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ICT and productivity growth - the paradox resolved?

  • Alan Hughes
  • Michael S Scott Morton
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    This paper argues that the gains from ICT at the individual business level depend upon the implementation of a range of complementary ÔinvestmentsÕ and organisational changes appropriate to the competitive and institutional context of particular sectors. To support our proposition we provide a brief overview of a recently emerging but compelling body of large sample micro-econometric research. We focus in depth, however on a single case study of ICT related organisational transformation in the transportation sector. This case builds upon the conceptual framework developed in the MIT interesting organisations project (Scott Morton (2003)). Taken as a whole we believe there is clear evidence of the conditions that seem to be required before the payoff from ICT can be realised by an organisation and hence diffuse through the economy. Effective use of ICT requires a holistic solution which recognises that there is no single factor, or even just a few, which leads to successful exploitation. Rather success comes from the artful crafting of a series of interrelated and mutually interdependent driving forces. The paradoxical 'gap' between investment in computers and realised performance can be closed if this lesson is absorbed.

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    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp316.

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    Date of creation: Dec 2005
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    Handle: RePEc:cbr:cbrwps:wp316
    Note: PRO-1
    Contact details of provider: Web page: http://www.cbr.cam.ac.uk/

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    1. Sandra E Black & Lisa M Lynch, 2002. "What's Driving the New Economy? The Benefits of Workplace Innovation," Working Papers 02-03, Center for Economic Studies, U.S. Census Bureau.
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    3. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2002. "Projecting productivity growth: lessons from the U.S. growth resurgence," Economic Review, Federal Reserve Bank of Atlanta, issue Q3, pages 1-13.
    4. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
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    10. 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.
    11. Barras, Richard, 1993. "Interactive innovation in financial and business services: The vanguard of the service revolution," Research Policy, Elsevier, vol. 22(2), pages 101-102, April.
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    13. Martin N. Baily, 2004. "Recent productivity growth: the role of information technology and other innovations," Economic Review, Federal Reserve Bank of San Francisco, pages 35-42.
    14. Susanto Basu & John G. Fernald & Nicholas Oulton & Sylaja Srinivasan, 2003. "The case of the missing productivity growth: or, does information technology explain why productivity accelerated in the United States but not the United Kingdom?," Working Paper Series WP-03-08, Federal Reserve Bank of Chicago.
    15. Sandra E. Black & Lisa M. Lynch, 1997. "How to Compete: The Impact of Workplace Practices and Information Technology on Productivity," NBER Working Papers 6120, National Bureau of Economic Research, Inc.
    16. Casey Ichniowski & Kathryn Shaw & Giovanna Prennushi, 1995. "The Effects of Human Resource Management Practices on Productivity," NBER Working Papers 5333, National Bureau of Economic Research, Inc.
    17. David, P.A., 1989. "Computer And Dynamo: The Modern Productivity Paradox In A Not-Too Distant Mirror," The Warwick Economics Research Paper Series (TWERPS) 339, University of Warwick, Department of Economics.
    18. C.J. Krizan & John Haltiwanger & Lucia Foster, 2002. "The Link Between Aggregate and Micro Productivity Growth: Evidence from Retail Trade," Working Papers 02-18, Center for Economic Studies, U.S. Census Bureau.
    19. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
    20. Robert J. Gordon, 2003. "Hi-tech Innovation and Productivity Growth: Does Supply Create Its Own Demand?," NBER Working Papers 9437, National Bureau of Economic Research, Inc.
    21. David Card & Richard B. Freeman, 2004. "What Have Two Decades of British Economic Reform Delivered?," NBER Chapters, in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 9-62 National Bureau of Economic Research, Inc.
    22. Black, Sandra E & Lynch, Lisa M, 1996. "Human-Capital Investments and Productivity," American Economic Review, American Economic Association, vol. 86(2), pages 263-67, May.
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