The impact of organizational virtuality on financial effectiveness

Abstract

Purpose

The research focused on the question how the authors could assess the impact of organizational virtuality on financial efficiency using primary data from company accounting records. The paper aims to discuss these issues.

Design/methodology/approach

The implemented model was based on the assumption that the authors could define virtuality with the joint effects of outsourcing and IT utilization. The authors also assumed that they could define virtuality with available financial indicators. The authors tested the model on a sample of tourist organizations in Slovenia. The main methodological challenges were hidden by diverse methods in calculating and keeping financial records in individual organizations. In some cases, the authors had to recalculate and adjust individual indicators in the particular company to make them methodologically comparable with others. As the modeling and testing tool the authors used structural equation modeling with two latent variables: organization virtuality and financial effectiveness.

Findings

The authors confirmed the basic research hypothesis that higher organizational virtuality leads to higher financial effectiveness in studied organizations. The authors also confirmed that they could develop a functional model of organizational virtuality on financial data only. However, the authors concluded that accuracy of the model could be improved if the authors would include also nonfinancial data that would provide a more holistic model of virtual organization.

Practical implications

The authors recognized that general concepts of organizational virtuality were often too academic and unpractical for managers in the real business. Therefore, the authors argued that financial indicators would provide managers with more convenient and management-like tools for assessing the level and the impact of virtuality.

Originality/value

Modeling organizational virtuality with financial indicators only extended the perception of virtuality and provided some original research and practical guidelines.

Citation

Manzin, M. and Bavec, C. (2013), "The impact of organizational virtuality on financial effectiveness", Kybernetes, Vol. 42 No. 8, pp. 1135-1148. https://doi.org/10.1108/K-11-2012-0106