Does Successful Investment in Information Technology Solve the Productivity Paradox?

Information & Management, Vol. 38, No. 2, pp. 103-117, December 2000

Posted: 26 Feb 2009

See all articles by Theophanis C. Stratopoulos

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics

Date Written: December 1, 2000

Abstract

Based on previous empirical research, there seems to be little relation between investment in information technology (IT) and financial performance (often referred to as the 'productivity paradox'). We hypothesize that this is due to the fact that many companies implement IT projects ineffectively. Like any other asset, IT must be utilized effectively to result in increased financial performance. By comparing successful users of IT and less successful users of IT, we show that successful users of IT have superior financial performance relative to less successful users of IT. However, any financial performance advantage is short-lived, possibly due to the ability of competitors to copy IT projects.

Keywords: Productivity paradox, Information technology investment, Financial ratios, Financial performance, Competitive advantage

JEL Classification: M15, M41, O14

Suggested Citation

Stratopoulos, Theophanis C. and Dehning, Bruce, Does Successful Investment in Information Technology Solve the Productivity Paradox? (December 1, 2000). Information & Management, Vol. 38, No. 2, pp. 103-117, December 2000 . Available at SSRN: https://ssrn.com/abstract=1306196

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 x35943 (Phone)

Bruce Dehning (Contact Author)

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

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