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Research Report: Increasing Returns to Information Technology

Author

Listed:
  • Stephan Kudyba

    (Null Sigma, Inc., Wayne, New Jersey 07470)

  • Romesh Diwan

    (Rensselaer Polytechnic Institute, Troy, New York 12180)

Abstract

This work analyzes firm-level investment in information technology and corresponding productivity through the use of a production function over the period from 1995-1997. The results are then compared to previous studies that utilized similar data and methodologies to compare productivity estimates over time. The analysis indicates that investment in IT enhances productivity over the period in question and has illustrated increasing returns over time. These findings are supported by the corresponding empirical analysis which yielded IT capital coefficients in a production function of (0.12, 0.16, 0.18) and IT flow coefficients in a similar function of (0.17, 0.24, 0.22) for the years 1995, 1996, and 1997, respectively. These results reflect the change in firm output given a one-percent change in the natural log of dollars invested in IT capital and flow, and are statistically significant.

Suggested Citation

  • Stephan Kudyba & Romesh Diwan, 2002. "Research Report: Increasing Returns to Information Technology," Information Systems Research, INFORMS, vol. 13(1), pages 104-111, March.
    • Handle: RePEc:inm:orisre:v:13:y:2002:i:1:p:104-111
    DOI: 10.1287/isre.13.1.104.98
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    References listed on IDEAS

    as
    1. Catherine J. Morrison, 2000. "Assessing The Productivity Of Information Technology Equipment In U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 471-481, August.
    2. Thomas W. Malone, 1987. "Modeling Coordination in Organizations and Markets," Management Science, INFORMS, vol. 33(10), pages 1317-1332, October.
    3. Lehr, William & Lichtenberg, Frank R, 1998. "Computer Use and Productivity Growth in US Federal Government Agencies, 1987-92," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 257-279, June.
    4. 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.
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    Citations

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    Cited by:

    1. Xu, Xiaobo & Zhang, Weiyong & Li, Ling, 2016. "The impact of technology type and life cycle on IT productivity variance: A contingency theoretical perspective," International Journal of Information Management, Elsevier, vol. 36(6), pages 1193-1204.
    2. Ge, Chunmian & Huang, Ke-Wei & Kankanhalli, Atreyi, 2020. "Platform skills and the value of new hires in the software industry," Research Policy, Elsevier, vol. 49(1).
    3. Myung Ko, 2010. "IT Innovativeness and Environmental Consciousness on Organizational Performance," Working Papers 0109, College of Business, University of Texas at San Antonio.
    4. Dawei Zhang & Zhuo (June) Cheng & Hasan A. Qurban H. Mohammad & Barrie R. Nault, 2015. "Research Commentary—Information Technology Substitution Revisited," Information Systems Research, INFORMS, vol. 26(3), pages 480-495, September.
    5. Khallaf, Ashraf, 2012. "Information technology investments and nonfinancial measures: A research framework," Accounting forum, Elsevier, vol. 36(2), pages 109-121.
    6. Patrick Afflerbach, 2015. "The Business Value of IT in Light of Prospect Theory," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 57(5), pages 299-310, October.
    7. Daozhi Zhao & Zhibao Li, 2018. "The impact of manufacturer’s encroachment and nonlinear production cost on retailer’s information sharing decisions," Annals of Operations Research, Springer, vol. 264(1), pages 499-539, May.
    8. 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.
    9. Stephan KUDYBA, 2004. "The productivity pay-off from effective allocation of IT and non-IT labour," International Labour Review, International Labour Organization, vol. 143(3), pages 235-247, September.
    10. Sunil Mithas & M. S. Krishnan & Claes Fornell, 2016. "Research Note—Information Technology, Customer Satisfaction, and Profit: Theory and Evidence," Information Systems Research, INFORMS, vol. 27(1), pages 166-181, March.
    11. Kudyba, Stephan & Diwan, Romesh, 2002. "The impact of information technology on US industry," Japan and the World Economy, Elsevier, vol. 14(3), pages 321-333, August.
    12. Myung Ko, 2010. "IT Innovativeness and Environmental Consciousness on Organizational Performance," Working Papers 0109, College of Business, University of Texas at San Antonio.
    13. Bo-Seong Yun & Sang-Gun Lee & Yaichi Aoshima, 2019. "An analysis of the trilemma phenomenon for Apple iPhone and Samsung Galaxy," Service Business, Springer;Pan-Pacific Business Association, vol. 13(4), pages 779-812, December.
    14. Saggi Nevo & Michael Wade & Wade D. Cook, 2010. "An empirical study of IT as a factor of production: The case of Net-enabled IT assets," Information Systems Frontiers, Springer, vol. 12(3), pages 323-335, July.
    15. Kunsoo Han & Robert J. Kauffman & Barrie R. Nault, 2011. "Research Note ---Returns to Information Technology Outsourcing," Information Systems Research, INFORMS, vol. 22(4), pages 824-840, December.
    16. Yongfei Li & Sang-Gun Lee & Myungjai Kong, 2019. "The industrial impact and competitive advantage of China’s ICT industry," Service Business, Springer;Pan-Pacific Business Association, vol. 13(1), pages 101-127, March.
    17. Koutroumpis, Pantelis & Leiponen, Aija & Thomas, Llewellyn D W, 2017. "The Young, the Old and the Innovative: The Impact of R&D on Firm Performance in ICT versus Other Sectors," ETLA Working Papers 51, The Research Institute of the Finnish Economy.

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