Integrating system dynamics and VoFI for the dynamic visualization of financial implications arising from IT and IS investments

DC FieldValueLanguage
dc.contributor.authorOesterreich, Thuy Duong
dc.contributor.authorTeuteberg, Frank
dc.date.accessioned2021-12-23T16:00:45Z-
dc.date.available2021-12-23T16:00:45Z-
dc.date.issued2020
dc.identifier.issn17465664
dc.identifier.urihttps://osnascholar.ub.uni-osnabrueck.de/handle/unios/4565-
dc.description.abstractPurpose Despite the advantages that the VoFI approach offers compared with traditional capital budgeting methods, its application for the appraisal of information technology (IT) and information systems (IS) investments in both research and practice is not widespread to date. Given the static nature of the generic VoFI table, the method reaches its limits in its financial plan form because it is unable to investigate the dynamic behaviour of complex investment calculations. To date, there has been no attempt to address these shortcomings to advance the use of VoFI as a useful and valid capital budgeting method in finance and accounting. Therefore, the purpose of this study is to address this research gap and aim at developing a `dynamic' VoFI model that integrates all input variables and target measures of a VoFI table and visualises the causal relationships among these variables. Design/methodology/approach The `dynamic' VoFI model is developed through System Dynamics (SD) modelling to enhance the strength of the VoFI concept as an instrument for visualising the financial implications of investments in IT and IS at the corporate level. Case study research is used as a research method to study the behaviour of the developed model. The validity of the model is demonstrated by conducting simulation runs in Vensim software. In addition, probabilistic sensitivity analyses are performed to account for the impact of uncertainty on the main model variables. Findings The results demonstrate the usefulness of SD modelling for extending the generic VoFI concept by integrating risk analyses and providing a new strategy of data analysis and data presentation different from the typical financial plan form. Furthermore, the dynamic VoFI model enables the visualisation of interdependencies among the various variables incorporated in the VoFI financial plan, which significantly enhances the conceptual understanding of the investment and its financial consequences. Originality/value The integration of the VoFI concept into an SD model helps researchers and practitioners to enhance their conceptual understanding of this method. This thus increases its acceptance and popularity as a practical capital budgeting method, especially for the financial assessment of IT and IS investments. The VoFI model proposed in this paper should also enable analysts and decision makers to become more conscious of the interdependencies between the assumptions made for an appraisal and the quantitative results.
dc.language.isoen
dc.publisherEMERALD GROUP PUBLISHING LTD
dc.relation.ispartofJOURNAL OF MODELLING IN MANAGEMENT
dc.subjectBusiness & Economics
dc.subjectCapital budgeting
dc.subjectDecision making
dc.subjectDESIGN
dc.subjectDynamic VoFI
dc.subjectFinancial analysis
dc.subjectINFORMATION
dc.subjectInformation systems
dc.subjectInvestment appraisal
dc.subjectManagement
dc.subjectModelling
dc.subjectRisk analysis
dc.subjectSimulation
dc.subjectSTRATEGY
dc.subjectSUPPORT
dc.subjectSystem dynamics
dc.subjectTHINKING
dc.subjectTRANSPARENCY
dc.titleIntegrating system dynamics and VoFI for the dynamic visualization of financial implications arising from IT and IS investments
dc.typejournal article
dc.identifier.doi10.1108/JM2-01-2019-0002
dc.identifier.isiISI:000508248700009
dc.description.volume15
dc.description.issue1
dc.description.startpage232
dc.description.endpage256
dc.contributor.orcid0000-0002-2988-7165
dc.identifier.eissn17465672
dc.publisher.placeHOWARD HOUSE, WAGON LANE, BINGLEY BD16 1WA, W YORKSHIRE, ENGLAND
dcterms.isPartOf.abbreviationJ. Model. Manag.
crisitem.author.deptFB 09 - Wirtschaftswissenschaften-
crisitem.author.deptidfb09-
crisitem.author.parentorgUniversität Osnabrück-
crisitem.author.netidTeFr823-
Show simple item record

Page view(s)

5
Last Week
0
Last month
0
checked on Apr 23, 2024

Google ScholarTM

Check

Altmetric