Stepping into the modern world of business and economics, Information Technology (IT) has emerged as a game-changer, standing shoulder-to-shoulder with traditional workforce and financial resources. This transformation has brought IT into the spotlight, making its real-world impact on business success and economic health a topic of keen interest. Understanding the real value of IT in business terms has become crucial for those who make decisions and shape policies.
However, understanding IT’s true business worth is muddled by an enduring puzzle known as the ‘productivity paradox’ of IT. This puzzle suggests that despite pouring money into IT, companies and countries don’t always see a clear boost in their overall productivity or performance. This puzzling situation, a hot topic in the 1980s, thought to be resolved by the mid-1990s, has recently come back into the limelight. The latest findings indicate that this paradox still exists, urging both well-established and emerging economies to rethink their IT strategies.
The research by Professor Winston Lin, Professor Yueh Chen, and Professor Shih-Sian Jhang, featured in the Asia Pacific Management Review, employs a detailed and multifaceted method to tackle these complex issues. The team used innovative approaches, known as one-equation and two-equation Partial Adjustment Valuation methods, to develop ten distinct research models. Their method, using the Box-Tidwell transformation function, aims to clearly show the desired results and bridge the understanding gap about how IT interacts with key economic indicators like unemployment and inflation.
In a special interview, Professor Lin clarifies, “The idea behind the productivity paradox of IT is that the large investments made in IT don’t always correlate with major improvements in either overall productivity or company performance. This has been a source of confusion and debate among business leaders, policymakers, and researchers since the 1980s, and it’s an issue that we thought had disappeared by the mid-1990s.”
The findings of the study unravel a subtle yet complex relationship between IT investments and economic factors. They discovered that the benefits of investing in IT depend heavily on how well other supportive resources are utilized and differ greatly from one economy to another. The team also identified a dynamic of cooperation and replacement between IT, unemployment, and inflation rates, showing that these relationships vary based on each country’s unique economic situation and available resources, challenging the idea that one strategy fits all in maximizing IT’s economic benefits.
Professor Lin further notes, “Adding to the complexity of determining IT’s business value is the long-standing debate over the productivity paradox of IT, where huge investments in IT don’t necessarily translate into significant improvements in overall productivity or company performance.”
In summary, the research by Professor Lin, Professor Chen, and Professor Jhang provides crucial insights into the sophisticated play of IT investment, unemployment, and inflation in shaping economic performance. It not only highlights the ongoing mystery of the IT productivity paradox but also paves the way for future studies in this area, underscoring the need for a deeper and more nuanced understanding of these relationships in our rapidly evolving global economy.
Lin, Winston & Chen, Yueh & Jhang, Shih-Sian. (2023). The effects of unemployment and inflation rates on the business value of information technology and economic performance: The partial adjustment valuation approaches. Asia Pacific Management Review. Vol. 28 (December 2023), 371-389 DOI: https://doi.org/10.1016/j.apmrv.2022.12.005
About the Authors
Dr. Winston T. Lin, Professor of Operations Management and Strategy in the School of Management at The State University of New York at Buffalo, New York, received his Ph.D. from Northwestern University, Evanston, Illinois, U.S.A. His current research interests are in the areas of operations management, Information systems, production economics, and business forecasting. He has published 104 articles, including 22 refereed proceedings and 82 journal articles in leading journals. He also has published two scholarly books. He has presented 108 papers at national and international conferences. He has received numerous significant research grants and three best paper awards in 2001, 2013, and 2015. He was a recipient of the Exceptional Scholar/Sustained Achievement Award from The State University of New York at Buffalo in 2004, a recipient of the 2018 Albert Nelson Marquis Lifetime Achievement Award granted by the Marquis Who’s Who Publications Selection Board to recognize his achievements of career longevity and demonstrations of unwavering excellence in his chosen fields; and a Pinnacle Lifetime Achiever in the Field of Higher Education, granted in 2019 by the Continental Who’s Who “dedicated to the recognition of excellence”. Email: email@example.com.
Dr. Yueh H. Chen received her Ph.D. at The State University of New York at Buffalo. She is a Professor of Finance at National Sun Yat-sen University, Kaohsiung, Taiwan. She has published papers in the Journal of International Money and Finance, Resources and Energy, Journal of Forecasting, The Financial Review, Applied Economics, The International Journal of Finance, Multinational Finance Journal, Journal of Academy of Business and Economics, Asia Pacific Management Review, International Journal of Production Economics, European Journal of Operational Research, Journal of Business Research, etc. She has received several significant research grants and served on several important administrative positions such as Department Chair, Associate Dean of the College of Management, Vice President of the University Student Affairs, and so on. Email: firstname.lastname@example.org.
Dr. Shih-Sian (Sherwin) Jhang, Assistant Professor of Finance in the College of Management at National Sun Yat-sen University, Kaohsiung, Taiwan, received his Ph.D. from the School of Management at The State University of New York at Buffalo, Buffalo, N.Y. He has published papers in Omega and Asia Pacific Management Review. His current research areas include Operations Management, Finance, and Supply Chain Management. Email:email@example.com.