Investments in Information Technology: Indirect Effects and Information Technology Intensity.

Author List: Mittal, Neeraj; Nault, Barrie R.;
Information Systems Research, 2009, Volume 20, Issue 1, Page 140-154.
Many studies measure the value of information technology (IT) by focusing on how much value is added rather than on the mechanisms that drive value addition. We argue that value from IT arises not only directly through changes in the factor input mix but also indirectly through IT-enabled augmentation of non-IT inputs and changes in the underlying production technology. We develop an augmented form of the Cobb- Douglas production function to separate and measure different productivity-enhancing effects of IT. Using industry-level data from the manufacturing sector, we find evidence that both direct and indirect effects of IT are significant. Partitioning industries into IT-intensive and non-IT-intensive, we find that the indirect effects of IT predominate in the IT-intensive sector. In contrast, the direct effects of IT predominate in the non-IT intensive sector. These results indicate structural differences in the role of IT in production between industries that are IT-intensive and those that are not. The implication for decision-makers is that for IT-intensive industries the gains from IT come primarily through indirect effects such as the augmentation of non-IT capital and labor.
Keywords: indirect effects; IT investment; IT productivity; output elasticity; production theory; technological change
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#148 0.444 productivity information technology data production investment output investments impact returns using labor value research results evidence spillovers industries analysis gains
#173 0.204 effect impact affect results positive effects direct findings influence important positively model data suggest test factors negative affects significant relationship
#197 0.131 agility capital substitution non-it enablers significant inhibitors link dynamism does agile labor executives enabling dual adaptive contrast substitute practices literature
#29 0.069 industry industries firms relative different use concentration strategic acquisitions measure competitive examine increases competition influence result characteristics mergers industry-level functions
#35 0.053 technology organizational information organizations organization new work perspective innovation processes used technological understanding technologies transformation consequences perspectives use administrative economic