Productivity and the Enactment of a Macro Culture

In this paper, we report the puzzling results of a study which examined IT capital investment and productivity at three of the largest IT user sites in the U.S. for the period 1970-1990: Social Security Adininistration (SSA), Internal Revenue Service (IRS), and the Federal Bureau of Investigation (FBI). Based on detailed IT invesunent, employment, and output data over twenty years, we found that only one agency had achieved significant productivity benefits, a second agency had modest results, and a third agency achieved no results whatever. These results cannot be explained by traditional theories of how productivity is produced. We argue that IT-induced productivity results not simply from strategic choice, nor the operation of the invisible hand in the market place, nor simply from keen managers adjusting their organizations to an "objective" environment. Instead we propose a new theory in which productivity benefits derive from a larger macro-culture enacted by powerful institutions in an organizational field. We extend this analysis to the larger economy and examine how this new theory helps us understand recent claims that IT is finally having positive productivity benefits at the sector level, and also helps us understand how the current fascination with re-engineering and downsizing may be a self-fulfilling prophecy. 1. PRODUCTIVITY: CONCEPT AND MEASURE In many cases input data is not available and is too costly to collect because there are so many different iliputs. The There are several difficulties with the concept and measure most widely used single factor productivity time series in of productivity. The first difficulty is understanding what the U.S. is output per hour, which divides outputs by total productivity is and how it might be measured over interestlabor hours of input to produce an output per hour measure. ing periods of time. The second difficulty is understanding Other measures of productivity attempt to take into account how productivity is produced over interesting periods of the role of other inputs besides labor. Multifactor productime. These difficulties are largely independent solving tivity measures such as the capital-labor index and the the former will not necessarily solve the latter. KLEM (capital, labor, energy, materials and services) index are available for only the manufacturing sector (U.S. The least controversial aspect of productivity research is its Department of Labor 1988). elementary definition as a measure of economic efficiency arrived at by dividing all outputs by all inputs (U.S. DepartAfter these simple initial definitions and measurement ment of Labor 1988). Generally the focus is on units of techniques, controversy is rife. Some well known limitaoutput and input, alid not prices, revenues or costs except tions of productivity research are: where physical unit data is unavailable. Outputs are defined as economic goods and services, and inputs are (1) Natural units. Natural units of output may not be defined as labor, capital, services, knowledge and energy. available. This forces researchers to base the value of When only price or revenue data is available, then deflators outputs on the value of inputs, resulting in permanent are used to adjust for inflation over specified time periods zero productivity growth. Poor or no systematic(usually no longer than a decade). productivity measures exist for sectors and industries