Before it becomes ubiquitous which gives early

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before it becomes ubiquitous which gives early adopters some time to use it while others do not, thus reaping strategic rewards if they succeed 7.4 PHASE 4: DECREASED PRICES • firms transform much of productivity gains through IT into price cuts • lower prices as cost of production is lower 7.5 PHASE 5: PRODUCTIVITY DISAPPEARS nominal picture (individual firm): sales in monetary terms must be lower than before IT adoption as prices of unit have decreased macro-economic level: inadequate GDP and other deflators may be to inaccurate in helping reflect true gains in productivity, especially because much comes through software etc 8. DISTINGUISHING BETWEEN PRODUCTIVITY AND STRATEGY vital difference between strategic advantage & productivity: although investment can yield great strategic benefits that result out of great productivity 9. THE MECHANICS OF THE MODEL most important factor to measure: contribution of IT to gains of labour productivity 10. CONCLUSION • studies of IT productivity have produced inconclusive results • difficulties in measuring productivity gains + firm productivity • further research needed: definition of IT resources and its pricing by government agencies • corporate boards of director have long given up expecting a detailed return on investment calculation for investment in IT LP = labour productivity Cap = total non-IT expenditures between year n+1 and n IT = IT investment between year n+1-d and year n-d (time lag d as it takes time for IT to yield fruit) b1 = tells how much IT investments contributed to labour productivity btw n and n+1 years
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