Unveiling the Determinants of IT Business Value: An Industry-Level Analysis on the Role of the Information-Based Nature of the Product

Abstract

Despite predictions that information technology (IT) investments would have a transformative effect on industry structures, little empirical research has compared the value generated by IT investments across sectors. This study theorizes and tests which component of value - output growth or input reduction - prevails at the industry level by analyzing the effects of IT investments on labor productivity. Results for 231 industries between 2008 and 2019 show that IT investments affect labor productivity growth. However, this effect has different drivers, depending on the industry. IT investments in industries specialized in information goods lead to output growth but to a reduction in labor input and output in other sectors. Taken together, the results confirm that industry is a relevant variable in IT business value research and raise policy implications about the structural divergence that IT investments are creating between sectors.