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Information technology investments and impact on the productivity of firms: an empirical analysis in light of the productivity paradox

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  • Ivan Ricardo Gartner
  • Ronaldo Zwicker
  • Wilhelm Rödder

Abstract

This study aimed to investigate the occurrence of the Productivity Paradox of information technology investments in a sample of Brazilian firms. This Paradox establishes that the increase in information technology investments is not accompanied by the increase of firms' productivity. The estimated model was based on the Cobb-Douglas production function and considered a sample of 429 observations of 98 Brazilian firms that had aggregated sales of over US$ 856 billion and had operated information technology investments around of US$ 12.9 billion during the period of 2000 to 2006. The estimated model showed evidence that changes in the information technology investments were statistically correlated with changes in productivity gains. In addition, the model showed that there was marginal efficiency in the information technology investments and that the functional relationship between production and the number of employees in information technology reached an apparent saturation point. The empirical results showed different behaviors among analyzed sectors and the findings were presented with examples of how the results could be applied to support information technology investments and business strategy processes.

Suggested Citation

  • Ivan Ricardo Gartner & Ronaldo Zwicker & Wilhelm Rödder, 2009. "Information technology investments and impact on the productivity of firms: an empirical analysis in light of the productivity paradox," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 13(3), pages 391-409.
    • Handle: RePEc:abg:anprac:v:13:y:2009:i:3:687
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