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7.2: The Productivity Paradox

  • Page ID
    9788
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    In 1991, Erik Brynjolfsson wrote an article, published in the Communications of the ACM, entitled “The Productivity Paradox of Information Technology: Review and Assessment” By reviewing studies about the impact of IT investment on productivity, Brynjolfsson was able to conclude that the addition of information technology to business had not improved productivity at all – the “productivity paradox.” He concluded that this paradox resulted from our inability to unequivocally document any contribution after so much effort due to the lack of quantitative measures.

    In 1998, Brynjolfsson and Lorin Hitt published a follow-up paper entitled “ Beyond the Productivity Paradox. ” In this paper, the authors utilized new data that had been collected and found that IT did, indeed, provide a positive result for businesses. Further, they found that sometimes the true advantages in using technology were not directly relatable to higher productivity but to “softer” measures, such as the impact on organizational structure. They also found that the impact of information technology can vary widely between companies.

    IT Doesn’t Matter

    Just as a consensus was forming about IT's value, the Internet stock market bubble burst; two years later, in 2003, Harvard professor Nicholas Carr wrote his article “IT Doesn’t Matterin the Harvard Business Review. In this article, Carr asserts that as information technology has become more ubiquitous, it has also become less of a differentiator. In other words: because information technology is so readily available and the software used so easily copied, businesses cannot hope to implement these tools to provide any competitive advantage. IT is essentially a commodity, and it should be managed like one: low cost, low risk. IT management should see themselves as a utility within the company and work to keep costs down. For IT, providing the best service with minimal downtime is the goal. As you can imagine, this article caused quite an uproar, especially from IT companies. Many articles were written in defense of IT; many others in support of Carr.

    The best thing to come out of the article and the subsequent book was that it opened up discussion on IT's place in a business strategy and exactly what role IT could play in competitive advantage. It is that question that we want to address in the rest of this chapter.

    References

    Brynjolfsson, E. and Hitt, L. (1998). Beyond the Productivity Paradox. Communications of the ACM. Retrieved August 16, 2020, from https://doi.org/10.1145/280324.280332

    Brynjolfsson, E. (1992). The Productivity Paradox of Information Technology: Review and Assessment. Center for Coordination Science MIT Sloan School of Management Cambridge, MA. Retrieved from August 16, 2020, from http://ccs.mit.edu/papers/CCSWP130/ccswp130.html

    Carr, Nicholas G (2003) IT Doesn’t Matter. Retrieved August 20 from https://hbr.org/2003/05/it-doesnt-matter


    7.2: The Productivity Paradox is shared under a CC BY-NC-SA 3.0 license and was authored, remixed, and/or curated by Ly-Huong T. Pham, Tejal Desai-Naik, Laurie Hammond, & Wael Abdeljabbar.