Source:
MIS Quarterly, Volume 20, Issue 2, p.121-142 (1996)
Keywords:
IT productivity, business profitability,IS investment, economic theory, consumer surplus, computers
Abstract:
The business value of information technology
(IT) has been debated for a number of years.
While some authors have attributed large productivity
improvements and substantial consumer
benefits to IT, others report that IT has
not had any bottom line impact on business
profitability. This paper focuses on the fact that
while productivity, consumer value, and business
profitability are related, they are ultimately separate questions. Accordingly, the empirical
results on IT value depend heavily on
which question is being addressed and what
data are being used. Applying methods based
on economic theory, we are able to define and
examine the relevant hypotheses for each of
these three questions, using recent firm-level
data on IT spending by 370 large firms. Our
findings indicate that IT has increased productivity
and created substantial value for consumers.
However, we do not find evidence that
these benefits have resulted in supranormal
business profitability. We conclude that while
modeling techniques need to be improved,
these results are collectively consistent with
economic theory. Thus, there is no inherent
contradiction between increased productivity,
increased consumer value, and unchanged
business profitability.
Full Text:
Full text is available from the MIS Quarterly site at: http://www.misq.org/archivist/bestpaper/hitt.pdf