7.1: The Paradox

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The Productivity Paradox

In 1991, Erik Brynjolfsson wrote an article, published in the Communications of the ACM, entitled “The Productivity Paradox of Information Technology: Review and Assessment.” By reviewing studies about the impact of IT investment on productivity, Brynjolfsson was able to conclude that the addition of information technology to business had not improved productivity at all – the “productivity paradox.” From the article^[1] He does not draw any specific conclusions from this finding, and provides the following analysis:

Although it is too early to conclude that IT’s productivity contribution has been subpar, a paradox remains in our inability to unequivocally document any contribution after so much effort. The various explanations that have been proposed can be grouped into four categories:

1) Mismeasurement of outputs and inputs,

2) Lags due to learning and adjustment,

3) Redistribution and dissipation of profits,

4) Mismanagement of information and technology.

In 1998, Brynjolfsson and Lorin Hitt published a follow-up paper entitled “ Beyond the Productivity Paradox .”^[2] In this paper, the authors utilized new data that had been collected and found that IT did, indeed, provide a positive result for businesses. Further, they found that sometimes the true advantages in using technology were not directly relatable to higher productivity, but to “softer” measures, such as the impact on organizational structure. They also found that the impact of information technology can vary widely between companies.