Abstract

In this paper, we report the puzzling results of a study which examined IT capital investment and productivity at three of the largest IT user sites in the U.S. for the period 1970-1990: Social Security Adininistratioii (SSA), Internal Revenue Service (IRS), and the Federal Bureau of Investigation (€331). Based on detailed IT investment, employment, and output data over twenty years, we found that only one agency had achieved significant productivity benefits, a second agency b2d modest results, and a third agency achieved no results whatever. These results cannot be explained by traditional theories of how productivity is produced. We argue that IT-induced productivity results not simply from strategic choice, nor the opration of the invisible hand in the market place, nor simply from keen managers adjusting thek organizations to an "objective" enviro~iment. Instead we propose 2 new theory in which productivity benefitsderivefromalargermacro-cultureenactedbypowerfulinstitutionsinanorganizationalfield. We extend this analysis to the larger economy and examine how this new theory helps us understand recent claims that IT is finally having positive productivity benefits at the sector level, and also helps us understand how the current fascination with re-engineering and downsizing may be a self-fulfilling prophecy.

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