Beyond the Productivity Paradox

Beyond the Productivity Paradox

August 1998 | Erik Brynjolfsson and Lorin M. Hitt
Computers are a key driver of significant changes in productivity. While the productivity paradox has long been debated, recent studies suggest that computers do contribute to productivity growth. Productivity is the ratio of output to input, and while it is difficult to measure, especially in the modern economy, there is growing evidence that computers are pulling their weight. The productivity paradox refers to the observation that, despite significant advances in computer technology, productivity growth has not kept pace with the growth in computer use. This paradox has been attributed to the difficulty of measuring productivity, particularly in the information economy, where output is more intangible and difficult to quantify. However, recent research suggests that computers do contribute to productivity growth. Studies have shown that firms that invest in information technology (IT) and make complementary organizational changes tend to experience higher productivity. These changes include new strategies, business processes, and organizational structures that allow firms to better utilize IT. The key to maximizing the benefits of IT is to make complementary investments in organizational changes. This is because the value of IT is not just in the technology itself, but also in the way it is integrated into the organization. Firms that make these changes are more likely to achieve higher productivity. The arrival of the "new organization" has been facilitated by the increased diffusion of IT into the workplace. This has led to a shift towards flatter, less hierarchical organizations where highly skilled workers take on more decision-making responsibilities. These changes have been shown to increase productivity and are likely to become more prevalent as IT continues to evolve. While the benefits of IT are clear, the process of implementing these changes can be time-consuming and costly. Firms must invest in both technology and organizational changes to fully realize the benefits of IT. This is a critical consideration for IT managers who must decide how to best use computers to improve productivity. In conclusion, computers are a key driver of productivity growth, but their impact depends on how they are integrated into the organization. Firms that make complementary investments in organizational changes are more likely to achieve higher productivity. As IT continues to evolve, it is increasingly important to organize in ways that leverage the value of IT.Computers are a key driver of significant changes in productivity. While the productivity paradox has long been debated, recent studies suggest that computers do contribute to productivity growth. Productivity is the ratio of output to input, and while it is difficult to measure, especially in the modern economy, there is growing evidence that computers are pulling their weight. The productivity paradox refers to the observation that, despite significant advances in computer technology, productivity growth has not kept pace with the growth in computer use. This paradox has been attributed to the difficulty of measuring productivity, particularly in the information economy, where output is more intangible and difficult to quantify. However, recent research suggests that computers do contribute to productivity growth. Studies have shown that firms that invest in information technology (IT) and make complementary organizational changes tend to experience higher productivity. These changes include new strategies, business processes, and organizational structures that allow firms to better utilize IT. The key to maximizing the benefits of IT is to make complementary investments in organizational changes. This is because the value of IT is not just in the technology itself, but also in the way it is integrated into the organization. Firms that make these changes are more likely to achieve higher productivity. The arrival of the "new organization" has been facilitated by the increased diffusion of IT into the workplace. This has led to a shift towards flatter, less hierarchical organizations where highly skilled workers take on more decision-making responsibilities. These changes have been shown to increase productivity and are likely to become more prevalent as IT continues to evolve. While the benefits of IT are clear, the process of implementing these changes can be time-consuming and costly. Firms must invest in both technology and organizational changes to fully realize the benefits of IT. This is a critical consideration for IT managers who must decide how to best use computers to improve productivity. In conclusion, computers are a key driver of productivity growth, but their impact depends on how they are integrated into the organization. Firms that make complementary investments in organizational changes are more likely to achieve higher productivity. As IT continues to evolve, it is increasingly important to organize in ways that leverage the value of IT.
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