Abstract:

We examine the relationships between productivity growth, IT investment and organisational change (?O) using UK firm data. Consistent with the small number of other micro studies we find (a) IT appears to have high returns in a growth accounting sense when ?O is omitted; when ?O is included the IT returns are greatly reduced, (b) IT and ?O interact in their effect on productivity growth, (c) non-IT investment and ?O do not interact in their effect on productivity growth. Some new findings are (a) ?O is affected by competition; (b) US-owned firms are much more likely to introduce ?O relative to foreign owned firms who are more likely still relative to UK firms; (c) our predicted measured TFP growth slowdown for firms who are not doing ?O and/or are in the early stages of IT investment compare well with the macro numbers documenting a UK measured TFP growth slowdown.