IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/46469.html
   My bibliography  Save this paper

Information technology, organizational change and firm productivity: A panel study of complementarity effects and clustering patterns in Manufacturing and Services

Author

Listed:
  • Zand, Fardad
  • Van Beers, Cees
  • Van Leeuwen, George

Abstract

Organizational complementarities are an essential factor in the process of creating business value from information technology (IT) investments. Organizational change (OC) is an important complementarity. This paper investigates complementarities between IT capital and OC initiatives of the firm. It analyzes the productivity impact of different clusters of IT and OC in the manufacturing and services sectors of the economy. Three dimensions of OC are studied: process, structure, and boundary changes. Two distinct econometric approaches are applied to a unique and detailed sample of 32,619 firm-level observations in the Netherlands for the period 1994-2006. The results reveal that the productivity effect of IT significantly increases when technology investments are accompanied by relevant organizational changes. The observed complementarity effects between IT and OC are stronger for services than for manufacturing firms. The effects become stronger if different types of change are combined with each other and form clusters. In contrast to IT capital, non-IT capital and OC exhibit a substitutability relationship. As to another finding of the research, IT seems to play a dual role with respect to change: generating or stimulating it and complementing or supporting it. The first role is more dominant among manufacturing, while the second is among services firms.

Suggested Citation

  • Zand, Fardad & Van Beers, Cees & Van Leeuwen, George, 2011. "Information technology, organizational change and firm productivity: A panel study of complementarity effects and clustering patterns in Manufacturing and Services," MPRA Paper 46469, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:46469
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/46469/1/MPRA_paper_46469.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jack E. Triplett, 1999. "The Solow productivity paradox: what do computers do to productivity?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 309-334, April.
    2. Piva, Mariacristina & Santarelli, Enrico & Vivarelli, Marco, 2005. "The skill bias effect of technological and organisational change: Evidence and policy implications," Research Policy, Elsevier, vol. 34(2), pages 141-157, March.
    3. repec:dau:papers:123456789/10093 is not listed on IDEAS
    4. Milgrom, Paul R & Qian, Yingyi & Roberts, John, 1991. "Complementarities, Momentum, and the Evolution of Modern Manufacturing," American Economic Review, American Economic Association, vol. 81(2), pages 84-88, May.
    5. Irene Bertschek & Ulrich Kaiser, 2004. "Productivity Effects of Organizational Change: Microeconometric Evidence," Management Science, INFORMS, vol. 50(3), pages 394-404, March.
    6. Martin Carree & Boris Lokshin & René Belderbos, 2011. "A note on testing for complementarity and substitutability in the case of multiple practices," Journal of Productivity Analysis, Springer, vol. 35(3), pages 263-269, June.
    7. Michael Polder & George van Leeuwen & Pierre Mohnen & Wladimir Raymond, 2010. "Product, Process and Organizational Innovation: Drivers, Complementarity and Productivity Effects," DRUID Working Papers 10-24, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    8. Ennen, Edgar & Richter, Ansgar, 2009. "The Whole Is More Than the Sum of Its Parts - Or Is It? A Review of the Empirical Literature on Complementarities in Organizations," MPRA Paper 15666, University Library of Munich, Germany.
    9. Anitesh Barua & Charles H. Kriebel & Tridas Mukhopadhyay, 1995. "Information Technologies and Business Value: An Analytic and Empirical Investigation," Information Systems Research, INFORMS, vol. 6(1), pages 3-23, March.
    10. Milgrom, Paul & Roberts, John, 1994. "Complementarities and systems: Understanding japanese economic organization," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 9(1), pages 3-42.
    11. Sundar Bharadwaj & Anandhi Bharadwaj & Elliot Bendoly, 2007. "The Performance Effects of Complementarities Between Information Systems, Marketing, Manufacturing, and Supply Chain Processes," Information Systems Research, INFORMS, vol. 18(4), pages 437-453, December.
    12. Mohnen, Pierre & Roller, Lars-Hendrik, 2005. "Complementarities in innovation policy," European Economic Review, Elsevier, vol. 49(6), pages 1431-1450, August.
    13. Paul M. Leonardi, 2007. "Activating the Informational Capabilities of Information Technology for Organizational Change," Organization Science, INFORMS, vol. 18(5), pages 813-831, October.
    14. Todd R. Zenger & William S. Hesterly, 1997. "The Disaggregation of Corporations: Selective Intervention, High-Powered Incentives, and Molecular Units," Organization Science, INFORMS, vol. 8(3), pages 209-222, June.
    15. Arvin Sahaym & H. Kevin Steensma & Melissa A. Schilling, 2007. "The Influence of Information Technology on the Use of Loosely Coupled Organizational Forms: An Industry-Level Analysis," Organization Science, INFORMS, vol. 18(5), pages 865-880, October.
    16. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    17. Sarv Devaraj & Rajiv Kohli, 2003. "Performance Impacts of Information Technology: Is Actual Usage the Missing Link?," Management Science, INFORMS, vol. 49(3), pages 273-289, March.
    18. Choi, Byounggu & Poon, Simon K. & Davis, Joseph G., 2008. "Effects of knowledge management strategy on organizational performance: A complementarity theory-based approach," Omega, Elsevier, vol. 36(2), pages 235-251, April.
    19. Sandra E. Black & Lisa M. Lynch, 2001. "How To Compete: The Impact Of Workplace Practices And Information Technology On Productivity," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 434-445, August.
    20. Eve Caroli & John Van Reenen, 2001. "Skill-Biased Organizational Change? Evidence from A Panel of British and French Establishments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 116(4), pages 1449-1492.
    21. Paola Giuri & Salvatore Torrisi & Natalia Zinovyeva, 2008. "ICT, skills, and organizational change: evidence from Italian manufacturing firms," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 17(1), pages 29-64, February.
    22. Massimo G. Colombo & Marco Delmastro, 2002. "The Determinants of Organizational Change and Structural Inertia: Technological and Organizational Factors," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 11(4), pages 595-635, December.
    23. Daniel A. Levinthal, 1997. "Adaptation on Rugged Landscapes," Management Science, INFORMS, vol. 43(7), pages 934-950, July.
    24. Erik Brynjolfsson & Thomas W. Malone & Vijay Gurbaxani & Ajit Kambil, 1994. "Does Information Technology Lead to Smaller Firms?," Management Science, INFORMS, vol. 40(12), pages 1628-1644, December.
    25. Ramesh Sankaranarayanan & Arun Sundararajan, 2010. "Electronic Markets, Search Costs, and Firm Boundaries," Information Systems Research, INFORMS, vol. 21(1), pages 154-169, March.
    26. Sarah J. Freeman & Kim S. Cameron, 1993. "Organizational Downsizing: A Convergence and Reorientation Framework," Organization Science, INFORMS, vol. 4(1), pages 10-29, February.
    27. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-1248, September.
    28. Ann Bartel & Casey Ichniowski & Kathryn Shaw, 2007. "How Does Information Technology Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement, and Worker Skills," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1721-1758.
    29. Koellinger, Philipp, 2008. "The relationship between technology, innovation, and firm performance--Empirical evidence from e-business in Europe," Research Policy, Elsevier, vol. 37(8), pages 1317-1328, September.
    30. Jeanne M. Pickering & John Leslie King, 1995. "Hardwiring Weak Ties: Interorganizational Computer-Mediated Communication, Occupational Communities, and Organizational Change," Organization Science, INFORMS, vol. 6(4), pages 479-486, August.
    31. Statistics Canada, 2007. "Depreciation Rates for the Productivity Accounts," The Canadian Productivity Review 2007005e, Statistics Canada, Economic Analysis Division.
    32. Fardad Zand & Cees van Beers, 2010. "Enterprise Systems Adoption and Firm Performance in Europe: The Role of Innovation," DRUID Working Papers 10-26, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    33. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 2002. "Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 339-376.
    34. PA Geroski & P. Gregg, 1993. "Coping the Recession," National Institute Economic Review, National Institute of Economic and Social Research, vol. 146(1), pages 64-75, November.
    35. Lorin M. Hitt, 1999. "Information Technology and Firm Boundaries: Evidence from Panel Data," Information Systems Research, INFORMS, vol. 10(2), pages 134-149, June.
    36. Koellinger, Ph.D., 2008. "The Relationship between Technology, Innovation, and Firm Performance: Empirical Evidence on E-Business in Europe," ERIM Report Series Research in Management ERS-2008-031-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    37. Richard E. White & John N. Pearson & Jeffrey R. Wilson, 1999. "JIT Manufacturing: A Survey of Implementations in Small and Large U.S. Manufacturers," Management Science, INFORMS, vol. 45(1), pages 1-15, January.
    38. Janet Fulk & Gerardine DeSanctis, 1995. "Electronic Communication and Changing Organizational Forms," Organization Science, INFORMS, vol. 6(4), pages 337-349, August.
    39. Spyros Arvanitis, 2005. "Computerization, workplace organization, skilled labour and firm productivity: Evidence for the Swiss business sector," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(4), pages 225-249.
    40. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
    41. Nathalie Greenan, 2003. "Organisational change, technology, employment and skills: an empirical study of French manufacturing," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 27(2), pages 287-316, March.
    42. Ramesh Sankaranarayanan & Arun Sundararajan, 2004. "Electronic Markets, Search Costs and Firm Boundaries," Econometric Society 2004 North American Summer Meetings 563, Econometric Society.
    43. Wolak, Frank A., 1989. "Testing inequality constraints in linear econometric models," Journal of Econometrics, Elsevier, vol. 41(2), pages 205-235, June.
    44. Ranjay Gulati & Dovev Lavie & Harbir Singh, 2009. "The nature of partnering experience and the gains from alliances," Strategic Management Journal, Wiley Blackwell, vol. 30(11), pages 1213-1233, November.
    45. Hemant Merchant & Dan Schendel, 2000. "How do international joint ventures create shareholder value?," Strategic Management Journal, Wiley Blackwell, vol. 21(7), pages 723-737, July.
    46. Froot, Kenneth A., 1989. "Consistent Covariance Matrix Estimation with Cross-Sectional Dependence and Heteroskedasticity in Financial Data," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(3), pages 333-355, September.
    47. Athey, Susan. & Stern, Scott, 1969-, 1998. "An empirical framework for testing theories about complementarity in orgaziational design," Working papers WP 4022-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    48. Gourieroux, Christian & Holly, Alberto & Monfort, Alain, 1982. "Likelihood Ratio Test, Wald Test, and Kuhn-Tucker Test in Linear Models with Inequality Constraints on the Regression Parameters," Econometrica, Econometric Society, vol. 50(1), pages 63-80, January.
    49. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    50. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
    51. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    52. Thomas Hempell, 2005. "What’s spurious, what’s real? Measuring the productivity impacts of ICT at the firm-level," Empirical Economics, Springer, vol. 30(2), pages 427-464, September.
    53. Sinan Aral & Peter Weill, 2007. "IT Assets, Organizational Capabilities, and Firm Performance: How Resource Allocations and Organizational Differences Explain Performance Variation," Organization Science, INFORMS, vol. 18(5), pages 763-780, October.
    54. Raymond F. Zammuto & Terri L. Griffith & Ann Majchrzak & Deborah J. Dougherty & Samer Faraj, 2007. "Information Technology and the Changing Fabric of Organization," Organization Science, INFORMS, vol. 18(5), pages 749-762, October.
    55. Bocquet, Rachel & Brossard, Olivier & Sabatier, Mareva, 2007. "Complementarities in organizational design and the diffusion of information technologies: An empirical analysis," Research Policy, Elsevier, vol. 36(3), pages 367-386, April.
    56. Maryellen R. Kelley, 1994. "Productivity and Information Technology: The Elusive Connection," Management Science, INFORMS, vol. 40(11), pages 1406-1425, November.
    57. Milgrom, Paul & Roberts, John, 1990. "The Economics of Modern Manufacturing: Technology, Strategy, and Organization," American Economic Review, American Economic Association, vol. 80(3), pages 511-528, June.
    58. Erik Brynjolfsson & Lorin Hitt, 1996. "Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending," Management Science, INFORMS, vol. 42(4), pages 541-558, April.
    59. Otley, David T., 1980. "The contingency theory of management accounting: Achievement and prognosis," Accounting, Organizations and Society, Elsevier, vol. 5(4), pages 413-428, October.
    60. Radner, Roy, 1993. "The Organization of Decentralized Information Processing," Econometrica, Econometric Society, vol. 61(5), pages 1109-1146, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adel Ben Khalifa, 2019. "Direct and Complementary Effects of Investment in Knowledge-Based Economy on Innovation Performance in Tunisian Firms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 561-589, June.
    2. Tobias Stucki & Daniel Wochner, 2019. "Technological and organizational capital: Where complementarities exist," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 458-487, June.
    3. Seri, Paolo & Zanfei, Antonello, 2013. "The co-evolution of ICT, skills and organization in public administrations: Evidence from new European country-level data," Structural Change and Economic Dynamics, Elsevier, vol. 27(C), pages 160-176.
    4. Graziella Bonanno, 2016. "ICT and R&D as inputs or efficiency determinants? Analysing Italian manufacturing firms (2007–2009)," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 6(3), pages 383-404, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adel Ben Khalifa, 2019. "Direct and Complementary Effects of Investment in Knowledge-Based Economy on Innovation Performance in Tunisian Firms," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(2), pages 561-589, June.
    2. Fibla Gasparín, Ma. Teresa, 2010. "Productivity in southern European small firms: When and how work organization complements process innovation," Working Papers 2072/179600, Universitat Rovira i Virgili, Department of Economics.
    3. Ennen, Edgar & Richter, Ansgar, 2009. "The Whole Is More Than the Sum of Its Parts - Or Is It? A Review of the Empirical Literature on Complementarities in Organizations," MPRA Paper 15666, University Library of Munich, Germany.
    4. Stefan Schweikl & Robert Obermaier, 2020. "Lessons from three decades of IT productivity research: towards a better understanding of IT-induced productivity effects," Management Review Quarterly, Springer, vol. 70(4), pages 461-507, November.
    5. Viete, Steffen & Erdsiek, Daniel, 2020. "Mobile Information Technologies and Firm Performance: The Role of Employee Autonomy," Information Economics and Policy, Elsevier, vol. 51(C).
    6. Sinan Aral & Peter Weill, 2007. "IT Assets, Organizational Capabilities, and Firm Performance: How Resource Allocations and Organizational Differences Explain Performance Variation," Organization Science, INFORMS, vol. 18(5), pages 763-780, October.
    7. Tobias Stucki & Daniel Wochner, 2019. "Technological and organizational capital: Where complementarities exist," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(3), pages 458-487, June.
    8. Martin Carree & Boris Lokshin & René Belderbos, 2011. "A note on testing for complementarity and substitutability in the case of multiple practices," Journal of Productivity Analysis, Springer, vol. 35(3), pages 263-269, June.
    9. repec:ipg:wpaper:2014-488 is not listed on IDEAS
    10. Piva, Mariacristina & Santarelli, Enrico & Vivarelli, Marco, 2005. "The skill bias effect of technological and organisational change: Evidence and policy implications," Research Policy, Elsevier, vol. 34(2), pages 141-157, March.
    11. Lokshin, B. & Carree, M.A. & Belderbos, R.A., 2004. "Testing for complementarity and substitutability in case of multiple practices," Research Memorandum 002, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    12. Sinan Aral & Erik Brynjolfsson & Lynn Wu, 2012. "Three-Way Complementarities: Performance Pay, Human Resource Analytics, and Information Technology," Management Science, INFORMS, vol. 58(5), pages 913-931, May.
    13. Resende, Marcelo & Strube, Eduardo & Zeidan, Rodrigo, 2014. "Complementarity of innovation policies in Brazilian industry: An econometric study," International Journal of Production Economics, Elsevier, vol. 158(C), pages 9-17.
    14. Caroline Mothe & Uyen T. Nguyen-Thi & Phu Nguyen-Van, 2014. "Are organizational innovation practices complements or substitutes for technological innovation performance?," Working Papers of BETA 2014-12, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    15. Caroline Mothe & Uyen T. Nguyen-Thi & Phu Nguyen-Van, 2015. "Assessing complementarity in organizational innovations for technological innovation: the role of knowledge management practices," Applied Economics, Taylor & Francis Journals, vol. 47(29), pages 3040-3058, June.
    16. Viete, Steffen & Erdsiek, Daniel, 2015. "Mobile information and communication technologies, flexible work organization and labor productivity: Firm-level evidence," ZEW Discussion Papers 15-087, ZEW - Leibniz Centre for European Economic Research.
    17. Paola Giuri & Salvatore Torrisi & Natalia Zinovyeva, 2005. "ICT, Skills and Organisational Change: Evidence from a Panel of Italian Manufacturing Firms," LEM Papers Series 2005/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    18. Sadaf Bashir & Bert Sadowski, 2014. "General Purpose Technologies: A Survey, a Critique and Future Research Directions," Working Papers 14-02, Eindhoven Center for Innovation Studies, revised Feb 2014.
    19. Prasanna Tambe, 2014. "Big Data Investment, Skills, and Firm Value," Management Science, INFORMS, vol. 60(6), pages 1452-1469, June.
    20. Shakina, Elena & Parshakov, Petr & Alsufiev, Artem, 2021. "Rethinking the corporate digital divide: The complementarity of technologies and the demand for digital skills," Technological Forecasting and Social Change, Elsevier, vol. 162(C).
    21. Rasel, Fabienne, 2014. "Combining technology and work organization: An analysis of complementarity between IT and decentralization across firms of different size," ZEW Discussion Papers 14-071, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

    Information Technology; Organizational Change; Firm Productivity; Complementarities; Clusters; Manufacturing; Services.;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:46469. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.