A Regression Tree Based Exploration of the Impact of Information Technology Investments on Firm Level Productivity

The issue as to whether investments in information technology (IT) contribute significantly to organizational productivity has been of major concern for many years, and various studies have lead to seemingly contradictory results. In this paper, we analyze the relationship between IT investments and firm level productivity using regression trees (RT). Use of this data mining technique represents a novel approach to identifying elements of this relationship as most previous studies have primarily used econometrics-based techniques. While the use of traditional techniques has provided valuable results, our RT-based analysis revealed additional findings that were not identified in the previous studies. For example unlike the econometric-based studies that identify a uniform impact of IT investments on productivity, our RT-based analysis suggests that IT has an impact on productivity only when Non-IT Labor expenses are within the interior interval. Also, even within this range, the impact of IT is not uniform

Knowledge and Productivity in the World's Largest Manufacturing Corporations

I examine the relationship between the characteristics of firm knowledge in terms of capital, diversity and relatedness, and productivity. Panel data regression models suggest that unlike knowledge diversity, knowledge capital and knowledge relatedness explain a substantial share of the variance of firm productivity. Activities based on a set of related technological knowledge are more productive than those based on unrelated knowledge because the cost of co-ordinating productive activities decreases as the knowledge used in these activities becomes integrated efficiently. The contribution of knowledge relatedness to productivity is significantly higher in high-technology sectors than in other sectors.knowledge, productivity, large corporations, knowledge measurement, panel data

Knowledge and Productivity in the World's Largest Manufacturing Corporations Level:Panel Data analysis on Compustat and Patent data

This paper examines the relationship between the characteristics of firm knowledge in terms of capital, diversity and relatedness, and productivity. Panel data regression models suggest that unlike knowledge diversity, knowledge capital and knowledge relatedness explain a substantial share of the variance of firm productivity. Activities based on a related set of technological knowledge are more productive than those based on unrelated knowledge because the cost of co-ordinating productive activities decreases as the knowledge used in these activities is being integrated efficiently. The impact of knowledge relatedness on productivity in high-technology sectors is higher than in other sectors.productivity; intangible assets; market value; panel data

Revisiting the IT Productivity Paradox: A Technology Life Cycle Perspective

In this paper, we revisit the “IT Productivity Paradox,” which refers to the inconclusive relationship between IT investment and performance improvement found in empirical studies. We argue that the cause of the “IT Productivity Paradox” is more than empirical measurement difficulties. Based on a rather comprehensive review of the literature, we identified and contrasted three underlying theoretical perspectives of the empirical studies. We then propose a new theoretical framework toward an in-depth theoretical understanding of the paradox. Developed upon the contingency approach, the proposed framework considers the stages of technology life cycle. The framework not only can provide useful guidance for practicing managers but also potentially can resolve the “IT Productivity Paradox,” hence making a significant contribution to the literature

Knowledge and productivity in the world's largest manufacturing corporations

This paper develops a model linking firm knowledge with productivity. The model captures three characteristics of firm knowledge (capital, diversity and relatedness) that are tested on a sample of 156 of the world’s largest corporations. Panel data regression models suggest that unlike knowledge diversity, knowledge capital and knowledge relatedness explain a substantial share of the variance of firm productivity. Relatedness matters because it lowers coordination costs between heterogeneous activities. Consequently, the traditional econometric specification has repeatedly underestimated by 15 percent the overall short-run contribution of intangible assets to firm productivity. This underestimation becomes fiercer in high-technology sectors

Corporate R&D and Firm Efficiency: Evidence from Europe’s Top R&D Investors

The main objective of this study is to investigate the impact of corporate R&D activities on firms' performance, measured by labour productivity. To this end, the stochastic frontier technique is applied, basing the analysis on a unique unbalanced longitudinal dataset consisting of 532 top European R&D investors over the period 2000–2005. R&D stocks are considered as pivotal input in order to control for their particular contribution to firm-level efficiency. Conceptually, the study quantifies the technical inefficiency of a given company and tests empirically whether R&D activities could explain the distance from the efficient boundary of the production possibility set, i.e. the production frontier. From a policy perspective, the results of this study suggest that – if the aim is to leverage companies' productivity – emphasis should be put on supporting corporate R&D in high-tech sectors and, to some extent, in medium-tech sectors. By contrast, supporting corporate R&D in the low-tech sector turns out to have a minor effect. Instead, encouraging investment in fixed assets appears vital for the productivity of low-tech industries. However, with regard to firms' technical efficiency, R&D matters for all industries (unlike capital intensity). Hence, the allocation of support for corporate R&D seems to be as important as its overall increase and an 'erga omnes' approach across all sectors appears inappropriate.corporate R&D, productivity, technical efficiency, stochastic frontier analysis

Innovation dynamics and the role of infrastructure

This report shows how the role of the infrastructure – standards, measurement, accreditation, design and intellectual property – can be integrated into a quantitative model of the innovation system and used to help explain levels and changes in labour productivity and growth in turnover and employment. The summary focuses on the new results from the project, set out in more detail in Sections 5 and 6. The first two sections of the report provide contextual material on the UK innovation system, the nature and content of the infrastructure knowledge and the institutions that provide it. Mixed modes of innovation, the typology of innovation practices developed and applied here, is constituted of six mixed modes, derived from many variables taken from the UK Innovation Survey. These are: Investing in intangibles Technology with IP innovating Using codified knowledge Wider (managerial) innovating Market-led innovating External process modernising. The composition of the innovation modes, and the approach used to compute them, is set out in more detail in Section 4. Modes can be thought of as the underlying process of innovation, a bundle of activities undertaken jointly by firms, and whose working out generates well known indicators such as new product innovations, R&D spending and accessing external information, that are the partial indicators gathered from the innovation survey itself

The Location of Japanese MNCs Affiliates: Agglomeration Spillovers and Firm Heterogeneity

This study examines the determinants of location choices of foreign affiliates by manufacturing Japanese firms, using a new data set that matches parents and their affiliates created over the years 1995-2003. The analysis is based on new economic geography theory and thus focuses on the effect of market and supplier access, as well as production and trade costs. Our interest is twofold. First, we investigate the importance of agglomeration and spillover effects on the firms' decision through the use of proxies relating to the presence of Japanese affiliates in the host countries as well as to that of Japanese multinational firms at home. Overall, our results confirm the economic importance of information sharing and network effects both at home and in the host country beside traditional determinants pertaining to production and transaction costs and access and supply access. Second, we explore whether the effects of key determinants of locational choice vary substantially depending on the characteristics of the investing firm and the plant. We find less productive and smaller parents to be more likely to create an affiliate in China rather than in Western Europe or an OECD country. Moreover less productive firms appear to be more sensitive to distance-related costs and low institutional quality while being more responsive to the presence of Japanese firms and JETRO presence in the host country.