Evaluating the impact of IT investments on productivity: a causal analysis at industry level

  • Authors:

  • Qing Hu;Jing "Jim" Quan

  • Affiliations:

  • Department of Information Technology & Operations Management, College of Business, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431, USA;Department of Information and Decision Sciences, Perdue School of Business, Salisbury University, Salisbury, MD 21801, USA

  • Venue:
  • International Journal of Information Management: The Journal for Information Professionals
  • Year:
  • 2005

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Abstract

While many studies have shown positive and significant relationships between IT investments and firm productivity or performance, the question of causality remains: do higher IT investments contribute to better performance or does better performance lead to higher IT investments? In this study, we examine the issue of IT investment impact on productivity using Granger causality model with industry level data over a 30-yr period. Our results suggest that a causal relationship exists between IT investments and productivity at the industry level. IT investments contribute to productivity growth in most of the industries in our sample. In addition, we find a feedback relationship from productivity to IT investments, as suggested by some studies. We postulate that the impact of IT investments on productivity is moderated by the interaction of product information intensity and value-chain information intensity. n information intensity.