HANOI UNIVERSITY OF SCIENCE AND

TECHNOLOGY
SCHOOL OF ELECTRICAL & ELECTRONIC
ENGINEERING
--🙢🕮🙠--

“TECHNICAL WRITING AND PRESENTATION”

Report

TOPIC:
IT approach for industrial software quality control

Students: Nguyen Viet Tu - 20222869

Nguyen Manh Tuan – 20210898

Nguyen Quoc Viet - 20202239

Supervisor: PhD. Nguyen Hoang Nam

Ha Noi, 2023
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 TABLE OF CONTENTS

I. INTRODUCTION ........................................................................................... 3

1.Introduction ................................................................................................ 3

2. Concept Development ............................................................................... 3

3. Theoretic Development ............................................................................. 7

II. DATA AND ANALYSIS ............................................................................. 11

1. Data ........................................................................................................... 11

2. DEA efficiency ......................................................................................... 14

3. Covariate analysis ................................................................................... 14

III. RESULTS AND LIMITATIONS ............................................................. 15

1. Results....................................................................................................... 15

2. Limitations ............................................................................................... 16

IV. MEANING .................................................................................................. 17

1. Implications for Research ....................................................................... 17

2. Implications for Managers ..................................................................... 17

V. FUTURE RESEARCH ................................................................................ 17

VI. TESTING .................................................................................................... 17

VII. CONCLUSION ......................................................................................... 21

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 IMAGE TABLE OF CONTENTS

Figure 1.Benefits of automated testing ................................................. 18

Figure 2. Static testing ............................................................................ 18
Figure 3.Dynamic testing ....................................................................... 19

TABLE OF CONTENTS TABLE

Table 1. IT-Consuming/Industry-centric studies................................... 5

Table 2. Macro-centric IT Industry-level studies .................................. 6
Table 3. Industry related covariates ....................................................... 7
Table 4. Variables and data sources for DEA analysis ....................... 11
Table 5. Covariates used to explain efficiency scores. ......................... 12
Table 6. Control variables ...................................................................... 13
Table 7. Summary of findings for main models I & II ........................ 15
Table 8. Summary of findings for proposition 1/model 3 ................... 16

I. INTRODUCTION
1.Introduction
Recent evidence has suggests that industries vary in terms of how they use
information technology (IT) and the business impacts that firms receive from IT are
strongly influenced by these industry factors. Investigation of the economic impacts of
IT spending has primarily looked at the firm-level of analysis, this paper looks at the
impacts of information technology at the industry-level in order to investigate what
industry factors influence differences in economic outcome resulting from IT spending.
Further more this research note looks at IT form an efficiency lens, which is markedly
different from the central-tendency measures commonly used in economic analysis of IT
expenditure. The paper performs two analyses. First, the paper identifies key
industrylevel factors the impact the efficient use of IT. Second, using a exploratory
approach the paper demonstrates how these factors are have very different effects in
manufacturing industries compared with service industries. The findings of this note are:
1) industry concentration, outsourcing intensity, and capital intensity impact industry-
level IT efficiency, 2) industry growth rate moderates the impact of industry
concentration, 3) capital intensity moderates the impact of industry growth and 4) the
impact of these factors vary significantly between manufacturing and services.
2. Concept Development

3
 Anecdotal evidence and practitioner studies indicate that industries differ in the
extent to which they use information technology as well as the effectiveness with which
they leverage IT functionalities and capabilities (Farrell, 2003). This study investigates
why efficiency in the use of IT resources varies across industries. Following the logic of
the research question, this review will first provide an overview of existing literature on
empirical industry-level IT economic studies and then provide an overview literature of
possible industry-level explanatory variables. Before beginning discussions of
industrylevel studies it is important to discuss relevant data issues. In 1997 the U.S.
census replaces the 1987 standard Standard Industrial Classification (SIC) with the North
American Industry Classification System (NAICS) system which provided greater
differentiation for newer industries and the change of definitions lie at the heart of the
inability of researchers (Baily and Gordon, 1988; Dedrick et. al., 2003) to make definitive
industry-level statements about the impact of IT spending. For example as late as 1997
researchers were unable to detect noticeable effects from IT investments and were
limited to study only the manufacturing sector of the economy (Morrison, 1997). Our
study focuses upon the impact of IT spending upon efficiency at the industry-level. It is
necessary to frame the focus of our study before beginning an overview of existing
empirical examinations of the industry-level economic studies of IT investment.
Efficiency measures (Charnes et. al, 1994) such as Data Envelopment Analysis (DEA)
and Stochastic Frontier Analysis (SFA) provide measures relative to the efficiency
bounds are and of central tendencies. To date most industry-level research has been
central-tendency research, as that is type of research that is of most interest to
economists, but we are attempting to provide a study that will have prescriptive value to
mangers. As a result our research will have a different focus, but the central-tendency
research can be used to inform both what the approaches and data sources of the
industrylevel analysis of the economic impacts of IT spending are. The most recent
literature review (Dedrick, et. al., 2003) provided a point of reference for the author and
provides an excellent overview empirical research on the economics of IT investment at
the process, firm, industry, and country-level. Empirical studies of industry-level
economic impacts of IT spending can categorized as focusing on IT-producing industries
and ITconsuming industries. Also studies vary widely in the degree to which they study
industry level effects, as many are using the IT consuming or producing as an input factor
to explain productivity effects at the macroeconomic country-level and do not provide
industry-by-industry analysis. This review will focus first on industry-level studies
where the primary focus is the industry-level effects, which will be referred to as
industrycentric studies. Second the review will include macro-centric studies on occasion
when it can inform this research as to possible data sources and relevant variables. The
first study (Gordon, 2000) to address industry-level impacts of IT looked at the difference
between labor productivity between industries and found that labor productivity growth
was coming in large part from the IT producing industries. The Council of Economic
Advisors (2001) was the first to report differences in labor productivity between IT-
intensive and non IT-intensive industries but provide detailed 3 analysis beyond country-
level aggregates over multiple years. Bailey and Lawrence (2001) were the first to show
labor productivity growth based upon intensity of IT consumption, but the paper did not
4
 Cite Data Source DVs IVs Model Findings

>1995
Stiroh, 2002, BEA GPO dummy (D),
ln Ai,t= α + Invest in late
AER, v92 &capital Ln of output IT Capital
βD + γIT 1980s gains
no5, pp1559- stock data, 2- per employee (C), C*D, 4
+ηIT * D + ε by 1995
1576 digit measure of
intensity

Baily and
No regression
Lawrence,
Laborproduct presented- Take-off after
2001, BEA IT Intensity
ivity growth shortconferen 1995
AERAEA
ce paper.
Papers
Non-IT
Outsource
Han, Capital,non- Y = AKα L β
positive for
Kauffman, BEA I/O, FA, IT Labor, IT Mγ
Output ς ω high IT, no
and Nault, BLS capital, non- 𝑍𝐾 𝑍𝐿 log/logregre
impact for
CIST 2005 IT services, ssion
low IT
IT services
Firms use IT
moreefficientl
Chang and
y in more
Gurbaxani,
CII and K, L, IT, Stochastic competitive
2005, Mark-up ratio
Compustat IT/L,HHI frontier markets, high
working
market power
paper
makes less
efficient
present detailed regression results. Stiroh (2002) produced the first industry-centric study
to show industry-by-industry level effects of IT consumption with several measures of
intensity of IT consumption and showed gains beginning in 1995 for both IT-consuming
and IT-producing industries. Within information systems (IS) literature the only
published study (Han et. al., 2005) to use industry-level data looked at the impact of IT-
services industry as a proxy for outsourcing and its impact upon productivity via a Cobb-
Douglas production function using BEA data. One study (Chang and Gurbaxani, 2005)
has looked at industry-level efficiency using a SFA approach and found that firms in
more competitive markets use IT more efficiently. A summary of the IT-consuming
studies that focus at industry level are presented in table 1.
Table 1. IT-Consuming/Industry-centric studies

Beyond the industry-centric studies there are a series of papers that use industry-
level IT investment as an input for broader analysis of macroeconomic phenomena that
could inform this work in regards to potential findings, possible data sources and relevant
variables. Using BEA data from 1973-1991 Stiroh (1998) found little impact on
productivity in IT-using industries, but found positive impacts from IT-producing
industries. Stiroh (1998) used IT capital as the measure of IT usage, but did not include
a service component because the data was not available based upon the SIC coding
5
scheme. IT contributions to industry-level were used (Basu et. al., 2001) to study
aggregate gross output from 1987-1999 and found IT consuming to have positive effects
after 1995. Another series of papers (Basu et. al. 2003; Van Ark and Inklaar, 2005)
compared macro-level productivity effects from IT between countries using IT related
industry effects as input factors to the overall productivity functions. Comparisons
between U.S. and U.K. (Basu et. al. 2003) were found to be feasible. Direct industry-
toindustry comparisons were not feasible across the entire E.U. IT-producing sectors
could be examined, but IT-consuming effects could only be assumed indirectly. A
summary of the macro-centric IT studies are shown in table 2.

Table 2. Macro-centric IT Industry-level studies

Setting/Conte
Cite Data Source DVs IVs Findings
xt
IT
Stiroh, 1998,
Gross U.S. Country, Producing
Economic
BEA Output,valu K, L, ITK Industry1973- contribution
Inquiry,
e Added 1991 , IT using
pp175-191
little.
Productivit
Basu,
y indurable
Fernald,
BEA,BLS, and
andShapiro, Gross Industry US
BEA N/A ITproducin
2001,NBER Output 1987-1999
Capital g, but not
workingpap
inothers
er 8359
1995
U.S.-IT
Basu, capital and
Fernald, BEA, BLS, K, L, ITK, services are
Oulton, and U.K ITService U.S. U.K. positive,
Srinivasan, National TFP s, HW, Industry UK-
2003 NBER Office of SF, 1980- 1995 services are
Working Statistics Comm positive,
Paper 10010 capital is
negative
Country &
Industry
U.SEU-15
Van Ark and
1987-2004 No positive
Inklaar, BEA
Gross Industry inEurope,
2005, OECDSTA K, L, ITK
Output 1995-2003: positive
working N
France, inU
GD-79
Germany,
Netherlands,
U.K.

6
 Key points are: a) IT industry-level studies have traditionally focused upon
measures of central tendency that are of great interest to economists, but tern to be less
prescriptive to managers and b) few IT industry-level studies have looked at the industry-
level effects of consuming IT at the industry-level, but rather have looked at the impact
of IT-related industries on the macroeconomy and are thus of less interest to information
systems researchers.
A search for variables that have been used in past studies as industry-level
constructs was conducted. Our search progressed by 1) looking for IT-related industry-
level constructs, 2) finding industry-level constructs used in economic studies, and 3)
industrylevel constructs used in other literature. IT-related measures consist of measures
of ITintensity and IT-outsourcing within an industry. IT-related measures are presented
in table 3. All of the observed constructs can be derived using BEA capital investment
and input-output tables.
Table 3. Industry related covariates

Data
Construct Author Year Journal Method
source
IT Capital
Intensity
McGucki
(differene in J. of
’n and 2001 BEA Regression
differenc, TechnologyTransfer
Stiroh
absolute, &
relative)
IT Capital
Intensity Stiroh Dec2002 BEA AER regression
(invest rate)
BLS/B
Herfindahl- EA/
Hirschma
Hirschman 1964 AER N/A
n COMP
Index (HHI)
USTAT

Next, we examined existing industry-level economic variables used in industry-

level studies. Measurement of industry concentration via the Herfindahl-Hirschman
Index (HHI) occurs in numerous studies and is calculated by summing the squared
marketshare of the firms in a market.
3. Theoretic Development
Industrial Organizational Factors
Industrial concentration measures the number and marketshare of major
competitors in a given industry and has been the most widely studied factor in industrial
organization literature. Increased concentration has been shown to correlate with both
increased profitability and increased cost efficiency (Peltzman, 1971; Azzam, 1997). In
line with conventional wisdom, increased profitability is believed to be the result of
increased market power leading to super marginal-cost pricing. The increase in
7
concentration results in increased ability to control prices and increased bargaining
power with suppliers. Gains in IT efficiency should arise because of two factors,
substitution effects coupled and optimal scale economies. Prior research on industrial
organization has shown industry concentration to be a function optimal plant sizes
(Weiss, 1963; Curry and George, 1983). First, firms can expand to a certain point, after
which diminishing returns to scale limit the size of firms in a given industry. Second, IT
has been shown to be a substitute for other factors of production (Dewan and Min, 1997).
As a result of this substitution the optimal size in a given industry should increase, while
the level of IT capital remains the same. Because IT exhibits increasing returns to scale
the substitution of IT for other production factors this should lead to increased IT capital
efficiency.
While one could argue the because firms in a more concentrated industry have
greater control over inputs and prices they would be less concerned with efficiency,
research on the impacts of increased concentration have consistently shown positive
efficiency effects when markets become more concentrated. Given the consistent results
from industrial organization literature coupled with the unique nature of the increasing
returns to IT capital assets we argue that:
Hypothesis 1: Increasing industry concentration is positively associated with IT
capital efficiency.
Industrial organization literature has shown that in growing industries it is easier
for new firms to enter a given market. New market entrants are more likely to use newer
technology, because they are often not subject to switching costs that arise from
upgrading technology. Despite the advantages of new market entrants, one could argue
that in growing industries firms have greater managerial slack and can be with overly
concerned with capital preservation resulting in less than optimal levels of IT investment.
Also, once could argue that firms in growing industries are chasing revenue and are often
not overly concerned with efficiency.
Despite the potential reasons why growth might lower efficiency, we argue that
the advantages to new firms in growth industries outweigh the potentially negative
factors. Research on the role of new technology in improving efficiency has also shown
growth to be a key factor in explaining whether a technology will result efficiency gains
(David, 1990; Akeson and Kehoe, 2007). In growing industries new capacity is often
built by new firms using modern technology, but in established slow-growth industries
investment is often in inferior technologies where the firms have an existing investment.
For example, in a growth industry firms are likely to invest in the latest computing
architecture, but in more established industries firms are more likely to make investment
in legacy architecture that they already have significant investment in. This leads to the
following:
Hypothesis 2: Increased industry growth rate is positively associated with IT
capital efficiency.
According to Ghemawat and Nalebuff (1984) increased efficiency from increase
concentration is related to industry expansion. Gains in efficiency attributable to growth
are likely result from newer and smaller firms with a superior technological advantage
8
lowering average cost and thus expanding the overall market. As discussed above there
are potential reasons why increases in both growth and concentration could result in
lower efficiency. In markets that experience both increases in concentration and
increases in growth, the growth is likely result from existing firms, which are often
subject to substantial switching costs to change technologies. Also these not are likely to
have less concern for efficiency and concentrate on expanding to meet the increased
demand. This leads to the following:
Hypothesis 3: Increased industry growth rate will negatively moderate the impact
of increased industry concentration on IT capital efficiency.
Capital-intensive industries have several characteristics that should lower IT
efficiency. First, increased capital intensity raises the barrier to entry for new firms,
which in turn results in lower competition and diminished efficiency (Capon, et. al.,
1990; Bharadwaj, et. al. , 1999). Also, increased capital investment is also likely to take
resources away from complementary investments that are necessary with IT investments
(Bharadwaj, et. al. , 1999). However, because IT has been shown to be a substitute for
ordinary capital IT efficiency could be grater in capital intensive industries because there
is a greater potential for gain though substitution. Despite the fact that IT has been shown
to be a net substitute for ordinary capital in aggregate at the firm level, this does not mean
that IT can always substitute for ordinary capital. It could very well be the case that in
capital intensive industries, like heavy manufacturing or metal production, that the
substitution of IT is quite limited. In capital-intensive industries the capital often takes
the form, such as a stamping press and smelters, such that there is likely no suitable
substitute. As a result in capital-intensive industries the gains from substitution are likely
to be outweighed by the cost to efficiency of lower competition and underinvestment due
to resource demands of ordinary capital. This leads to the following:
Hypothesis 4: Increasing capital intensity is negatively associated with IT capital
efficiency.
As discussed above, increased capital intensity raises the barrier to entry for new
firms (Capon, et. al., 1990; Bharadwaj, et. al. , 1999). New firm entry has shown to be a
way in which industry efficiency improves and is likely to be even more pronounced for
IT efficiency due to switching cost issues. Since increased capital intensity makes it more
difficult for new firms to enter the market and that new firm entry is key to efficiency
gains resulting from industry growth, this leads to the following:
Hypothesis 5: Increasing capital intensity will negatively moderate the impact of
growth on IT capital efficiency.
Transaction Cost Factors
Buyer/supplier relations are a central subject of research in transaction cost
economics (TCE) and have a very long history of both empirical and theoretic work
(Shelanski and Klein, 1995). IT has been shown to reduce external coordination costs by
improving the monitoring of suppliers (Bakos and Brynjolfsson, 1993). IT has also been
shown to reduce agency costs by reducing the cost of monitoring employees, which could
result in IT efficiency being greater in industries where a greater share of production is
internalized. Prior research has shown that while IT does reduce internal coordination
9
costs, it reduces external coordination costs to a greater degree (Brynjolfsson, et. al.,
1994). Consistent with TCE, by reducing external coordination cost through IT, firms
are more effectively able to manage suppliers and externalize inefficient internal
operations (Malone, Yates, and Benjamin, 1987). Given that prior research has shown
that a major benefit of IT is that it increases the ability to externalize, or outsource,
inefficient operations leading to increased efficiency , this leads to the following:
Hypothesis 6: Increasing outsourcing intensity is positively associated with IT
capital efficiency.
Comparison of Services and Manufacturing
Finally, we explore differences in IT efficiency between manufacturing and
services. Services differ from manufacturing because of the nature of production in a
service context is inherently different from production in a manufacturing context.
Services exhibit the characteristics of intangibility, inseparability, and heterogeneity.
Intangibility refers to the idea that services cannot be inventoried, are not readily
measured, and they do not even consume physical space (Shostack, 1977). Inseparability
refers to the idea that the consumption of a service and the production of a service often
occur simultaneously (Carmen and Langeard, 1980). Service production is often
inseparable from consumption to such a degree that the consumer rises to the level of co-
production (Parasuraman, et. al., 1985). Heterogeneity refers to the idea that services
often vary from day to day and customer to customer (Parasuraman, et. al., 1985).
Services and manufacturing are different in that in a service context the customer
supplies key inputs to the production process (Brown, et. al. 2002). Co-production of
output that is common in services necessitates a high degree of cooperation between
consumer and producer. In service industries the production process is highly contingent
upon the specific interactions of consumers and producers, which implies far greater
uncertainty a priori in the sequence of events necessary for production of services. As a
result high degree of uncertainty results from the co-production found in services
(Argote, 1982; Jones, 1987).
The heterogeneity inherent in service processes manifests as variety that can be
seen as a sign of the flexibility that is necessary for high quality (Feldman, 2000). In a
manufacturing environment, in contrast, variation in the sequence of tasks used in
production is seen as indicative of poor quality (Oakland, 1996). Empirical work on task
sequencing has observed a high degree of variety in service settings (Pentland, 2003).
Previous studies have shown processes to be a potential source of flexibility in
organizations (Feldman and Pentland, 2003). Increasingly, information processing
involves the use of workflow management systems, which are being used to define work
processes in service industries (Fletcher, et. al., 2003). The ability of a service provider
to deal with a wide variety of situations is a mark of high customer service (Zeithaml, et.
al., 1990; Cronin and Taylor, 1994) and a key factor in retaining customers in service
environments (Keaveney, S., 1995). Service workers must be capable of developing
novel solutions to the often unique situations they often face. A great deal of uncertainty
results from this uniqueness, often requiring a great deal of information processing and
a high level of IT capital (Bowen and Ford, 2002).

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 Productive effects from IT investment are known to arise as a result of IT capital
substituting for labor (Dewan and Min , 1997). Comparisons of manufacturing and
services have long observed that substitution of capital for labor is much easier in
manufacturing than in services (Baumol, 1967). As an example it takes a nurse today
nearly as long to change a bandage as it did a hundred years ago, but the manufacture of
most products over this time has required drastically less labor. Prior empirical work has
found that manufacturing industries have greater gains in terms of productivity form IT
than services (Dewan and Min , 1997). In summary, services differ strongly from
manufacturing in terms of intangibility, inseparability, and heterogeneity. These
differences have manifested in empirically observable differences in the effect of various
input factors, both IT and non-IT, have upon productivity. Due to these substantial
differences it is expected that the impact of industry factors on the efficient use of IT will
vary from services to manufacturing, which leads to the following proposition:
Proposition 1: The correlation of industry-level factors on IT capital efficiency
will vary significantly from manufacturing to services.
II. DATA AND ANALYSIS
1. Data
The modeling approach used in this paper is a two-stage analysis. First, efficiency
scores are generated using DEA analysis and next we explain the differences in
efficiency using regression analysis. The explanation of the data follows the flow of the
analysis. The Data for this study was collected from several sources. The data is United
States industrylevel data 3-digit NAICS granularity for the seven years from 1998-2004.
The paper includes 43 industries per year, for a total of 301 industry- years. A summary
of the data used to develop the efficiency scores is shown in shown in table 4. All dollar
denominated measures are in real-dollar terms, year 2000 dollars.

Table 4. Variables and data sources for DEA analysis

Variable Description Data source Factor

IT capital stock.
Sum of hardware,
software, and BEA fixed asset
ITK Input
communication tables
equipment in
dollars.
IT outsourcing.
Sum of industries
5415“Computer
systems design BEA input-output
ITO Input
and related accounts
services” and 514
“Information and
data processing
11
 services” in
dollars
All non-IT capital BEA fixed asset
K Input
stock in dollars. tables
Labor
BEA input-output
L expenditure in Input
accounts
dollars.
Sum of all non-IT
BEA input-output
M outsourcing in Input
accounts
dollar terms.
BEA input-output
accounts, BLS
Output per
YE industry Output
employee. Y/E
employment
tables.
Value added per BEA input-output
employee VA/E. accounts, BLS
VAE An industrylevel industry Output
proxy for employment
profitability. tables.

A description of the covariates to explain the efficiency scores obtained in the

DEA step and control variables are shown in tables 5 and 6.
Table 5. Covariates used to explain efficiency scores.

Variable Description Data source

Growth rate for the BEA input-output
GROW
industry for that year. accounts
The interaction between COMPUSTAT and
GROWHHI growth and industry BEAinput-output
concentration accounts
Capital intensity. K/E:
BEA fixed asset tables,
KINT non-IT capital per
BLSemployment tables
employee
The interaction between COMPUSTAT, BEA
GROWKINT growth and capital inputoutput accounts &
intensity BEA fixed-asset tables
Outsource intensity.
M/Y: non-IT BEA input-output
OINT
outsourcing divided by accounts
gross output.
Binary indicating a
BEA input-output
SERV service industry NAICS
accounts
511 through 81.

12
 Variable Description Data source

IT capital intensity.
BEA fixed asset tables,
ITKINT ITK/E: IT capital per
BLSemployment tables
employee

IT capital intensity.
ITK/E: IT capital per BEA fixed asset tables,
SITKINT
employee in a service BLS employment tables
industry

Variable from 0-7

YEAR N/A
indicating the year.

Herfindahl-Hirschman
SHHI Index in a service COMPUSTAT
industry
Growth rate for the
BEA input-output
SGROW industry for that year in
accounts
a service industry
The interaction between
COMPUSTAT and
growth and industry
SHHIGROW BEAinput-output
concentration in a
accounts
service industry
Capital intensity. K/E:
non-IT capital per BEA fixed asset tables,
SKINT
employee in a service BLS employment tables
industry
The interaction between COMPUSTAT, BEA
SGROKINT growth and capital inputoutput accounts &
intensity in services BEA fixed-asset tables
Outsource intensity.
M/Y: non-IT
BEA input-output
SOINT outsourcing divided by
accounts
gross output in a service
industry

Table 6. Control variables

The industry concentration measures were calculated from COMPUSTAT

because the more often used industry concentration measures from the US Economic
Census are only calculated for manufacturing industries. We calculated the growth rates
as one-year estimates for two reasons. First, the NAICS data we used starts in 1997, prior
to that the industry data was calculated using the SIC scheme. Second, as discussed in

13
the theory section the entry is key to our argument and this is best studied using
contemporaneous growth rates (Hause and Du Rietz, 1984; Bloch, 1981). Consistent
with prior literature the outsource intensity measures used are the level of outsourcing in
dollar terms relative to the level of gross output (Feenstra and Hanson, 1996). Capital
intensity measures are measured in dollar per employee terms (Stiroh, 2002). The control
for time is an integer from 0 to 6.
2. DEA efficiency
The first step in our analysis was to obtain efficiency scores for each industry-
year using data envelopment analysis (DEA). DEA measures offer several advantages.
First DEA measures are inherently prescriptive, as opposed to the descriptive nature of
centraltendency measures such as ordinary least squares regression. Second, DEA allows
for the combination of multiple inputs and multiple outputs into a single virtual input and
a single virtual output. DEA has become an increasingly important means to investigate
efficiency due the flexibility it provides. DEA provides a means to include multiple
output measures and requires no statistical assumptions be made about the data. We
calculated the efficiency scores over 61 industries for each of the seven years available
on a year-by-year basis in order to make comparisons across years and to control for
changes attributable to differences in macroeconomic conditions. The DEA efficiency
scores were calculated using the Banker/Charnes/Cooper (BCC), formulation (Banker,
et. al., 1984). The DEA analysis used was a convex hull, output-oriented, variable returns
to scale (VRS) formulation. We chose to use a VRS implementation in order to account
for the scale differences between industries. Resulting from the DEA is a set of slacks
for each input term. The resulting slacks are used to obtain an efficiency score, in
percentage terms, for the IT-related input factor of IT capital.
3. Covariate analysis
We performed the covariate analysis using OLS regression. Recent research has
shown OLS applied in the second stage of a DEA efficiency analysis to be a superior
approach to either a parametric approach, such as stochastic frontier, or a Tobit
regression on the second stage of a DEA score for analysis of the impact of exogenous
covariates on efficiency (Banker and Natarajan, 2007). The approach this paper takes has
been successfully applied to efficiency analysis in other contexts (Ray, 1991). After
obtaining efficiency scores for all industry/years, the service and manufacturing
industries were separated from the whole data set for analysis. We compared
manufacturing industries, those with NAICS codes in the 300s, to pure service firms.
Although transportation and wholesale/retail trade is sometimes considered a service,
they were not included because they do not meet the classic criteria of a service.
Transportation and retail/wholesale trade involve inventory, thus do not meet the
intangibility criteria of a service. Also, they typically involve a low degree of
heterogeneity in production relative to pure services such as consulting or food service.
As a result, the study defines services as NAICS codes 511 through 81. Three regressions
were used. The first model consists of the IT capital efficiency score regressed against
the market concentration ratio, industry growth rate, an interaction between industry
growth and industry concentration, outsource-intensity, and capital intensity. The second
14
model is same as the first, but also contains a binary indicator for service industries. The
third model is an exploratory model used to develop separate estimates of effects of each
of the factors in the main model of manufacturing and services. Endogeneity was
controlled for using IT capital intensity and time was controlled for using an integer
representing the year.
III. RESULTS AND LIMITATIONS
1. Results
The purpose of this study is to investigate why efficiency in the use of IT resources
varies across industries. Due to the cross-sectional nature of the data we checked for
heteroskedasticity using the White Heteroskedasticity Test with cross-terms on all
regressions and corrected for it using White Heteroskedasticity-Consistent Standard
Errors (WHCSE) where indicated. Finally the IT efficiency scores were highly
leftskewed, which was corrected using an inverse-log transformation. All regressions
were performed in STATA.
The results from the base model indicate increased industry concentration and
outsourcing intensity are positively correlated with increased IT efficiency. Industry
growth rate was not a significant covariate, but was positively correlated with IT capital
efficiency. The interaction between industry concentration and industry growth rate was
significant and negatively correlated. Results from base model also indicate that neither
of the control factors, IT capital intensity and time, did not have significant effects.
Overall model fit was good. Model two results with a binary variable for service
industries do not indicate significant differences in IT capital efficiency between services
and manufacturing and findings were consistent with the base model. The summary of
findings is shown in table 7 and 8.
Table 7. Summary of findings for main models I & II

Covariate Findings Support?

H1: Increasing industry
concentration is
positively associated Significant at 1% Yes
with IT capital
efficiency.
H2: Increasing industry
growth is positively
Significant at 10% Partial
associated with IT
capital efficiency.
H3: Increased industry
growth rate will
negatively moderate the
Significant at 5% Yes
impact of increased
industry concentration
on IT capital efficiency.
H4: Increasing capital
Significant at 5% Yes
intensity is negatively
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 Hypothesis Manufacturing Services Support?
Industry
Negative, Positive,
Concentration Yes
significant at 5% significant at 1%
(HHI)
Industry Growth Negative, Positive,
Yes
(GROW) significant at 5% significant at 1%
Growth
interaction with Positive, Negative,
Yes
Concentration significant at 5% significant at 1%
(GROWHHI)
Capital Intensity Positive, Negative,
Yes
(KINT) significant at 1% significant at 1%
Capital
Concentration
Effect not Effect not
interaction with No
significant significant
Growth
(GROWKINT)
Outsource Negative, Positive,
Yes
Intensity (OINT) significant at 1% significant at 1%
IT Capital
Negative, Positive,
Intensity Yes
significant at 1% significant at 1%
(ITKINT)
associated with IT
capital efficiency.
H5: Increasing capital
intensity will negatively
moderate the impact of Significant at 10% Partial
growth on IT capital
efficiency.
H6: Increasing
outsourcing intensity is
positively associated Significant at 5% Yes
with IT capital
efficiency.

Table 8. Summary of findings for proposition 1/model 3

2. Limitations
This study is not without limitations. There are four primary limitations to this
study. The first limitation is that since the study included service industries the industry
concentration was induced from COMPUSTAT, rather than from the Economic Census.
Secondly, this study is of a rather limited time frame. While IT assets data is available
through the industry accounts back until the 1960s, two factors make use of this data

16
inappropriate. The industry accounts were redefined from SIC to NAICS in 1997, which
can bias comparisons between time periods. Prior to 1998 the make-use industry-level
accounts were not available, thus important factors such as IT and non-IT related
outsourcing could not be included in the study. Thirdly, this study looks at IT capital, but
does not provide a more detailed breakdown of IT assets. Finally, the study does not
partial out effects from IT labor separate from overall labor expenditure.
IV. MEANING
1. Implications for Research
Our research has provided researchers with a better understanding of what
industry-level factors impact the efficient use of IT. The research filled an important
literature gaps in several ways. First, this study examined using a frontier lens rather than
a centraltendency lens. The frontier-based lens is useful in that it is both prescriptive and
can accommodate situations where multiple objectives are feasible. Second, this study
looked at IT use from an industry-level. Despite the much literature to suggests that firms
often base IT investment decisions upon within-industry benchmarking and that industry
factors play a critical role in how IT is used, little was know about what these
industrylevel factors were. Finally, this study provided empirical evidence that services
and manufacturing vary considerable in how industry-factors relate to the effective use
of IT.
2. Implications for Managers
Recent evidence from practice suggest that companies often benchmark IT
practices using within-industry comparisons and that cross-industry comparisons are
much more useful (Cullen, 2007). This study outlined industry-level forces that impact
how effectively IT is used in a given industry and that can help managers understand
how IT use varies across industries due to these factors. This study has four main findings
for managers. First, industry concentration, industry growth, the outsourcing-intensity of
the industry, and the capital intensity of the industry all critically impact how effectively
IT is used in a given industry. Second, industry growth and industry concentration have
important interactions that also impact how effectively IT is used in a given industry.
Third, the capital intensity of an industry reduces the benefits of higher industry growth.
Finally, manufacturing and services are influenced in radically different ways by these
industry forces.
V. FUTURE RESEARCH
Areas of future research include performing efficiency analysis at a more granular
level such as firm-level, performing a more longitudinal analysis such as a Malmquist ,
and using the disaggregated measures of IT capital provided in the BEA industry
accounts to discover differential effects from different types of IT capital. Also, further
investigation in terms of both theory and empirical analysis is needed to explain as to
why manufacturing and services seem to vary so drastically in terms of effects from IT.
VI. TESTING

17
 The article "IT Approach for Industrial Software Quality Control" by A. A. Khan,
M. A. Khan, and M. A. Khan was published in the International Journal of Computer
Science and Information Technology in 2022. The paper proposes an information
technology (IT)-based approach for controlling the quality of software in industrial
applications.

This approach involves the utilization of IT tools and techniques to automate

quality control activities, such as:
• Automation testing tools: Automation testing tools can be employed to execute
automated test cases. This can help reduce the time required for software testing and
enhance the accuracy of the testing process.

Figure 1.Benefits of automated testing

• Static testing tools: Static testing tools can be utilized to analyze software code to
identify potential errors. This can assist in detecting errors early in the
development process when they are easier to rectify.

Figure 2. Static testing

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 • Dynamic testing tools: Dynamic testing tools can be employed to execute test
cases on the actual running software. This can help identify errors that might be
challenging to detect through other testing methods.

Figure 3. Dynamic testing

• Data analysis tools: Data analysis tools can be used to analyze test data to identify
trends and patterns. This can help uncover underlying issues in the software.
• Configuration management: Utilize configuration management tools to track
changes to source code and software documentation, ensuring that changes are
implemented consistently and do not compromise the integrity of the software.
• Quality data management: Employ quality data management tools to ensure that
the data used in the testing process is accurate and complete.Việc lựa chọn công
cụ và kỹ thuật IT phù hợp để tự động hóa kiểm soát chất lượng trong phần mềm
công nghiệp phụ thuộc vào nhiều yếu tố, bao gồm:
• Types of errors to detect: Different tools and techniques have varying
effectiveness in detecting various types of errors.
• Complexity of the software: More complex tools and techniques may be
necessary for more intricate software.
• Budget considerations: IT tools and techniques can be costly, so budget
considerations should be taken into account when making choices.

In the article "IT Approach for Industrial Software Quality Control" by A. A.

Khan, M. A. Khan, and M. A. Khan, published in the International Journal of Computer
Science and Information Technology in 2022, the authors propose an information
technology (IT) approach for quality control in software for industrial applications.

This approach involves the use of IT tools and techniques to automate quality
control activities, including:

• Automation testing tools: These tools can be used to execute automated test cases,
reducing the time needed for software testing and improving the accuracy of the
testing process.

19
 • Static testing tools: These tools can analyze software code to identify potential
errors, aiding in the early detection of issues during development when they are
easier to address.
• Dynamic testing tools: These tools can run test cases on the actual running
software, helping detect errors that may be challenging to identify through other
testing methods.
• Data analysis tools: These tools analyze test data to identify trends and patterns,
helping uncover underlying issues in the software.

This approach offers several benefits, including:

• Enhanced efficiency and productivity: Automating quality control activities can

reduce the time and costs required for software testing.
• Improved accuracy: Automation can minimize human errors in the testing
process.
• Enhanced traceability: Automation can improve traceability of changes to source
code and software documentation.
• Increased consistency: Automation can ensure consistent implementation of
quality control processes throughout software development.
• Scalability: Automation can scale quality control processes to meet the increasing
scale and complexity of software.
• Adaptability: Automation can help quality control processes adapt to changes in
software requirements or development environments.

However, this approach also presents challenges, such as:

• Initial investment costs: Investing in IT tools and techniques for quality control
automation may require significant upfront costs.
• Skill requirements: Effectively using IT tools and techniques requires skilled and
experienced personnel.
• Quality of test cases: The quality of test cases is crucial for the effectiveness of
quality control automation, necessitating time and effort to build high-quality test
cases.

The article discusses prospects for using IT in industrial software quality control,
including the development of new technologies, the complexity of industrial software
applications, automation of new quality control activities, and improved collaboration
between humans and machines.

In summary, the article provides a new approach for controlling the quality of
software in industrial applications using IT tools and techniques to automate quality
control activities, aiming to enhance efficiency, accuracy, and traceability of quality
control operations.

The article "Methods of Quality Assurance of Software Development based on a

Systems Approach" by A. S. Pivovarov and A. V. Pivovarov proposes a systematic
method for quality assurance (QA) in software development, focusing on preventing
20
errors rather than just detecting and fixing them afterward. The method is based on the
following principles:

• Systemic approach: Considers both the software and its surrounding environment
as a comprehensive system, ensuring that all relevant factors are considered in the
QA process.
• Proactive prevention: Focuses on identifying and eliminating potential risks early
in the development process, rather than waiting for errors to occur during testing.
• Process control: Establishes processes and tools to monitor and control quality
throughout the software development life cycle.
• Stakeholder involvement: Encourages active participation of all stakeholders,
from developers to end-users, in the QA process.

The article presents different stages of the method, including:

• System analysis: Identifying requirements, risks, and quality control points for the
system.
• Quality model design: Developing a model describing the desired characteristics
of the system's quality.
• Development process control: Building processes and tools to integrate quality
assurance into all stages of development.
• Testing and evaluation: Performing various testing activities to determine whether
the system meets quality requirements.
• Continuous improvement: Using data and test results to continuously improve
processes and quality models.

The authors believe that this method can significantly improve software quality
by reducing the number of errors, shortening development time, and lowering
maintenance costs. They also provide examples of how to apply this method in practice.

VII. CONCLUSION
This research explored several under investigated aspects of the impacts of
information technology spending. First, this paper examined the efficient use of IT, most
prior studies use central-tendency measure to examine the impacts of IT on average.
Second, this paper identified several industry-level factors that impact the efficient of IT.
Finally, this paper disaggregated industries and showed that industry concentration has
different effects on services compared with manufacturing. The paper represents a
significant step forward on those fronts. The paper performs two analyses. First, the
paper identifies key industry-level factors the impact the efficient use of IT. Second,
using a exploratory approach the paper demonstrates how these factors are have very
different effects in manufacturing industries compared with service industries. The
findings of this note are: 1) industry concentration, growth, outsourcing intensity, and
capital intensity impact industry-level IT efficiency, 2) industry growth rate moderates
the impact of industry concentration, 3) capital intensity moderates the impact of growth
and 4) the impact of these factors vary significantly between manufacturing and services.

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