An empirical study of IT as a factor of production: The case of Net-enabled IT assets

Abstract

A great deal of research in the information systems field has focused on the link between IT and firm-level outputs, like productivity and performance. This paper critically examines the economic assumptions and methodological approaches that underlie much of this work. Three important issues and gaps are identified. First, the functional form of the relationship between IT and firmlevel outputs has been inconsistently specified, or overlooked. Second, multiple input and output variables are often arbitrarily combined. Third, the characteristics of IT as a factor of production have not been tested in the era of Net-enabled IT assets. This paper sheds light on these issues by analyzing an appropriate dataset in a two-stage process. In the first stage, data envelopment analysis (DEA) is employed in order to derive a meaningful measure for IT productivity from a compilation of input and output variables. This measure is treated as a dependent variable in a multivariate regression analysis during the second stage. The paper confirms the diminishing marginal productivity and input substitutability of IT for the subcategory of Net-enabled IT assets.

Perceived performance effects of ICT in manufacturing SMEs

“…It shows the intensity of ICT implementation within the company (Nevo et al, 2010). In the same vein, we generated indices showing the intensity of implementation of each of the three groups of ICT.…”

“…Many authors have suggested that one of the reasons for inconsistent findings about ICT payoffs might be the existence of lag effects since ICT payoff may require time to materialize. However, most of the studies that take time-lags into account relate to large organizations (Brynjolfsson and Hitt, 2000;Brynjolfsson et al, 2002;Devaraj and Kohli, 2003;Lee and Kim, 2006;Nevo et al, 2010) or specific sectors (Das et al, 2011).Our research contributes to the debate about whether ICT creates value for SMEs performance, providing empirical evidence of the relationships between information technologies, organizational innovation and firm performance from a sample of 267 Spanish manufacturing SMEs. We aim to investigate whether ICT resources, including investment and use of specific types of ICT, along with innovative work practices, correlate positively with several dimensions of firm performance, taking into account both direct and indirect effects and both short (less than one year of ICT implementation) and long-term effects (more than five years).…”

“…What appears to be generally lacking from the literature on ICT payoff in SMEs are studies exploring how different types of ICT adopted by SMEs impact on different areas of performance. Studies have shown that ICT effects vary according to the type of technology being used and its degree of adoption (Lucchetti and Sterlacchini, 2004; Nevo et al , 2010; Boothy et al , 2010). In addition, many analyses of ICT impact on firm performance have demonstrated the existence of complementarities between technological and organizational changes (Brynjolfsson and Hitt, 2000; Boothy et al , 2010; Cao, 2010; Cozzarin and Percival, 2010).…”

“…Many authors have suggested that one of the reasons for inconsistent findings about ICT payoffs might be the existence of lag effects since ICT payoff may require time to materialize. However, most of the studies that take time‐lags into account relate to large organizations (Brynjolfsson and Hitt, 2000; Brynjolfsson et al , 2002; Devaraj and Kohli, 2003; Lee and Kim, 2006; Nevo et al , 2010) or specific sectors (Das et al , 2011).…”

The impact of information and communication technology on skilled labor and organization types

“…The characteristics of ICT as a factor of production have not been tested in the era of net-enabled ICT assets. Regarding net-enabled ICT assets, diminishing marginal productivity and input substitutability of ICT have been found (Nevo et al 2008). …”