Does Technological Progress Alter the Nature of Information Technology as a Production Input? New Evidence and New Results Export

@article{citeulike:6097993, abstract = {Prior research at the firm level finds information technology (IT) to be a net substitute for both labor and non-IT capital inputs. However, it is unclear whether these results hold, given recent IT innovations and continued price declines. In this study we extend prior research to examine whether these input relationships have evolved over time. First, we introduce new price indexes to account for varying technological progress across different types of IT hardware. Second, we use the rental price methodology to measure capital in terms of the flow of services provided. Finally, we use hedonic methods to extend our IT measures to 1998, enabling analysis spanning the emergence of the Internet. Analyzing approximately 9,800 observations from over 800 Fortune 1,000 firms for the years 1987-1998, we find firm demand for IT to be elastic for decentralized IT and inelastic for centralized IT. Moreover, Allen Elasticity of Substitution estimates confirm that through labor substitution, the increasing factor share of IT comes at the expense of labor. Last, we identify a complementary relationship between IT and ordinary capital, suggesting an evolution in this relationship as firms have shifted to more decentralized organizational forms. We discuss these results in terms of prior research, suggest areas of future research, and discuss managerial implications. This paper is dedicated to the memory of Paul Chwelos, respected colleague and dear friend. 10.1287/isre.1090.0229}, author = {Chwelos, Paul and Ramirez, Ronald and Kraemer, Kenneth L. and Melville, Nigel P.}, citeulike-article-id = {6097993}, citeulike-linkout-0 = {http://dx.doi.org/10.1287/isre.1090.0229}, citeulike-linkout-1 = {http://isr.journal.informs.org/content/isre.1090.0229v1/.abstract}, citeulike-linkout-2 = {http://isr.journal.informs.org/content/isre.1090.0229v1/.full.pdf}, day = {31}, doi = {10.1287/isre.1090.0229}, journal = {INFORMATION SYSTEMS RESEARCH}, keywords = {alter, does, evidence, information, input, nature, new, production, progress, results, technological, technology}, month = {August}, pages = {isre.1090.0229+}, posted-at = {2009-11-11 12:33:37}, priority = {3}, title = {Does Technological Progress Alter the Nature of Information Technology as a Production Input? New Evidence and New Results}, url = {http://dx.doi.org/10.1287/isre.1090.0229}, year = {2009} }

TY - JOUR ID - citeulike:6097993 L3 - citeulike-article-id:6097993 N2 - Prior research at the firm level finds information technology (IT) to be a net substitute for both labor and non-IT capital inputs. However, it is unclear whether these results hold, given recent IT innovations and continued price declines. In this study we extend prior research to examine whether these input relationships have evolved over time. First, we introduce new price indexes to account for varying technological progress across different types of IT hardware. Second, we use the rental price methodology to measure capital in terms of the flow of services provided. Finally, we use hedonic methods to extend our IT measures to 1998, enabling analysis spanning the emergence of the Internet. Analyzing approximately 9,800 observations from over 800 Fortune 1,000 firms for the years 1987-1998, we find firm demand for IT to be elastic for decentralized IT and inelastic for centralized IT. Moreover, Allen Elasticity of Substitution estimates confirm that through labor substitution, the increasing factor share of IT comes at the expense of labor. Last, we identify a complementary relationship between IT and ordinary capital, suggesting an evolution in this relationship as firms have shifted to more decentralized organizational forms. We discuss these results in terms of prior research, suggest areas of future research, and discuss managerial implications. This paper is dedicated to the memory of Paul Chwelos, respected colleague and dear friend. 10.1287/isre.1090.0229 JF - INFORMATION SYSTEMS RESEARCH TI - Does Technological Progress Alter the Nature of Information Technology as a Production Input? New Evidence and New Results SP - isre.1090.0229 KW - alter KW - does KW - evidence KW - information KW - input KW - nature KW - new KW - production KW - progress KW - results KW - technological KW - technology AU - Chwelos, Paul AU - Ramirez, Ronald AU - Kraemer, Kenneth AU - Melville, Nigel PY - 2009/08/31/ UR - http://dx.doi.org/10.1287/isre.1090.0229 ER -