MANAGEMENT STRATEGY, INVESTMENT IN IT, AND PRODUCTIVITY

Abstract

Previous literature on IT and productivity does not take into account different organizational goals and different management strategies for achieving these goals. But productivity and ROI relationships can easily differ as organizational goals and management strategies differ. Therefore, we argue, it is no longer appropriate to ask, "Does IT lead to productivity enhancement." or "Is the ROI on IT investments large or small or nonexistent? The better question is under what conditions of organizational climate and management choice does IT enhanced productivity result. To illustrate the powerful effect of organizational goals and management strategy on IT-productivity relationships, we examine the twenty year history of two of the largest IT users in the world: the Internal Revenue Service and the Social Security Administration. And we find that these two very similar agencies experienced very different results from massive investments in IT despite sharing a similar production function. There is nothing in micro economics however to explain the different strategies pursed by these managers. Instead we must turn to political and sociological models of organizations to understand the social construction of productivity results.