Information Technology, Organisational Change and Productivity Growth: Evidence from UK Firms

We examine the relationships between productivity growth, IT investment and organisational change (∆Ο) using UK firm data. Consistent with the small number of other micro studies we find (a) IT appears to have high returns in a growth accounting sense when ∆Ο is omitted; when ∆Ο is included the IT returns are greatly reduced, (b) IT and ∆Ο interact in their effect on productivity growth, (c) non-IT investment and ∆Ο do not interact in their effect on productivity growth. Some new findings are (a) ∆Ο is affected by competition; (b) US-owned firms are much more likely to introduce ∆Ο relative to foreign owned firms who are more likely still relative to UK firms; (c) our predicted measured TFP growth slowdown for firms who are not doing ∆O and/or are in the early stages of IT investment compare well with the macro numbers documenting a UK measured TFP growth slowdown.