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Abstract:
The performance impacts of information technology (IT) investments in organizations have received considerable attention in recent years. In this research, we investigate the cost factors that are affected by such investments. We analyze a data set containing the information technology budgets of over 400 large and mediumsized U.S. corporations. We find that higher IT investments are associated with lower average production costs, lower average total costs, and higher average overhead costs. We also find that larger companies spend more on information technology as a percentage of their revenues than smaller companies. We do not find any evidence that information technology reduces labor costs in organizations. We explain our findings, which are often counterintuitive but interesting, using basic microeconomic theory of the firm.
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Notes on contributors
Sabyasachi Mitra
Sabyasachi Mitra is an Assistant Professor at the Dupree School of Management at the Georgia Institute of Technology. His research interests include strategic information systems, the economic impacts of information technology, software outsourcing, and telecommunications. His education includes a Ph.D in information systems from the University of Iowa, and a B.Tech. in mechanical engineering from the Indian Institute of Technology, India.
Antoine Karim Chaya
Antoine Karim Chaya is a Ph.D candidate at the Dupree School of Management at the Georgia Institute of Technology. His education includes an M.S. in management from Georgia Tech, and a B.S. in civil engineering from the American University of Beirut. His research interests are focused on the economic impacts of information technology, justification of information technology expenditures, and strategic information systems.
