Are Computers Boosting Productivity? A Test of the Paradox in State Governments

Abstract

An issue that has long nagged scholars who study the effects of information technology (IT) investments is the so-called productivity paradox. Investments in IT have promised productivity improvements, but the benefits often have not materialized. This research explicitly studies many of the explanations for null findings in previous research in a rarely studied context, state governments. The research employs several novel features - including innovative measures of productivity and the technology itself - and a formal measure of information technology management structure. IT investments by state governments have positive and significant effects on the measure of productivity, gross state product. Organizations that use chief information officer structures to manage the technology reap greater rewards from their investments. We conclude that research that eliminates shortcomings of previous studies is likely to find performance improvements from IT investments.