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Computing Productivity: Firm-Level Evidence

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Author Info
Erik Brynjolfsson (MIT Sloan School of Management)
Lorin M. Hitt (University of Pennsylvania, Wharton School)

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Abstract

We explore the effect of computerization on productivity and output growth using data from 527 large U.S. firms over 1987-1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using 1-year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to 5 times greater over long periods (using 5- to 7-year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s. Copyright (c) 2003 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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File URL: http://www.mitpressjournals.org/doi/pdfplus/10.1162/003465303772815736
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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 85 (2003)
Issue (Month): 4 (November)
Pages: 793-808
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Handle: RePEc:tpr:restat:v:85:y:2003:i:4:p:793-808

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