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Abstract

The way in which information technology (IT) impacts firm productivity is an enduring question in organizational research and practice. Rather than adopting the common explanation that IT spending improves organizational performance, we hypothesize that IT spending determines the amount of IT assets, such as IT hardware, IT personnel, IT systems, and IT outsourcing, that can be acquired. These IT assets, in turn, affect productivity. The context of our study is the healthcare industry. Because of the unique set of managerial values, incentives, and constraints in this industry, we also hypothesize that IT personnel play a key role in determining hospital productivity. Analysis of panel data on acute-care centers provides support for our hypotheses. This paper contributes to literature by (1) refining earlier research that explains that IT spending improves organizational productivity; (2) examining the interrelationships between various types of IT assets; and (3) providing initial indications that outsourcing of the IT function may not have the beneficial effects in healthcare that it does in other industries.

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