IDEAS home Printed from https://ideas.repec.org/a/inm/orisre/v27y2016i1p6-26.html
   My bibliography  Save this article

On the Longitudinal Effects of IT Use on Firm-Level Employment

Author

Listed:
  • Hilal Atasoy

    (Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122)

  • Rajiv D. Banker

    (Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122)

  • Paul A. Pavlou

    (Fox School of Business, Temple University, Philadelphia, Pennsylvania 19122)

Abstract

The effect of information technology (IT) on employment is a crucial question in today’s economy given the increased digitization of work. To analyze the relationship between IT use and firm-level employment, we examine the longitudinal role of IT use in the firm’s total number of employees. Our data set comes from the emerging economy of Turkey, and it represents firms of different sizes and industries. The data capture the firm’s use of enterprise applications, such as enterprise resource planning and customer relationship management, and the use of Web applications, such as e-banking and e-government. Our empirical specifications exploit both within-firm and between-firm variations to show the positive effect of IT use on firm-level employment, which varies across IT applications over time. Interestingly, we find that the effects of the use of enterprise applications materialize after two years, whereas the effects of the use of Web applications are realized in the current year. We also examine whether the role of IT use in firm-level employment are moderated by firm size, average wage rate, and industry technology intensity. The long-term effects of the use of enterprise applications on firm-level employment are more pronounced in larger firms, with higher average wages, and in high-technology industries. The results are robust to alternative specifications and tests that address causality and endogeneity concerns. Implications for research, practice, and public policy are discussed.

Suggested Citation

  • Hilal Atasoy & Rajiv D. Banker & Paul A. Pavlou, 2016. "On the Longitudinal Effects of IT Use on Firm-Level Employment," Information Systems Research, INFORMS, vol. 27(1), pages 6-26, March.
  • Handle: RePEc:inm:orisre:v:27:y:2016:i:1:p:6-26
    DOI: 10.1287/isre.2015.0618
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/isre.2015.0618
    Download Restriction: no

    File URL: https://libkey.io/10.1287/isre.2015.0618?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Walter Y. Oi & Todd L. Idson, 1999. "Workers Are More Productive in Large Firms," American Economic Review, American Economic Association, vol. 89(2), pages 104-108, May.
    2. Kosuke Imai & David A. van Dyk, 2004. "Causal Inference With General Treatment Regimes: Generalizing the Propensity Score," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 854-866, January.
    3. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    4. Paul Osterman, 1986. "The Impact of Computers on the Employment of Clerks and Managers," ILR Review, Cornell University, ILR School, vol. 39(2), pages 175-186, January.
    5. Peter Weill, 1992. "The Relationship Between Investment in Information Technology and Firm Performance: A Study of the Valve Manufacturing Sector," Information Systems Research, INFORMS, vol. 3(4), pages 307-333, December.
    6. 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.
    7. Kluve, Jochen & Schneider, Hilmar & Uhlendorff, Arne & Zhao, Zhong, 2007. "Evaluating Continuous Training Programs Using the Generalized Propensity Score," IZA Discussion Papers 3255, Institute of Labor Economics (IZA).
    8. David H. Autor & David Dorn, 2013. "The Growth of Low-Skill Service Jobs and the Polarization of the US Labor Market," American Economic Review, American Economic Association, vol. 103(5), pages 1553-1597, August.
    9. 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.
    10. Curtis P. Armstrong & V. Sambamurthy, 1999. "Information Technology Assimilation in Firms: The Influence of Senior Leadership and IT Infrastructures," Information Systems Research, INFORMS, vol. 10(4), pages 304-327, December.
    11. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    12. Param Vir Singh & Yong Tan & Nara Youn, 2011. "A Hidden Markov Model of Developer Learning Dynamics in Open Source Software Projects," Information Systems Research, INFORMS, vol. 22(4), pages 790-807, December.
    13. Prasanna Tambe & Lorin M. Hitt, 2012. "The Productivity of Information Technology Investments: New Evidence from IT Labor Data," Information Systems Research, INFORMS, vol. 23(3-part-1), pages 599-617, September.
    14. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    15. 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.
    16. Hall, Bronwyn H, 1987. "The Relationship between Firm Size and Firm Growth in the U.S. Manufacturing Sector," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 583-606, June.
    17. Lorin M. Hitt, 1999. "Information Technology and Firm Boundaries: Evidence from Panel Data," Information Systems Research, INFORMS, vol. 10(2), pages 134-149, June.
    18. 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.
    19. Thomas W. Malone, 1987. "Modeling Coordination in Organizations and Markets," Management Science, INFORMS, vol. 33(10), pages 1317-1332, October.
    20. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    21. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1169-1213.
    22. Hilal Atasoy, 2013. "The Effects of Broadband Internet Expansion on Labor Market Outcomes," ILR Review, Cornell University, ILR School, vol. 66(2), pages 315-345, April.
    23. Chris Forman & Avi Goldfarb & Shane Greenstein, 2012. "The Internet and Local Wages: A Puzzle," American Economic Review, American Economic Association, vol. 102(1), pages 556-575, February.
    24. 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.
    25. Jochen Kluve & Hilmar Schneider & Arne Uhlendorff & Zhong Zhao, 2012. "Evaluating continuous training programmes by using the generalized propensity score," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 175(2), pages 587-617, April.
    26. Erik Brynjolfsson & Lorin M. Hitt, 2003. "Computing Productivity: Firm-Level Evidence," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 793-808, November.
    27. Sidney E. Harris & Joseph L. Katz, 1991. "Organizational Performance and Information Technology Investment Intensity in the Insurance Industry," Organization Science, INFORMS, vol. 2(3), pages 263-295, August.
    28. Jochen Kluve & Hilmar Schneider & Arne Uhlendorff & Zhong Zhao, 2012. "Evaluating continuous training programmes by using the generalized propensity score," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 175(2), pages 587-617, April.
    29. Abhay Nath Mishra & Ritu Agarwal, 2010. "Technological Frames, Organizational Capabilities, and IT Use: An Empirical Investigation of Electronic Procurement," Information Systems Research, INFORMS, vol. 21(2), pages 249-270, June.
    30. Michela Bia & Alessandra Mattei, 2008. "A Stata package for the estimation of the dose–response function through adjustment for the generalized propensity score," Stata Journal, StataCorp LP, vol. 8(3), pages 354-373, September.
    31. Timothy Bresnahan & Shane Greenstein, 1996. "Technical Progress and Co-invention in Computing and in the Uses of Computers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996 Micr), pages 1-83.
    32. Henri Barki & Ryad Titah & Céline Boffo, 2007. "Information System Use--Related Activity: An Expanded Behavioral Conceptualization of Individual-Level Information System Use," Information Systems Research, INFORMS, vol. 18(2), pages 173-192, June.
    33. Neeraj Mittal & Barrie R. Nault, 2009. "Research Note ---Investments in Information Technology: Indirect Effects and Information Technology Intensity," Information Systems Research, INFORMS, vol. 20(1), pages 140-154, March.
    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. Matthias Firgo & Peter Mayerhofer & Michael Peneder & Philipp Piribauer & Peter Reschenhofer, 2018. "Beschäftigungseffekte der Digitalisierung in den Bundesländern sowie in Stadt und Land," WIFO Studies, WIFO, number 61633.
    2. Terence J. V. Saldanha & Arvin Sahaym & Sunil Mithas & Mariana Giovanna Andrade-Rojas & Abhishek Kathuria & Hsiao-Hui Lee, 2020. "Turning Liabilities of Global Operations into Assets: IT-Enabled Social Integration Capacity and Exploratory Innovation," Information Systems Research, INFORMS, vol. 31(2), pages 361-382, June.
    3. Axenbeck, Janna & Niebel, Thomas, 2021. "Climate protection potentials of digitalized production processes: Microeconometric evidence?," ZEW Discussion Papers 21-105, ZEW - Leibniz Centre for European Economic Research.
    4. Biagi, Federico & Falk, Martin, 2017. "The impact of ICT and e-commerce on employment in Europe," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 1-18.
    5. Hüseyin Taştan & Feride Gönel, 2020. "ICT labor, software usage, and productivity: firm-level evidence from Turkey," Journal of Productivity Analysis, Springer, vol. 53(2), pages 265-285, April.
    6. Hilal Atasoy & Rajiv D. Banker & Paul A. Pavlou, 2021. "Information Technology Skills and Labor Market Outcomes for Workers," Information Systems Research, INFORMS, vol. 32(2), pages 437-461, June.
    7. Biagi, Federico & Falk, Martin, 2017. "The Impact of ICT and E-Commerce Activities on Employment in Europe," Ratio Working Papers 285, The Ratio Institute.
    8. Christophe Combemale & Kate S Whitefoot & Laurence Ales & Erica R H Fuchs, 2021. "Not all technological change is equal: how the separability of tasks mediates the effect of technology change on skill demand [Patterns of industrial innovation]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(6), pages 1361-1387.
    9. Monteiro, Natália P. & Straume, Odd Rune & Valente, Marieta, 2021. "When does remote electronic access (not) boost productivity? Longitudinal evidence from Portugal," Information Economics and Policy, Elsevier, vol. 56(C).
    10. Inha Oh & Jungho Kim, 2023. "Frontiers and laggards: Which firms benefit from adopting advanced digital technologies?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 753-766, March.
    11. Chaitanya Sambhara & Arun Rai & Sean Xin Xu, 2022. "Configuring the Enterprise Systems Portfolio: The Role of Information Risk," Information Systems Research, INFORMS, vol. 33(2), pages 446-463, June.
    12. Hemant Jain & Balaji Padmanabhan & Paul A. Pavlou & T. S. Raghu, 2021. "Editorial for the Special Section on Humans, Algorithms, and Augmented Intelligence: The Future of Work, Organizations, and Society," Information Systems Research, INFORMS, vol. 32(3), pages 675-687, September.
    13. Youngho Kang & Jeongmeen Suh, 2022. "Information technology and the spatial reorganization of firms," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 674-692, August.
    14. Ni Huang & Gordon Burtch & Yili Hong & Paul A. Pavlou, 2020. "Unemployment and Worker Participation in the Gig Economy: Evidence from an Online Labor Market," Information Systems Research, INFORMS, vol. 31(2), pages 431-448, June.
    15. Huang, Jiashun & Li, Weiping & Guo, Lijia & Hall, Jim W., 2022. "Information and communications technology infrastructure and firm growth: An empirical study of China's cities," Telecommunications Policy, Elsevier, vol. 46(3).
    16. Inha Oh & Dongnyok Shim, 2020. "IT Adoption and Sustainable Growth of Firms in Different Industries—Are the Benefits Still Expected?," Sustainability, MDPI, vol. 12(22), pages 1-29, November.

    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. Barth, Erling & Davis, James C. & Freeman, Richard B. & McElheran, Kristina, 2023. "Twisting the demand curve: Digitalization and the older workforce," Journal of Econometrics, Elsevier, vol. 233(2), pages 443-467.
    2. 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.
    3. 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.
    4. Fonseca, Tiago & Lima, Francisco & Pereira, Sonia C., 2018. "Understanding productivity dynamics: A task taxonomy approach," Research Policy, Elsevier, vol. 47(1), pages 289-304.
    5. 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.
    6. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
    7. Harrigan, James & Reshef, Ariell & Toubal, Farid, 2021. "The March of the Techies: Job Polarization Within and Between Firms," Research Policy, Elsevier, vol. 50(7).
    8. Paul Gaggl & Greg C. Wright, 2017. "A Short-Run View of What Computers Do: Evidence from a UK Tax Incentive," American Economic Journal: Applied Economics, American Economic Association, vol. 9(3), pages 262-294, July.
    9. Gallipoli, Giovanni & Makridis, Christos A., 2018. "Structural transformation and the rise of information technology," Journal of Monetary Economics, Elsevier, vol. 97(C), pages 91-110.
    10. Candel Haug, Katharina & Kretschmer, Tobias & Strobel, Thomas, 2016. "Cloud adaptiveness within industry sectors – Measurement and observations," Telecommunications Policy, Elsevier, vol. 40(4), pages 291-306.
    11. Hüseyin Taştan & Feride Gönel, 2020. "ICT labor, software usage, and productivity: firm-level evidence from Turkey," Journal of Productivity Analysis, Springer, vol. 53(2), pages 265-285, April.
    12. Filippo Pusterla & Ursula Renold, 2022. "Does ICT affect the demand for vocationally educated workers?," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-22, December.
    13. Falck, Oliver & Heimisch-Roecker, Alexandra & Wiederhold, Simon, 2021. "Returns to ICT skills," Research Policy, Elsevier, vol. 50(7).
    14. Borghans, Lex & Weel, Bas ter, 2001. "What happens when agent T gets a computer?," Research Memorandum 017, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    15. Borghans, Lex & ter Weel, Bas, 2007. "The diffusion of computers and the distribution of wages," European Economic Review, Elsevier, vol. 51(3), pages 715-748, April.
    16. Ariell Reshef, 2013. "Is Technological Change Biased Towards the Unskilled in Services? An Empirical Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 312-331, April.
    17. Nancy L. Stokey, 2018. "Technology and Skill: Twin Engines of Growth," NBER Working Papers 24570, National Bureau of Economic Research, Inc.
    18. 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.
    19. Hilal Atasoy, 2011. "ICT Use and Labor: Firm-Level Evidence from Turkey," Working Papers 11-23, NET Institute, revised Nov 2011.
    20. Hilal Atasoy & Rajiv D. Banker & Paul A. Pavlou, 2021. "Information Technology Skills and Labor Market Outcomes for Workers," Information Systems Research, INFORMS, vol. 32(2), pages 437-461, June.

    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:inm:orisre:v:27:y:2016:i:1:p:6-26. 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: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.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.