The Productivity Paradox Revisited: Its Implications and Research Issues

Abstract

Information technology (IT) investments in the public and private sector are made with an expectation that productivity improvement will follow. We do have a bunch of theories to expect this. However, a review of the literature shows that the empirical evidence of productivity gain is scant, especially in the public sector. Understanding the nature of the relationship between IT investment in the public sector and its impact will help us to make better investment decisions and better use of the technology. This paper investigates the reasons for the productivity paradox in terms of redistribution, poor performance measure, lagged effect, and management issues. Four sources of productivity paradox are discussed to understand the characteristics of each problem. The use of larger and representative samples, creation of new performance measures to capture the diverse effects of IT, and explicit consideration of lagged effect of IT in the research design are suggested as future research issues.