Computing Productivity: Firm-Level Evidence

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Operations, Information and Decisions Papers
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Databases and Information Systems
Other Computer Sciences
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Brynjolfsson, Erik
Hitt, Lorin M
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We explore the effect of computerization on productivity and output growth using data from 527 large U.S. firms over 1987–1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using 1-year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to 5 times greater over long periods (using 5- to 7-year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.

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2003-11-01
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