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Increased IT Investment Does Not Guarantee Improved Economic Performance: New Research

Introduction

A recent research study conducted by the School of Management has revealed that an increase in Information Technology (IT) expenditure does not necessarily result in improved economic performance for a nation. The findings question the effectiveness of IT spending in driving economic growth.

The Productivity Paradox

The study, soon to be published in the Asia Pacific Management Review, focused on the impact of IT, unemployment rates, and inflation rates on a country’s performance. It highlighted the existence of the productivity paradox, which refers to a decline in productivity growth during the 1970s and 80s despite rapid IT development. Interestingly, this paradox still persists in some developed countries.

The Role of Complementary Resources

Winston Lin, the lead author of the study and professor of operations management and strategy, emphasized that while increased IT spending does not always lead to increased productivity, it can be beneficial when countries leverage complementary resources such as e-commerce, traditional capital, and traditional labor. This highlights the importance of a holistic approach to IT investment.

Evaluating the Impact

To evaluate the impact of unemployment and inflation rates on IT value, the researchers utilized 10 mathematical models and analyzed panel data from 11 countries spanning from 1993 to 2011. The data was collected from reputable sources such as Digital Planet, the OECD Statistics, the United Nations Common Database, International Monetary Fund, Eurostat Database, and the World Bank.

Implications for Decision-Makers

Given the findings of this research, it is crucial for managers, policymakers, and decision-makers to carefully assess the value and impact of IT investment. The study underscores the relevance of considering economic environments characterized by varying rates of inflation and unemployment.

The Role of IT Investment

Lin explains that through a combination of fiscal and monetary policies, IT investment can contribute significantly to a country’s economic performance, particularly when it aligns with the competitive strategy and contingent factors in the economic environment.

Collaborative Study

Lin collaborated on this study with Yueh H. Chen, a professor of finance, and Shih-Sian “Sherwin” Jhang, an assistant professor of finance, both from the National Sun Yat-Sen University College of Management.

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