We attempt to gain a better perspective on evolving firm-size in the past 20 years across industries by combining the empirical framework of Brynjolfsson et al. (1994) for measuring the effect of coordination cost reduction due to information technology investment, and the synopsis of theories of the firm by Kumar et al. (2001). We find that although in general Brynjolfsson et al.’s result holds for new firm data from COMPUSTAT, the firm size of the professional service sector grows as IT investment increases. The paper’s potential contributions to empirical methods include (1) a different focus on the measurement of firm size by utilizing the weighted average employee-measure of firm size adopted by Kumar et al. work to replicate Brynjolfsson et al.’s findings with a new dataset, and (2) refinement of Kumar et al.’s weighted average employee-measure of firm size using entropy partition techniques from the machine learning literature, to fully account for the effect of larger firms within each industry.
Jiang, Tianyi, "Firm Size and Information Technology Investment: Beyond Simple Averages" (2003). ICIS 2003 Proceedings. 80.