The relationship between information technology (IT) and productivity is widely discussed but little understood. Delivered computing-power in the US economy has increased by more than two orders of magnitude since 1970 (figure 1) yet productivity, especially in the service sector, seems to have stagnated (figure 2). Given the enormous promise of IT to usher in "the biggest technological revolution men have known" (Snow, 1966), disillusionment and even frustration with the technology is increasingly evident in statements like "No, computers do not boost productivity, at least not most of the time" (Economist, 1990).
The increased interest in the "productivity paradox," as it has become known, has engendered a significant amount of research, but, thus far, this has only deepened the mystery. Robert Solow, the Nobel Laureate economist, has aptly characterized the results: "we see computers everywhere except in the productivity statistics." Although similar conclusions are repeated by an alarming number of researchers in this area, we must be careful not to over interpret these findings; a shortfall of evidence is not necessarily evidence of a shortfall. In fact, many of the most widely cited aspects of the "paradox" do not stand up to closer scrutiny.
This article summarizes what we know and don't know, distinguishes the central issues from diversions, and clarifies the questions that can be profitably explored in future research. After reviewing and assessing the research to date, it appears that the shortfall of IT productivity is as much due to deficiencies in our measurement and methodological tool kit as to mismanagement by developers and users of IT.
The research considered in this review reflects the results of a computerized literature search of 30 of the leading journals in both information systems and economics[1], as well as discussions with leading researchers in the field. In what follows, I have highlighted the key findings and essential research references.