CEC Theses and Dissertations

Title

A Firm Level Study of Information Technology Productivity Using Financial and Market Based Measures

Date of Award

2001

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Graduate School of Computer and Information Sciences

Advisor

Sumitra Mukherjee

Committee Member

Marlyn Kemper Littman

Committee Member

Maxine S. Cohen

Abstract

Modern business continues to invest significant resources on information technology, hardware, software, and manpower. The benefits gained from the expenditure of these monies have been the subject of scholarly debate for nearly two decades. Conflicting results have been obtained in a variety of studies and no firm conclusion has been drawn on the benefits or lack thereof, to the economy as a whole, from this spending. The objective of this study was to investigate information technology productivity in a more comprehensive fashion. This included setting a longer time perspective, reviewing more current information, both United States and European data, and measuring productivity using both market and financial based measures.

The study reviewed a longer time frame than most, utilizing data from 1989 -- 1999. This research separately analyzed the same data set using two different groups of productivity measures -- financial and market based. Prior analyses have focused on only one or the other of these measures. This study was the first to examine current information including year 1999 data from the InformationWeek 500. The study separately analyzed United States and European firms, determining whether there was a difference between information technologies spending in the United States versus Europe. The analysis compared two time periods to see if anything changed from the early 1990s to the late 1990s. Industry level analysis was separately performed to determine the impact of industry on information technology productivity. Finally, the report reviewed productivity separately for different sized firms. This determined the impact of information technology in different sized firms. Firm level performance was analyzed providing more accurate information for overall economic information technology productivity (similar to Brynjolfsson and other researchers).

Results of the study indicated that information technology did not have a consistent positive impact on firm level productivity throughout the time frame. Neither market nor financial based productivity measures provided consistent significant returns with regard to IT productivity. Positive and significant productivity results were absent for U.S. firms but present for European firms. The early time frame of 1989-1993 showed similar but non-significant returns compared to the later time period of 1994-1999. There were no consistent returns in productivity based on the size of the firm. Finally, industry sector was not a significant determinant of productivity from IT spending. The major contribution of the study is that it provides a broad comprehensive analysis of the impact of information technology on firm and economic productivity. The study highlights specific instances of higher and lower productivity by geography, industry, and time frame. Lastly, the report provides recommendations to firms on whether continued high levels of investment in information technology are warranted.

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