Examining measurements of process capital- a system model perspective

Abstract

Process capital is the accumulated knowledge and established capability to exploit technology, process information, and organize resources in designing and managing work activities. Although it can extend and enhance the efficiency of manufacturing or the delivery of products and services for long-term value, few studies have discussed its specific content. The objectives of this study are to investigate possible methods of measuring process capital and to test variables that can effectively reflect the value of process capital. This empirical study used a system model to identify three methods of measuring process capital: (1) process input-measuring the resources invested in process changes, (2) process management capability-measuring the management capability of the process changes, and (3) process output-measuring the results of the changed processes. With a valid sample of 167 firms out of the top 522 firms in Taiwan, this study compared the firms` process input (investment in IT and process change), process management capability (process improvement), and process output (efficiency) with business performance over the period 2002-2005. The results reveal that (1) the input of process capital has low association with business performance in the short and long terms, (2) process output has significantly positive association with operational and managerial performance in both the short and long terms, (3) process management capability has not only significantly positive association with operational and managerial performance but also partially and significantly positive association with strategic performance in both the short and long terms. Gaining an understanding of the value of process capital would need to involve a careful examination of the output and management capabilities of business processes and consideration of both the short- and-long term impacts.