Does Technological Progress Alter the Nature of Information Technology as a Production Input? New Evidence and New Results.

Author List: Chwelos, Paul; Ramirez, Ronald V.; Kraemer, Kenneth L.; Melville, Nigel P.;
Information Systems Research, 2010, Volume 21, Issue 2, Page 392-408.
Prior research at the firm level finds information technology (IT) to be a net substitute for both labor and non-IT capital inputs. However, it is unclear whether these results hold, given recent IT innovations and continued price declines. In this study we extend prior research to examine whether these input relationships have evolved over time. First, we introduce new price indexes to account for varying technological progress across different types of IT hardware. Second, we use the rental price methodology to measure capital in terms of the flow of services provided. Finally, we use hedonic methods to extend our IT measures to 1998, enabling analysis spanning the emergence of the Internet. Analyzing approximately 9,800 observations from over 800 Fortune 1,000 firms for the years 1987-1998, we find firm demand for IT to be elastic for decentralized IT and inelastic for centralized IT. Moreover, Allen Elasticity of Substitution estimates confirm that through labor substitution, the increasing factor share of IT comes at the expense of labor. Last, we identify a complementary relationship between IT and ordinary capital, suggesting an evolution in this relationship as firms have shifted to more decentralized organizational forms. We discuss these results in terms of prior research, suggest areas of future research, and discuss managerial implications.
Keywords: capital services; complement; hedonic; IT business value; organizational decentralization; price index; productivity; rental price; substitute; technological change
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#148 0.191 productivity information technology data production investment output investments impact returns using labor value research results evidence spillovers industries analysis gains
#168 0.131 firms firm financial services firm's size examine new based result level including results industry important account does suggests characterize limited
#197 0.112 agility capital substitution non-it enablers significant inhibitors link dynamism does agile labor executives enabling dual adaptive contrast substitute practices literature
#220 0.104 research study different context findings types prior results focused studies empirical examine work previous little knowledge sources implications specifically provide
#277 0.101 structure organization structures organizational centralized decentralized study organizations forms decentralization processing communication sharing cbis activities appropriate provide identify organizing communications
#222 0.079 research researchers framework future information systems important present agenda identify areas provide understanding contributions using literature studies paper potential review
#182 0.066 percent sales average economic growth increasing total using number million percentage evidence analyze approximately does business flow annual book daily
#41 0.063 price prices dispersion spot buying good transaction forward retailers commodity pricing collected premium customers using posted relatively obtain listing uncertainty