IT Productivity Paradox - A Duopoly Prospective

摘要

Over the last two decades extensive empirical studies have been conducted on the, contribution of information technology (IT) to productivity and other measures of firm performance. However, few theoretical studies have attempted to explain the contingencies under which IT investments may or may not be valuable to a firm in a competitive market. This research proposes a duopoly competition model to study the impacts of IT investments on firm productivity. We show that in a duopoly market, in order for firm productivity to benefit from IT investments, in addition to the. condition under monopoly that its fixed cost has to be sufficiently large in relation to its market size, market sensitivities are also important factors. Moreover, the price sensitivity has a positive impact on the effect of IT investments on productivity and quality sensitivity has a negative impact.