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OCR for page 217
Appendix A
Selected Research on
Economic and Strategic Impacts of
Information Technology
217
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218
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
TABLE A.1 Selected Research on Economic and Strategic Impacts of
Information Technology
Type of Unit of Performance
Reference Research Analysis Construct and Measure(s)
Alpar and Kim
(1990)
Econometric
Time series
Cross-sectional
(1979 to 1986)
Firm/small
business unit
(759 banks)
Productivity
(multifactor)
Applegate et al. Theory, description Managers Productivity
(1988) Flexibility
Creativity
Attewell and Rule Review of Individual Number and quality of jobs,
(1984) management Management management decision
information Organization making, organizational
systems literature dealings with clients and
customers
Baily and Economic analysis Company White-collar productivity
Chakrabarti and simulation
(1988)
Baily and Gordon Methodology Aggregate Average labor productivity
(1988) review economy vs. and multifactor productivity
industry
Banker and Econometric Firm/small Competitive advantage
Kauffman Cross-sectional business unit (marginal bank branch
(1988) (508 branch banks) deposit share as contribution
to reducing costs)
Bender Correlational Firm (132 life Operating cost efficiency
(1986) Cross-sectional insurance
(1983) companies)
Benjamin et al. Case studies and 24 companies Strategic opportunities
(1984) surveys; prescriptive
Bikson and Literature review, Organization "Successful" implementation
Eveland retrospective (diverse range) (user, management
(1986) application of satisfaction)
sociotechnical systems
Blumenthal Theory review International Productivity and impacts
(1987) National on industry and employment
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APPENDIX A
219
Input Measure(s) Key Findings (Brynjolfsson and Bimber Hypothesis Code)a
Total information 10% increase in IT associated with a 1.9% decrease in total costs.
system expenses; labor; IT contributed to reduction in demand deposit amount and an
capital; time deposits increase in time deposits. IT is capital using and labor saving.
IT Discusses present and future impacts of computers on managers.
Emphasizes increased flexibility, new structures. (IE)
Computing Significant disagreement and/or conflicting studies in every major
dimension examined. (IE)
Electronics innovation Proposes 3 potential explanations for the IT paradox in white
collar context: mismeasurement, distributional rather than
productive effects, information value problem: Price decreases in
technology lead to more technology purchased rather than
decreased cost; also suggests may be just transitional time lag. (IC)
Output per hour, Uncovers large measurement errors but finds that they explain at
multifactor most 0.5% of the 1.5% slowdown in aggregate productivity. Key
contributing errors are undervaluing of variety, service quality,
and convenience. Adjustments applied to the banking industry
produce much stronger productivity growth than do government
analysis/statistics of productivity growth. (IA)
Presence of ATM at a Use of ATMs enables branch to protect rather than grow market
branch. Connection to share. Bank customers evidenced willingness to pay for regional
regional shared ATM access to shared electronic banking networks.
network
Total IT expenses Higher IT spending associated with higher unit cost efficiency.
IT IT can help firms establish new markets and redistribute profits
in existing markets. (IE)
Process of What is needed is an integrated view, in which decisions about
introduction of new tools, uses, and users are seen as essential properties of a strategy
technology that is iterative and emergent, learning from its own successes
and failures over time and committed to change as a continuous
fact of life. (IIE)
Programmable Confronts dilemma in the popular view: increased use of
automation programmable automation leads to increased competitiveness and
other benefits to industry while threatening job loss and other
negative consequences to workers. (JIB)
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220
TABLE A. 1 Continued
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
Type of Unit of Performance
Reference Research Analysis Construct and Measure(s)
Bresnahan Econometric Financial sector Spillover to customers
(1986) methodology downstream
Cecil and Hall Prescriptive, Company Performance
(1988) descriptive
Cron and Sobol Correlational Firm (138 Profitability (return on
(1983) Cross-sectional surgical assets; profits/sales;
wholesalers) return on net worth).
Competitive advantage
(5-year sales growth)
Curley and Pyburn Case studies of 13 46 manufacturing Improved productivity
(1982) organizations, survey and service (managerial, clerical,
of additional 33 industries professional)
Dertouzos Descriptive, Economy Productivity
(1989) prescriptive,
models
Feldman and Review of literature, Organizations Use of information
March (1981) theory (wide range)
Franke Econometric Financial sector Productivity (average
(1987) (1958 to 1983) (insurance and labor). Capital (ROI)
banking)
Fudenberg and Economic model Firm Net cash flow
Tirole (1985) development
Giesler and Descriptive, survey Bank Competitive performance
Rubenstein of 20 banks and
(1988) interviews
Graham Firm Performance
(1976)
Harris and Katz Correlational Firm (40 life Operating cost efficiency
(1991) Time series insurance (operating expenses"
(1983 to 1986) companies) premium income)
Hirshleifer Economic models Private vs. social
(1971)
Kraut et al. Case with lagged, Company (one Productivity, quality of
(1989) time-series design public utility) work, attitudes toward
(methodology computers
emphasis)
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APPENDIX A
221
Input Measure(s) Key Findings (Brynjolfsson and Bimber Hypothesis Code)a
Technological Benefits to the public that were derived from computerization of
innovation financial services were five times the expenditures on computers. (LA)
IT Fundamental changes in strategy and organization are required to
produce significant benefits. (IE)
Number of Firms with extensive automation are either very strong or very
software applications weak financial performers.
Office automation Meaningful improvements in productivity require active
management of an ongoing learning process that brings about
changes in the way people think about the work they do. (IB)
Computer field, Questions value of increased work quality; develops method for
technology, and theory measuring computer productivity and defines a value of
information. (IIC)
Acquisition of Offers a critique of the decision-theoretic model of information
information acquisition and use in organizations; provides alternative
explanations for the common observation that information often
seems to be acquired excessively. (ID)
Total IT capital stock Declines in productivity of capital vs. labor productivity
associated with specific technological innovations. (ID)
Early or late adoption Develops game-theoretic model of rent-dissipation in the timing
of introduction of new technologies. (IC)
IT Three-quarters lacked any formal evaluation procedure; only 3
viewed IT in terms of strategic goals and long-term growth. (IID)
Better managerial decision making would apparently contribute
positively to performance, yet questions if IT materially
contributes to the quality of decision making. (IIC)
IT expense ratio Top-performing firms had higher growth in IT expense ratios and
IT cost efficiency ratio lower growth in operating expense than did weak performers.
Private value of information may have no relationship to the
social value, principally because of rent dissipation; shows that
information may have negative social value if it destroys
opportunities for insurance and risk-sharing. (IC)
Automation of Extends a simple impact model (1) by expanding what one
record system considers the technology to be, (2) by identifying individual and
organizational contingencies that moderate impact, and (3) by
recognizing bidirectional nature of technological change. (IIF)
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222
TABLE A. 1 Continued
Reference
Loveman
(1988)
Malone et al.
(1987)
Mark
(1982)
Nelson
(1981)
Noyelle
(1990)
OECD
(1988)
Osterman
(1986)
Parsons et al.
(1990)
Pentland
(1989)
Porter and Millar
(198S)
Roach
(1991)
Sassone and
Schwartz
(1986)
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
Type of
Research
Unit of
Analysis
Performance
Construct and Measure(s)
Econometric
Time series
Cross-sectional
(1978 to 1984)
Conceptual
framework and
prescription
Methodology review
Critique and economic
model development
Correlation
socio-economic
analysis
Econometric
time series
(1972 to 1987)
Model
Survey (1988)
Some case examples,
prescriptive
Trend comparisons
(1950 to 1989)
Method to quantify
benefits
Firm/small
business unit
(60 manufacturing
small business units)
Productivity (average
labor)
Firm and market Costs of coordination
structures
Service industry Labor productivity
U.S. and French
retailing industry
Individual to
international
Industry (40
service and
manufacturing
industries)
Firm
(2 large banks)
Individual
(1100 Internal
Revenue Service
agents), Department
Productivity measure and
employment
Employment, productivity
growth
Productivity (clerical
employment volume/output;
managerial employment
volume/output)
Multifactor productivity
Productivity (labor hours/
audit), Output quality
(client reports)
Competitive advantage
Service sector Productivity (employment
volume/output)
Departments (4) of Dollars saved by
large corporations restructuring work activities
(587 individuals)
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APPENDIX A
223
Input Measure(s) Key Findings (Brynjolfsson and Bimber Hypothesis Code)a
Total IT capital stock Increases in shares of IT capital have insignificant effects on
productivity. (IA)
Electronic
IT reduces the costs of coordination and thus leads to more
communications, coordination-intensive organizational forms, such as markets. (IE)
electronic brokerage,
and electronic
integration
Labor
Describes the problems in measuring service productivity and
attempts of the Bureau of Labor Statistics to correct them. (IA)
Emphasizes evolutionary models over traditional economic theory
of productivity. (ID)
Conventional Severe measurement problems in services.
productivity
New technologies Possible reasons for failure at aggregate levels: (1) economy, (2)
lags in translating potential gains in productivity into actual gains
because of problems of organizational and institutional
adaptation, (3) disequilibrating effects of technical change in
relation to international trade. (IIE)
Aggregated number Each 10% increase in computing stock associated with 1.8%
of mainframes; decrease in clerical employment and 1.2% decrease in managerial
number of central employment. Found lagged effect; displacement partially reversed
processing units after initial impact.
IT and operating data IT coefficient in translog production function small and often
negative.
Laptop computer use No discernible improvement in productivity. Major discrepancy
between users' perceptions of improved productivity and actual
results.
IT IT affects competition in 3 ways: (1) it alters industry/value
chain structure, (2) it supports cost and differentiation strategies,
and (3) it spawns entirely new businesses. (IE)
Total IT capital stock Large-scale increases in ratio of IT capital stock to other shares
of capital, coupled with stagnant productivity, suggest no payoff
from IT investments. (IID)
Office automation Reports on poor status of costjustification procedures, difficulty
of measuring the dollar value of investments in new technology.
(IIA)
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9
224
TABLE A. 1 Continued
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
Type of Unit of Performance
Reference Research Analysis Construct and Measure(s)
Strassmann Correlation Company (38 Percent return to
(1990) service companies) shareholders
Thurow Theory challenges Service-sector Productivity growth
(1987) economic businesses
assumptions
Prescriptive
Venkatraman and Quasi-experiment Individual Productivity
Zaheer Time series (78 insurance (number of policies in force,
(1990) (1985 to 1987) agents) number of new policies)
Effectiveness (total
premiums and commissions)
Weitzendorf and Model case study Company (2)
Wigand (1991)
Performance
aCode gives elements of Brynjolfsson and Bimber hypotheses outlined below:
I. Economic Hypotheses
A. Measurement error: Outputs (and inputs) of information-using industries are not being
properly measured.
B. Lags: Time lags in the payoffs from information technology make analysis of current
costs versus current benefits misleading.
C. Redistribution: Information technology is especially likely to be used in redistributive
activities among firms, making it privately beneficial without adding to total output.
D. Mismanagement: The lack of explicit measures of the value of information make it
particularly vulnerable to misallocation and overconsumption by managers.
E. Business transformation: Measures of gross output do not well capture the benefits that
motivate expenditures on information technology and information workers.
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APPENDIX A
Input Measure(s)
225
Key Findings (Brynjolfsson and Bimber Hypothesis Code)a
Various IT ratios,
weighted differently
Movement to bonus
system, value-added
maximization, delayed
management fast track
Electronic integration
with insurance carriers
IT
No correlations between various IT ratios and performance
measures.
Our institutions, styles, and beliefs have not adapted to realities
of new technologies, leading to too many managers and too much
information gathering. (ID)
No improvement in operating efficiency. No improvement in
effectiveness.
Interactive model of information use.
II. Behavioral Hypotheses
A. Quantity of work: For the production of a fixed level of output by a firm, the introduc-
tion of information technology increases rather than decreases the volume of work re-
quired.
B. Nature of productivity: Information technology increases the efficiency of individuals,
work groups, or departments in the performance of certain tasks without contributing to
the overall productivity of the firm.
C. Quality: Improvements in work quality from the use of information technology are not
affecting productivity.
D. Purchase decision: The decision to purchase information technology is not made on the
basis of maximization of quantifiable productivity.
E. Organizational factors: Firms are failing to undertake the necessary organizational
adaptations to realize the potential productivity gains inherent in the information tech-
nology that they have purchased.
F. Technology: Other problems are so strongly depressing service-sector and white-collar
productivity that any small gains from new technology are not noticeable.
SOURCES: Derived from the literature reviews in papers by Brynjolfsson, Erik, and Bruce
Bimber, 1991, "Information Technology and the 'Productivity Paradox,"' Working Paper, Brookings
Institution, Washington, D.C., Feb. 7; Brynjolfsson, Erik, 1991, "The Productivity Paradox of
Information Technology: Review and Assessment," Center for Coordination Science Techni-
cal Report #130, December; and Wilson, Diane D., 1992, "Assessing the Impact of Informa-
tion Technology on Organizational Performance," Sloan School of Management, Massachu-
setts Institute of Technology, (revised), May 1.
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226
INFORMATION TECHNOLOGY IN THE SERVICE SOCIETY
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APPENDIX A
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Representative terms from entire chapter:
time series
