Understanding the information technology investment thresholds for productivity growth: Manufacturing vs. Service industries

Abstract

Information Technology investment is generally considered an enabler of a firm's productivity growth. However, the phenomenon "productivity paradox" indicates that investment in information technology is not positively associated with financial performance, even though there have been debates as to whether this phenomenon is actually valid or not. In this study, we explore the different roles of IT for increasing productivity in manufacturing and service industries using the data mining method called Waikato Environment for Knowledge Analysis (Weka). We found that there exist both similarities and differences between the two industries. The level of investment in IT stock for a firm must exist between upper and lower thresholds. Furthermore, the role of Chief Information Officer (CIO) is addressed, as well as the role of E-learning Systems associated with productivity in the service industry. Finally, the vulnerability of small businesses to the IT productivity paradox is discussed.