ICT adoption in textile manufacturing can reduce capital market uncertainty over time.
Category: Innovation & Markets · Effect: Moderate effect · Year: 2023
Increased adoption of Information and Communication Technology (ICT) in the textile industry, specifically through a higher ratio of online transactions, initially heightens capital market uncertainty but leads to a reduction in the long term.
Design Takeaway
When introducing new digital technologies or systems, anticipate a period of increased market volatility followed by a stabilizing effect on capital markets.
Why It Matters
This research highlights a temporal dynamic in the impact of technological adoption on market stability. For design and engineering professionals, understanding this lag effect is crucial when forecasting the broader economic implications of implementing new digital systems within their respective industries.
Key Finding
While initially increasing market volatility, greater use of online transactions in the textile sector ultimately stabilizes the capital market over time, alongside other economic factors.
Key Findings
- In the short term, an increase in the ratio of online transactions to the total volume of transactions has increased capital market uncertainty.
- In the long term, an increase in the ratio of online transactions to the total volume of transactions has reduced capital market uncertainty.
- Inflation, economic growth, and exchange rate significantly affect the performance uncertainty of the total stock exchange index.
- It takes approximately 7.5 quarters on average for imbalances in capital market uncertainty to be completely offset.
Research Evidence
Aim: To investigate the impact of ICT adoption, measured by the ratio of online transactions to total transaction volume, on capital market uncertainty within the textile industry in Iran.
Method: Econometric modeling (ARDL and GARCH models)
Procedure: The study utilized quarterly data from 2011:1 to 2020:4 to estimate the capital market uncertainty index using the GARCH model. The ARDL model was then employed to analyze the short-term and long-term effects of ICT indicators (ratio of online transactions to total volume) and other macroeconomic factors (inflation, economic growth, exchange rate) on capital market uncertainty.
Context: Textile industry in Iran, financial markets
Design Principle
Technological adoption often exhibits a lag effect on market stability, requiring patience for long-term benefits to materialize.
How to Apply
When proposing or implementing digital transformation projects, include a risk assessment that accounts for potential short-term market uncertainty and a projection of long-term stability gains.
Limitations
The study is specific to the Iranian textile industry and may not generalize to other sectors or economies. The chosen ICT indicator might not capture all facets of ICT adoption.
Student Guide (IB Design Technology)
Simple Explanation: Using more online tools in a business, like in the textile industry, can make the stock market a bit shaky at first, but it makes it steadier over time.
Why This Matters: Understanding how technology impacts markets helps you design solutions that are not only functional but also economically viable and stable in the broader business environment.
Critical Thinking: How might the specific nature of the textile industry's supply chain and market dynamics influence the observed short-term versus long-term effects of ICT adoption on capital market uncertainty?
IA-Ready Paragraph: The implementation of digital technologies, such as increased online transaction ratios within industries like textiles, has been shown to exhibit a dual effect on capital market uncertainty. While initial adoption may lead to short-term volatility, a sustained integration of ICT ultimately contributes to long-term market stability, as evidenced by research in the Iranian context.
Project Tips
- Consider how your design project's adoption of new technology might affect market perceptions in the short and long term.
- If your project involves digital integration, research the economic context of its implementation.
How to Use in IA
- You can use this research to justify the long-term economic benefits of your design project, even if there are initial challenges.
- Cite this study when discussing the market adoption and diffusion of your designed technology.
Examiner Tips
- Demonstrate an awareness of the temporal effects of innovation on market dynamics.
- Connect your design choices to potential economic outcomes, both immediate and delayed.
Independent Variable: Ratio of online transactions to total transaction volume (ICT indicator), Inflation, Economic growth, Exchange rate
Dependent Variable: Capital market uncertainty index
Controlled Variables: Time period (2011:1 to 2020:4), Industry (Textile), Country (Iran)
Strengths
- Utilizes established econometric models (GARCH, ARDL) for robust analysis.
- Investigates both short-term and long-term effects, providing a nuanced perspective.
Critical Questions
- Could other ICT indicators provide different insights into market uncertainty?
- How do the findings vary across different economic development levels or industry types?
Extended Essay Application
- Investigate the impact of a specific technological innovation (e.g., AI in design) on the market valuation or perceived risk of companies in a particular sector.
- Analyze the diffusion rate of a new technology and its correlation with market volatility over time.
Source
Investigating the effects of Information and Communication Technology (ICT)on capital market uncertainty by considering its impact on the textileindustry: a case study for Iran · Industria Textila · 2023 · 10.35530/it.074.06.2022136