Does Successful Investment in Information Technology Solve the Productivity Paradox?
Information & Management, Vol. 38, No. 2, pp. 103-117, December 2000
Posted: 26 Feb 2009
Date Written: December 1, 2000
Abstract
Based on previous empirical research, there seems to be little relation between investment in information technology (IT) and financial performance (often referred to as the 'productivity paradox'). We hypothesize that this is due to the fact that many companies implement IT projects ineffectively. Like any other asset, IT must be utilized effectively to result in increased financial performance. By comparing successful users of IT and less successful users of IT, we show that successful users of IT have superior financial performance relative to less successful users of IT. However, any financial performance advantage is short-lived, possibly due to the ability of competitors to copy IT projects.
Keywords: Productivity paradox, Information technology investment, Financial ratios, Financial performance, Competitive advantage
JEL Classification: M15, M41, O14
Suggested Citation: Suggested Citation