Conference Paper

Organizational change and productivity growth: an empirical analysis of the Italian insurance industry.

Conference: Proceedings of the 11th European Conference on Information Systems, ECIS 2003, Naples, Italy 16-21 June 2003
Source: DBLP
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Available from: Paolo Neirotti, Oct 04, 2015
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    ABSTRACT: The "productivity paradox" of information systems (IS) is that, despite enormous improvements in the underlying technology, the benefits of IS spending have not been found in aggregate output statistics. One explanation is that IS spending may lead to increases in product quality or variety which tend to be overlooked in the aggregate statistics, even if they increase output at the firm-level. Furthermore, the restructuring and cost-cutting that are often necessary to realize the potential benefits of IS have only recently been undertaken in many firms. Our study uses new firm-level data on several components of IS spending for 1987-1991. The dataset includes 367 large firms which generated approximately 1.8 trillion dollars in output in 1991. We supplemented the IS data with data on other inputs, output, and price deflators from other sources. As a result, we could assess several econometric models of the contribution of IS to firm-level productivity. Our results indicate that IS spending has made a substantial and statistically significant contribution to firm output. We find that the gross marginal product (MP) for computer capital averaged 81% for the firms in our sample. We find that the MP for computer capital is at least as large as the marginal product of other types of capital investment and that, dollar for dollar, IS labor spending generates at least as much output as spending on non-IS labor and expenses. Because the models we applied were similar to those that have been previously used to assess the contribution of IS and other factors of production, we attribute the different results to the fact that our data set is more current and larger than others explored. We conclude that the productivity paradox disappeared by 1991, at least in our sample of firms.
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    ABSTRACT: This paper investigates the impact of IT investments and worker composition on the productivity of life insurance companies. The majority of previous IT productivity studies follow a technological imperative, hypothesizing a direct relationship between higher IT investments and increased productivity. This paper shifts the focus toward the organizational imperative, which views returns on IT investments as a result of the alignment between technology and other critical management choices. Specifically, the study focuses on the alignment between IT investments and worker composition, measured in terms of relative numbers of clerical, managerial, and professional positions to the total number of employees. Hypotheses are tested using a data set compiled over a 10-year period for 52 life insurance companies. With respect to prior research, the study is novel in its adoption of a model of productivity that accounts for both separate and combined effects of IT investments and worker composition. Premium income per employee and total operating expense to premium income are used as indicators of productivity. Study findings show that increases in IT expenses are associated with productivity benefits when accompanied by changes in worker composition. Life insurance companies that have decreased their proportion of clericals and professionals while at the same time investing in IT have experienced productivity improvements. On the other hand, companies decreasing their proportion of managers while investing in IT are found to have reduced productivity.
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