Impact of information technology on productivity

Productivity is an important economic factor which has a key role in evaluating the economic growth. It is identified as the foundation for economic prosperity, a prerequisite for national development and also an important indicator of organizational competitiveness (Dedrick et al., 2003).

Information Technology (IT) is one of the important resources for increasing the economic growth. It causes companies to use their input resources as much as possible in an effective way. As investment in IT capital accounts for an ever-increasing share of capital investment, it is important to understand how these investments might pay off (Gilchrist et al., 2001).There has been much debate on whether or not the investment in IT provides improvements in productivity and business efficiencies.

IT investment may make little direct contribution to overall performance of companies until they are combined with complementary investments in business activities, human capital, and company restructuring. Therefore, according to role of IT in Business Process Reengineering, as a facilitator and enabler, BPR is valuable for companies to increase the impact of IT on overall performance of companies. On the other word, both IT and BPR investments, together, are able to improve productivity drastically.

In this research Cobb-Douglas model was used to examine the impact of Information Technology investment on productivity at Telecommunication Company of Tehran (TCT).44 financial and economic data were collected since 1997 up to 2007 for driving the corresponding model. Weighted Least Square (WLS) was run by SPSS 15 to test hypotheses. The results have indicated that IT investment not only makes the positive contribution to output of Telecommunication Company of Tehran but also this contribution is positive after deductions for depreciation and labor expenses. Further productivity analysis exposed the positive correlations between IT, Total Factor Productivity and Labor Productivity.

In order to reveal the importance of BPR approach as a complementary investment for improving IT influences, the appropriate questionnaires distributed through Employees and Experts of TCT in the second phase of this study. Evaluation of BPR factors proved the necessity of employing this complementary investment at Telecommunication Company of Tehran.

Author: Sobhani, Ahmad

Source: LuleƄ University of Technology

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