April 1, 2006
We examine the relationships between productivity growth, IT investment and organisational change (ΔO) using UK firm panel data. Consistent with the small number of other micro studies we find (a) IT appears to have high returns in a growth accounting sense when ΔO is omitted; when ΔO is included the IT returns are greatly reduced, (b) IT and ΔO interact in their effect on productivity growth, (c) non-IT investment and ΔO do not interact in their effect on productivity growth. Some new findings are (a) ΔO is affected by competition and (b) we also find strong effects on the probability of introducing ΔO from ownership. US-owned firms are much more likely to introduce ΔO relative to foreign owned firms who are more likely still relative to UK firms.
J.E.L classification codes: D24, E22, L22, O31
Keywords:Information technology, Productivity growth, Organisational change