Analysing the Complex Relationships between IT Investments and Business Value.

Main Researchers: 
Simon Poon
Research Areas: 
Knowledge Economy
Research Areas: 
Knowledge Management
The original formulation of the productivity paradox by Nobel Price Laureate, Economist Robert Solow in 1987, gave rise to an active debate on the complex relationships between information technology (IT) investments and productivity. One of the most interesting issues that has emerged in this context is the dual role played by IT in organisations. Apart from being a type of input capital directly consumed in the production process, IT can also act as an "enabler", not only in providing useful information to enhance business decisions, but also to induce organisational transformations. The goal of this research is to explore the interweaving relationships between different characterisations of IT, organisational factors and productivity growth. This research aims to enhance our understanding between IT and productivity gains beyond the basic technical relationships described by the theory of production economics.Our preliminary findings indicate that Australian firms has been using IT effectively (since mid-90s)to generate productivity gains under the endogenous growth theory. Particularly, we find that software investment is the key to productivity growth in the IT-using world (i.e. Australia). Furthermore, we have discovered that the organisational factors complementary to IT use which contribute positively to productivity growth, are different to the organisational factors contributing negatively to productivity growth. We suspect that certain organisational factors that positively affect productivity growth do not necessarily have a reverse effect when they are reduced or removed. Such finding is consistent with the Frederick Herzberg's 2-factors theory in the discipline of organisational behaviour. The study has brought to surface another possible factors contributing to the productivity paradox.