The Productivity of Information Technology: Review and Assessment

Productivity is the bottom line for any investment. The quandary of information technology (IT) is that, despite astonishing improvements in the underlying capabilities of the computer, its productivity has proven almost impossible to assess. There is an increasing perception that IT has not lived up to its promise, fueled in part by the fact that the existing empirical literature on IT productivity generally has not identified significant productivity improvements. However, a careful review, whether at the level of the economy as a whole, among information workers, or in specific manufacturing and service industries, indicates that the evidence must still be considered inconclusive. It is premature to surmise that computers have been a paradoxically unwise investment. A puzzle remains in the inability of both academics and managers to document unambiguously the performance effects of IT. Four possible explanations are reviewed in turn: mismeasurement, lags, redistribution and mismanagement. The paper concludes with recommendations for investigating each of these explanations using traditional methodologies, while also proposing alternative, broader metrics of welfare that ultimately may be required to assess, and enhance, the benefits of IT. KEYWORDS: Productivity, Computers, Performance measurement, Economic value, Investment justification.