• Asia pacific journal of information systems
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• v.20 no.3
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• pp.115-137
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• 2010

Information technology (IT) outsourcing, the use of a third-party vendor to provide IT services, started in the late 1980s and early 1990s in Korea, and has increased rapidly since 2000. Recently, firms have increased their efforts to capture greater value from IT outsourcing. To date, there have been a large number of studies on IT outsourcing. Most prior studies on IT outsourcing have focused on outsourcing practices and decisions, and little attention has been paid to objectively measuring the value of IT outsourcing. In addition, studies that examined the performance of IT outsourcing have mainly relied on anecdotal evidence or practitioners' perceptions. Our study examines the contribution of IT outsourcing to economic growth in Korean industries over the 1990 to 2007 period, using a production function framework and a panel data set for 54 industries constructed from input-output tables, fixed-capital formation tables, and employment tables. Based on the framework and estimation procedures that Han, Kauffman and Nault (2010) used to examine the economic impact of IT outsourcing in U.S. industries, we evaluate the impact of IT outsourcing on output and productivity in Korean industries. Because IT outsourcing started to grow at a significantly more rapid pace in 2000, we compare the impact of IT outsourcing in pre- and post-2000 periods. Our industry-level panel data cover a large proportion of Korean economy-54 out of 58 Korean industries. This allows us greater opportunity to assess the impacts of IT outsourcing on objective performance measures, such as output and productivity. Using IT outsourcing and IT capital as our primary independent variables, we employ an extended Cobb-Douglas production function in which both variables are treated as factor inputs. We also derive and estimate a labor productivity equation to assess the impact of our IT variables on labor productivity. We use data from seven years (1990, 1993, 2000, 2003, 2005, 2006, and 2007) for which both input-output tables and fixed-capital formation tables are available. Combining the input-output tables and fixed-capital formation tables resulted in 54 industries. IT outsourcing is measured as the value of computer-related services purchased by each industry in a given year. All the variables have been converted to 2000 Korean Won using GDP deflators. To calculate labor hours, we use the average work hours for each sector provided by the OECD. To effectively control for heteroskedasticity and autocorrelation present in our dataset, we use the feasible generalized least squares (FGLS) procedures. Because the AR1 process may be industry-specific (i.e., panel-specific), we consider both common AR1 and panel-specific AR1 (PSAR1) processes in our estimations. We also include year dummies to control for year-specific effects common across industries, and sector dummies (as defined in the GDP deflator) to control for time-invariant sector-specific effects. Based on the full sample of 378 observations, we find that a 1% increase in IT outsourcing is associated with a 0.012~0.014% increase in gross output and a 1% increase in IT capital is associated with a 0.024~0.027% increase in gross output. To compare the contribution of IT outsourcing relative to that of IT capital, we examined gross marginal product (GMP). The average GMP of IT outsourcing was 6.423, which is substantially greater than that of IT capital at 2.093. This indicates that on average if an industry invests KRW 1 millon, it can increase its output by KRW 6.4 million. In terms of the contribution to labor productivity, we find that a 1% increase in IT outsourcing is associated with a 0.009~0.01% increase in labor productivity while a 1% increase in IT capital is associated with a 0.024~0.025% increase in labor productivity. Overall, our results indicate that IT outsourcing has made positive and economically meaningful contributions to output and productivity in Korean industries over the 1990 to 2007 period. The average GMP of IT outsourcing we report about Korean industries is 1.44 times greater than that in U.S. industries reported in Han et al. (2010). Further, we find that the contribution of IT outsourcing has been significantly greater in the 2000~2007 period during which the growth of IT outsourcing accelerated. Our study provides implication for policymakers and managers. First, our results suggest that Korean industries can capture further benefits by increasing investments in IT outsourcing. Second, our analyses and results provide a basis for managers to assess the impact of investments in IT outsourcing and IT capital in an objective and quantitative manner. Building on our study, future research should examine the impact of IT outsourcing at a more detailed industry level and the firm level.

• Journal of Distribution Science
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• v.10 no.7
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• pp.33-41
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• 2012

The purpose of this study is to analyse the state of the energy industry and to determine the efficiency of its functioning on the basis of energy conservation principle and application of innovative technologies aimed at improving the ecological modernisation of agricultural sectors of Kazakhstan. The research methodology is based on an integrated approach of financial and economic evaluation of the effectiveness of the investment project, based on calculation of elasticity, total costs and profitability, as well as on comparative, graphical and system analysis. The current stage is characterised by widely spread restructuring processes of electric power industry in many countries through introduction of new technical installations of energy facilities and increased government regulation in order to enhance the competitive advantage of electricity market. Electric power industry features a considerable value of creating areas. For example, by providing scientific and technical progress, it crucially affects not only the development but also the territorial organisation of productive forces, first of all the industry. In modern life, more than 90% of electricity and heat is obtained by Kazakhstan's economy by consuming non-renewable energy resources: different types of coal, oil shale, oil, natural gas and peat. Therefore, it is significant to ensure energy security, as the country faces a rapid fall back to mono-gas structure of fuel and energy balance. However, energy resources in Kazakhstan are spread very unevenly. Its main supplies are concentrated in northern and central parts of the republic, and the majority of consumers of electrical power live in the southern and western areas of the country. However, energy plays an important role in the economy of industrial production and to a large extent determines the level of competitive advantage, which is a promising condition for implementation of energy-saving and environmentally friendly technologies. In these circumstances, issues of modernisation and reforms of this sector in Kazakhstan gain more and more importance, which can be seen in the example of economically sustainable solutions of a large local monopoly company, significant savings in capital investment and efficiency of implementation of an investment project. A major disadvantage of development of electricity distribution companies is the prevalence of very high moral and physical amortisation of equipment, reaching almost 70-80%, which significantly increases the operating costs. For example, while an investment of 12 billion tenge was planned in 2009 in this branch, in 2012 it is planned to invest more than 17 billion. Obviously, despite the absolute increase, the rate of investment is still quite low, as the total demand in this area is at least more than 250 billion tenge. In addition, industrial infrastructure, including the objects of Kazakhstan electric power industry, have a tangible adverse impact on the environment. Thus, since there is a large number of various power projects that are sources of electromagnetic radiation, the environment is deteriorated. Hence, there is a need to optimise the efficiency of the organisation and management of production activities of energy companies, to create and implement new technologies, to ensure safe production and provide solutions to various environmental aspects. These are key strategic factors to ensure success of the modern energy sector of Kazakhstan. The contribution of authors in developing the scope of this subject is explained by the fact that there was not enough research in the energy sector, especially in the view of ecological modernisation. This work differs from similar works in Kazakhstan in the way that the proposed method of investment project calculation takes into account the time factor, which compares the current and future value of profit from the implementation of innovative equipment that helps to bring it to actual practise. The feasibility of writing this article lies in the need of forming a public policy in the industrial sector, including optimising the structure of energy disbursing rate, which complies with the terms of future modernised development of the domestic energy sector.

• Korean Chemical Engineering Research
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• v.56 no.1
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• pp.6-13
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• 2018

Utilizing the heat of cooling water discharge of coal-fired power plant, pipeline investment costs for businesses that supply heat to agricultural facilities near power plants increase in proportion to installation distance. On one hand, the distance from the power plant is a factor that brings difficulties to secure economic efficiency. On the other, if the installation distance is short, there is a problem of securing the heating demands, facility houses, which causes economical efficiency to suffer. In this study, the economic efficiency of 1km length of standard heat pipeline was evaluated. The sensitivity of the heat pipe to the new length variation was analyzed at the level of government subsidy, amount of heating demand and the incremental rate of pipeline with additional government subsidy. As a result of the analysis, it was estimated that NPV 131 million won and IRR 15.73%. The sensitivity analysis showed that NPV was negative when the length of heat pipe facility exceeded 2.6 km. If the government supports 50% of the initial investment, the efficiency is secured within the estimated length of 5.3 km, and if it supports 80%, the length increases within 11.4 km. If the heat demand is reduced to less than 62% at the new length of the standard heat pipe, it is expected economic efficiency is not obtained. If the ratio of government subsidies to initial investment increases, the elasticity of the new bloc will increase, and the fixed investment, which is the cost of capital investment for one unit of heating demand, will decrease. This would result in a reduction in the cost of production per unit, and it would be possible to supply heat at a cheaper price level to the facility farming. Government subsidies will result in the increased economic availability of hot plumbing facilities and additional efficiencies due to increased demand. The greater government subsidies to initial investment, the less farms cost due to the decrease in the price per unit. The results of the study are significant in terms of the economic evaluation of the effectiveness of the government subsidy for the thermal power plant heat utilization project. The implication can be applied to any related pilot to come.