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A Firm Level Study of Information Technology Productivity to Company Size Using Financial and Market Based Measures
Abstract
The Productivity Paradox, first identified by economist Robert Solow, is the concept that despite increases in information technology expenditures, productivity gains have not been recognized in industry. The author has analyzed past data and determined that over an extended number of years there is no significant and positive correlation at a firm level between information technology spending at a firm level and firm productivity as measured by a variety of market and financial based measures. Significant research has identified firm size as a factor in firm level analysis. This study measures whether stratification by firm size results in positive and significant correlations between information technology and firm level performance. The report analyzes the last year that information technology expenditures by firm were openly published. The results lead to the conclusion that for the data set analyzed there remains a Productivity Paradox since only two of sixty analyses provide significant correlation. Separate analysis by firm size does not result in significant correlation between information technology expenditures and firm productivity as measured by financial and market based dependent factors.
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