Information technology investments and aggregate productivity

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Earlier studies have shown positive and large impacts of information technology (IT) investments on aggregate products in the nascent stage. However, this causal inference may not be applicable in the adult regime with a diminishing marginal productivity. We conduct a 52 cross-country analysis on a 15 year data of IT capital stocks, rather than flows as used in the literature. Controlling for country and time effects, the empirical implications of our study are as follows: First, the IT investment intensity positively affects aggregate productivity controlling for labor, assets, and financial markets. Second, the relative contribution has decreased as the law of diminishing returns predicts. Lastly, software and services have gained more capital allocation on relative terms in exchange for less on hardware. This finding contrasts with the existing argument that the hardware-software mix is time-constant due to substitution.
Publisher
CIBER Institute
Issue Date
2016-07
Language
English
Citation

Journal of Applied Business Research, v.32, no.4, pp.995 - 1008

ISSN
0892-7626
URI
http://hdl.handle.net/10203/222849
Appears in Collection
RIMS Journal Papers
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