Applying Data Mining Techniques to Understand the Impact of Information Technology on Organizational Productivity

We explore conditions under which investments in Information Technology (IT) have a statistically significant impact on productivity. Rather than using a traditional analytical technique such as regression, we use two data mining techniques (i.e. regression trees and regression splines) for doing data analysis and integrated their results. Our analysis indicates the following: 1) IT investments have a positive impact on organizational productivity only when IT investments meet certain conditions; and 2) the IT impact is not uniform but varies depending on the amounts invested in other related areas, such as Non-IT Labor, Non-IT Capital, and IT Stock. Thus, our study leads to some suggestions to top managers that organizations should assess the current state of investments in Non-IT Labor, Non-IT Capital, and IT Stock before making any further commitments to invest in IT as this current state partially determines the potential impact of additional investments in IT on organizational productivity.