Factors Explaining ICT Expenditure Behavior of Greek Firms During the Economic Crisis 2009–2014

Abstract

The financial and economic crisis of 2008 affected negatively investment in general, and investment in ICT was not left unchanged, with negative consequences for firms’ future performance and competitiveness. So this paper aims at investigating factors explaining firms’ crisis behavior with respect to ICT investment and ICT operational expenditures, i.e. their crisis vulnerability of ICT expenditures, for the crisis period 2009–2014. To this end, we examine the effects of six groups of factors on firms’ ICT investment and expenditure behavior during the crisis 2009–2014: three groups of internal factors and three groups of external factors. We focus our analysis on the internal ICT-related factors; we need all other factors in order to be able to appropriately specify two econometric models, one for ICT investment expenditures and a second one for ICT operational expenditures, and avoid omitted variable bias. The analysis of the factors that may influence the likelihood of a reduction of ICT investment and operating expenditure as a consequence of the crisis is primarily explorative, thus driven by available data and economic intuition. Our study is based on Greek firm data from the manufacturing, construction and services sector that have been collected in 2015/2016. We find that all six groups of variables contribute significantly to the explanation of both ICT investment and ICT operational expenditures during the crisis period 2009–2014, even if not to the same extent and not for each of the two dependent variables.

Appendix. Definition of Variables

Variable	Definition
Dependent variables
Impact of crisis 2009–2014 on ICT investment expenditures	Six-level ordinal variable; 1: ‘increase’; 6: ‘very large decrease’; see also Table 2
Impact of crisis 2009–2014 on ICT operational expenditures	Six-level ordinal variable; 1: ‘increase’; 6: ‘very large decrease’; see also Table 2
Independent variables
ICT-related resource endowment
R&D	R&D activities in the period 2012-2014: yes/no; binary variable
HQUAL	Share of employees with tertiary-level education 2014
ICT_PERS	Share of ICT-specialized personnel 2014
ORG	Use of new forms of workplace organization such as teams, job rotation, decentralization of decision making, etc.
ICT_TECHN	Average use intensity of the following ICT applications: ERP, CRM, SCM, Business Intelligence/Business Analytics System, Collaboration Support system; intensity use is measured on a five-point Likert scale (1: ‘no use’; 5: ‘very intensive use’)
CLOUD	Use of cloud computing: yes/no; binary variable
ICT-related capabilities
ICT_CAP_NEW	Rapid implementation of changes of the applications of existing information systems to cover specific firm needs
ICT_CAP_DEVELOP	Rapid development of new ICT applications to cover specific firm needs
ICT_CAP_INTERCON	Rapid realization of interconnection and integration of existing ICT applications inside the firm
ICT_CAP_COOP_INT	Good cooperation and information exchange between ICT personnel and ICT users inside the firm
ICT_CAP_COOP_EXT	Good cooperation and information exchange with ICT providers of hardware, software and networks)
ICT_CAP_ICT_PLANS	Existence of ICT plans that are connected with overall firm strategy (ICT business alignment)
Overall internal problems
INTERNAL	Average of the scores on a five-point Likert scale of the following three single factors that could be considered as sources/causes of firm problems in the period 2009–2014: insufficient cost control; over-investment in equipment, buildings and storage capacity; over-expansion by takeovers, mergers, etc.
Competition conditions
P_COMPET	Intensity of price competition at the product market; five-level ordinal variable: 1 ‘very small’; 5; ‘very strong’
NP_COMPET	Intensity of non-price competition at the product market; five-level ordinal variable: 1 ‘very small’; 5; ‘very strong’
OBSOLESCENCE	Average of the scores on a five-point Likert scale of the two single factors concerning the extent to which firm’s products and services quickly become obsolete/outdated, and also their technologies change quickly
Broad economic environment
MARKET	Average of the scores on a five-point Likert scale for the following four single factors that could be considered as sources/causes of firm problems in the period 2009–2014: decrease of credit limits by banks; by providers; decrease of paying willingness of customers; increase of competition pressure at the product market (1: ‘not relevant; 5: ‘very relevant’)
Macroeconomic conditions
MACRO	Average of the scores on a five-point Likert scale for the following four single factors that could be considered as sources/causes of firm problems in the period 2009–2014: decrease of domestic private demand, demand of the state; of foreign demand; decrease of product and service prices (1: ‘not relevant; 5: ‘very relevant’)
LAGE	Natural logarithm of firm age (2015 minus foundation year)
Medium-sized	50 to 149 employees; binary variable
Large	250 and more variables

1. Note: The capability variables ICT_CAP_NEW to ICT_CAP_ICT_PLANS are ordinal variables measured on five-point Likert scale (1: ‘(available) to a very small extent/not at all’; 5: ‘(available) to a very large extent’).