Source:
International Conference on Information Systems (2008)
Keywords:
Information Technology, Productivity, Organizational Practices, External Focus
Abstract:
We combine detailed survey data on firms’ organizational practices with information technology (IT)
intensity measures to test the hypothesis that along with decentralization, external focus is an important
determinant of returns to IT investments. Using survey-based measures, we first show that external focus,
decentralization, and information technology investments are highly correlated and associated with a firm’s
product innovation capabilities. We then report estimates from a complementarities model that indicates that
the output elasticity of IT investment is about 8-9% for firms that are both decentralized and externally
focused, while IT investments in firms that have one or neither of these organizational assets in place do not
significantly increase productivity. Both our product development and productivity estimates are robust to
IV regressions that address the potential endogeneity of organizational investments. Our results may help
explain why more “networked” regions and economies have experienced especially high returns to IT
investment.
Notes:
Submitted version. Official full-text version available from the Association for Information Systems (AIS)