| Information technology (IT) investments are usually made with expectations that productivity improvements will follow. Thus far, IT investments pose a productivity paradox. The evidence of IT-induced performance improvement is scant, especially in the service and the public sectors. This study is one of the first that reports positive impacts of IT in the public sector. A literature review identified four potential sources of the productivity paradox: poor measurement, mismanagement, lagged effects, and the redistribution across firms. This study examines the measurement, management, and lagged effects explanations for the paradox.; To investigate the impact of IT in public organizations, this study used data for 50 U.S. state governments from 1989 to 1995. The data were collected from various sources including the Bureau of Economic Analysis, the Census Bureau, the National Association of State Information Resource Executives, and Computer Intelligence. Two aspects of IT investments were investigated. First, the study looked at the diffusion of IT in state governments. Secondly, using a model based on the Cobb-Douglas production function, the impacts of state government IT investments on statewide economic performance were estimated.; The analysis of IT diffusion in state governments shows that every aspect of IT in state governments surged during the study period. IT investment in state governments has been augmented steadily, resulting in increased computing power and accessibility to computing facilities.; The analysis of the productivity impact of IT indicates that IT in state governments has a positive impact on statewide economic performance. It also shows that state governments with chief information officers (CIOs) perform better than other states with different information resources management structures. Management structure is an even more critical factor in large states than small states.; The results of the analysis indicate that while the amount of IT is an important factor in enhancing productivity, the way IT resources are managed is also a critical factor in achieving IT's potential. An efficient and centralized IT management structure delivers better performance than other types. Nearly identical results were obtained from models using a traditional market-value based IT measure and a performance-based IT measure. |
