was undertaken with a survey because of cent quartiles to be 14.0 and 18.0, respectively. The
its previous successful use in the same field of re- former indicates that 25% of the firms have an ITP
search by Christianah and John (2007). The question- index ≤14.0, and the latter that 25% of the firms have
naire was sent to the three top managers in the com- an ITP index ≥ 17.0. The majority of responses ob-
panies surveyed - General Manger, Senior Manager tained from the firms provided consistent perform-
and Project Manager – with only one response re- ance and utilization metrics. Moreover, more than
quired per company. The questionnaire was based half the respondents were General Mangers, 25%
on that used for the Canadian part of the international Senior Managers and 20% Project Managers. That
IT Barometer Survey by the Royal Institute of the responses were from such senior staff lent cred-
Technology (Kungl Tekniska Högskolan), Sweden, ibility to the data collected. Collectively, the answers
1997, slightly modified and improved for Malaysian supported the validity of the survey.
conditions. The questionnaire was in six sections -
personal information, company information, com-
puter and software use, data and communications, Differences in IT Investment with Firm Size
IT Investment, and Overall Performance and IT Ef- and Type
fectiveness - with a total of 40 questions. Tables (2) and (3) summarize the respondent firms’
The respondents were asked to answer honestly investment in IT as a percentage of their annual
from their own company experience. They were turnover. Table (2) shows that about half (48%) of
asked their IT usage, level of training in IT of newly the construction companies and 33% of the structural
hired staff, staff access to equipment like PCs and companies invested less than 1% of their turnover
lap-tops, types of general software and specific in- on IT, whereas over 45% of the other firms invested
dustry software used, types of software and number 1 to 5%.
of licenses, and applications for CAD. Then, they

Table 1: IT Index Descriptive Statistics


Firm No of ITP INDEX
Annual Turnover Firms Mean Std. Deviation Min Max 25% Quart- 75% Quartile
( RM, 2003) ile
<50,000 6 13.00 1.54 11.00 14.00 11.00 14.0
50,000- 100,000 23 12.86 1.96 10.00 16.00 11.00 14.0
100,000 -150,000 7 16.42 2.07 14.00 19.00 14.00 19.0
150,000 -200,000 4 18.00 2.30 16.00 20.00 16.00 20.0
>200,000 28 15.85 4.73 5.00 23.00 14.25 18.0
Total 68
FARAG HUSSAN GAITH DERYAG, ABDUL KHALIM ABDUL RASHID, AMIRUDDIN ISMAIL

Table 2: IT Investment (as Percentage of Annual Turnover) by Firm Types (%)


IT Investment as a Percent of Annual Turnover
Firm Type
< 1% 1–5% 6–10% 11–20% Total
Construction 48 36 10 4 100
Structure 33 51 16 0 100
Infrastructure 21 35 44 0 100
Materials 35 32 33 0 100
M&E 36 37 25 2 100

Table 3: Number of Employees by Firms with Different Levels of IT Investment


IT investment as Percent of Annual Turnover
Number Employees in Firm
< 1% 1–5% 6–10% 11–20% Total
< 10 67 23 10 0 100
11 -20 60 29 11 0 100
21 - 30 57 31 12 0 100
31 - 50 24 42 33 1 100
51 or more 26 53 20 1 100

Table 3 indicates that IT investment of <1% annual


turnover was made by 67% of the firms that had >10 Perception of IT Impact on Firm
employees and 60% of the firms with 11-20 employ-
Performance
ees. However, 57% of the firms with 21 – 30 employ-
ees invested >10% and 42% with 31 – 50 employees To gauge the benefits from IT, the respondents were
and >50 employees invested 1 – 5% and 11 – 20%, asked how it had affected their company perform-
respectively. Most of the companies invested 1-5 %, ance. They had to respond in one of four levels -
increasing with the number of employees. strongly agree, slightly agree, slightly disagree or
ANOVA revealed that the investment in IT did strongly disagree. Figure 1 shows their response to
not significantly vary with firm size (turnover and the statement “IT has had a positive impact on your
number of employees) (P < 0:05). However, there company’s performance”. Most (64%) agreed, 29%
are no significant differences in IT investments with slightly agreed, 5% slightly disagreed and 2%
firm size and type. strongly disagreed.

Figure 1: Responses to Statement: IT has had a Positive Impact on your Firm’s Performance
THE INTERNATIONAL JOURNAL OF TECHNOLOGY, KNOWLEDGE AND SOCIETY, VOLUME 4

Correlation Matrix of IT index 0.01), Effects by Information Technology on Firm


Productivity and Financial Performance vs. Business
Correlation is one of the most common and useful Resources (P < 0.01) and Human Resources Barriers
statistical tools. The correlation gives a coefficient from Use of Information Technology vs. with Areas
that describes the degree of relationship between two in which you Plan to Increase the use of Information
variables. In this study, all the examined variables Technology (P < 0.05).
were correlated in a matrix with the results given in Business Resources had significant positive correl-
Table 4. The correlations were done using Pearson’s ations (P < 0.05) with Human Resources, Financial
2-tailed test for perceptions. Performance and Information Technology Effective-
Significant positive correlations were found for ness Level Agreement. Important Reasons for Mak-
Information Technology Effectiveness Level ing Decisions about new Information Technology
Agreement vs. Financial Performance (P < 0.01) , Investments had a significant negative correlation
Information Technology Performance vs. Information with Business Resources.
Technology Effectiveness Level Agreement (P <

Table 4: Correlation Matrix of IT Index Coefficients of Respondent Perceptions (N = 68)


A
ITEL EIT ITRC IRM
TR FP ITP AIT BR HR BIT PI
A P E DITI
IT
TR 1
ITE
0.057 1
LA
FP 0.190 0.485(**) 1
ITP -0.039 0.435(**) 0.293(*) 1
A I T -0.216 -0.017 -0.118 -0.215 1
EIT
-0.097 0.380(**) 0.150 0.198 0.271(*) 1
P
ITR
0.007 0.346(**) 0.103 0.332(**) 0.490(**) 0.120 1
CE
IR
M D -0.276(*) -0.087 -0.191 -0.137 0.643(**) 0.224 -0.439(**) 1
ITI
BR 0.509(**) 0.257(*) 0.441(**) 0.073 0.578(**) -0.207 0.230 -0.473(**) 1
HR 0.293(*) 0.524(**) 0.603(**) 0.208 -0.063 0.283(*) 0.126 -0.066 0.641(**) 1
B I T -0.308(*) 0.357(**) 0.022 0.317(**) 0.233 0.620(**) 0.255(*) 0.226 -0.189 0.265(*) 1
API
-0.360(**) 0.193 -0.066 -0.053 0.522(**) 0.344(**) -0.157 0.457(**) -0.209 0.245(*) 0.406(**) 1
IT
* Significant at P < 0.05 (2-tailed).
** Significant at P < 0.01 (2-tailed).
Note. T R = Technical Resources, I T E L A = Information Technology Effectiveness Level Agreement , F
P = Financial Performance, I T P = Information Technology Performance, A I T = Advantages use of Inform-
ation Technology had given your firm, E I T P = Effects by Information Technology your firm had on the
Productivity , I T R C E = Information Technology Resulted in Changes in Efficiency, I R M D I T I = Im-
portant Reasons for Making Decisions about new Information Technology Investments, B R = Business Re-
sources, H R = Human Resources, B I T = Barriers to use of Information Technology , A P I I T = Areas in
which you Plan to Increase the use of Information Technology.
FARAG HUSSAN GAITH DERYAG, ABDUL KHALIM ABDUL RASHID, AMIRUDDIN ISMAIL

Performance vs. IT Investment, Turnover


and Technical Software (Regression
Analysis)

Table 5: IT Investment, Turnover and Technical Software Use vs. Performance


Variable Coefficient t sig
Constant 11.747 11.21 0.00
Turnover 0.901 11.241 0.002
IT investment -0.078 -0.676 -0.084
Technical software use -0.110 -0.950 -0.117
Model = 11.741 + 0.901 x Turnover - 0.078 x IT investment - 0.110 x Technical software use.

All variables in Table (5) are significant at P < 0.05.


The IT invested and Technical software use variables
Conclusion
have negative coefficients, implying that an increase
in them would increase the firm’s performance. The Today, IT has accelerated the speed of work in the
coefficient for Turnover was unexpectedly positive, Malaysian construction industry. This study has
implying that Turnover did not have much effect on identified the factors in IT use and assessed their ef-
the firm performance, possibly because of the low fects on the company performance. Many factors are
IT investment made. This finding concurs with the seen to influence the company performance, with
descriptive analysis (Table 3). The regression shows the resultant perceptions by the respondents being
that a unit increase in IT investment and technical the complex interaction of these influences. Matrix
software use will increase the company’s perform- correlations were performed to gauge the relation-
ance by 92% and 89.5%. ships between the variables (Table 4). The significant
Overall, the results show a negative relationship variables, which can be used to improve company
between company performance and IT investment performance by increased use of IT, are Financial
and Technical Software Use. It is concluded that IT Performance, Business Resources and Human Re-
investment and Technique software use is a contrib- sources. It can be seen from the analysis that the
utor to the performance of construction industry likelihood for firms to improve their performance is
firms. The most important criterion for the logistic low unless they increase their IT investment. This
regression model is the pseudo R2. SPSS presents supports Samuelson (2002) and Rivard (2000) who
R2 measurements to estimate how much of the vari- assessed the level of IT use across design and con-
ation is accounted for by the model. The model has struction firms in the Canadian construction industry,
R2 = 0.791, explaining 79% of the variation in the and found that the great majority of them had in-
dependent variable. This result concurs with Griffis creased their investment in IT in the past few years
et al. (1995), Koo and Fischer (2000) and Back and and will increase them further in the next two years
Bell (1995) who generally found that increased IT The main benefits achieved by the increased use of
investment and technical software use increased the IT is better documentation, faster speed of work and
firm’s performance. better financial control. The next step in this research
would be to develop a performance model which
results can then be used to plan the strategy to en-
hance the firm’s performance.

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About the Authors


Farag Hussan Gaith Deryag
Universiti Kebangsaan Malaysia, Malaysia

Abdul Khalim Abdul Rashid


Universiti Kebangsaan Malaysia, Malaysia

Amiruddin Ismail
Universiti Kebangsaan Malaysia, Malaysia
EDITORS
Bill Cope, University of Illinois, Urbana-Champaign, USA.
Mary Kalantzis, University of Illinois, Urbana-Champaign, USA.

EDITORIAL ADVISORY BOARD


Darin Barney, McGill University, Montreal, Quebec, Canada.
Marcus Breen, Northeastern University, Boston, USA.
G.K. Chadha, Jawahrlal Nehru University, India.
Simon Cooper, Monash University, Australia.
Bill Dutton, University of Oxford, United Kingdom.
Amareswar Galla, The University of Queensland, Australia.
David Hakken, University of Indiana, Bloomington, Indiana, USA.
Michele Knobel, Montclair State University, New Jersey, USA.
Jeannette Shaffer, Edtech Leaders, VA, USA.
Ravi S. Sharma, Nanyang Technological University, Singapore.
Robin Stanton, Australian National University, Canberra, Australia.
Telle Whitney, Anita Borg Institute for Women and Technology.

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http://www.Design-Journal.com
International Journal of Diversity in Organisations, Communities and Nations
Provides a forum for discussion and builds a body of knowledge on the forms and dynamics of difference and diversity.
ISSN: 1447-9583
http://www.Diversity-Journal.com
International Journal of Environmental, Cultural, Economic and Social Sustainability
Draws from the various fields and perspectives through which we can address fundamental questions of sustainability.
ISSN: 1832-2077
http://www.Sustainability-Journal.com
Global Studies Journal
Maps and interprets new trends and patterns in globalization. ISSN 1835-4432
http://www.GlobalStudiesJournal.com
International Journal of the Humanities
Discusses the role of the humanities in contemplating the future and the human, in an era otherwise dominated by
scientific, technical and economic rationalisms. ISSN: 1447-9559
http://www.Humanities-Journal.com
International Journal of the Inclusive Museum
Addresses the key question: How can the institution of the museum become more inclusive? ISSN 1835-2014
http://www.Museum-Journal.com
International Journal of Interdisciplinary Social Sciences
Discusses disciplinary and interdisciplinary approaches to knowledge creation within and across the various social
sciences and between the social, natural and applied sciences.
ISSN: 1833-1882
http://www.Socialsciences-Journal.com
International Journal of Knowledge, Culture and Change Management
Creates a space for discussion of the nature and future of organisations, in all their forms and manifestations.
ISSN: 1447-9575
http://www.Management-Journal.com
International Journal of Learning
Sets out to foster inquiry, invite dialogue and build a body of knowledge on the nature and future of learning.
ISSN: 1447-9540
http://www.Learning-Journal.com
International Journal of Technology, Knowledge and Society
Focuses on a range of critically important themes in the various fields that address the complex and subtle relationships
between technology, knowledge and society. ISSN: 1832-3669
http://www.Technology-Journal.com
Journal of the World Universities Forum
Explores the meaning and purpose of the academy in times of striking social transformation.
ISSN 1835-2030
http://www.Universities-Journal.com

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