Information technology (IT) productivity paradox in the 21st century

Abstract

Purpose – Since the 1970s productivity growth in most economies slowed, while information and communication technology expenditures increased: the “information technology (IT) productivity paradox.” Some researchers reported an end to the paradox, but this is most likely due to IT industry growth approaching the Year 2000 phenomenon. The purpose of this paper is to update IT productivity paradox research. Design/methodology/approach – For comparability this research replicates methods employed by previous studies but employs a two-level approach: first macroeconomic indicators; second labor and multi-factor productivity. Findings – Findings suggest IT investment has high positive correlation with gross domestic product growth, but not labor or multi-factor productivity. This ambiguity suggests the paradox is still poorly understood. Research limitations/implications – The findings are not conclusive; the authors cannot confirm or reject the existence of the productivity paradox. The global recession and banking crisis makes it prudent to wait until recovery before analyzing data from that period. Practical implications – Lack of convincing evidence supporting positive effects from IT investment suggests some firms benefit from IT investment, but not others, and that IT investment has questionable returns. Social implications – Firm level studies might find IT investment benefits some firms, but lack of convincing macroeconomic level evidence of positive effects of IT investment suggests the paradox still exists. Originality/value – This research updates the IT productivity paradox demonstrating the phenomenon is still poorly understood and thus worthy of further study, questioning the benefits of IT investment for industry and national economies.