UNPACKING THE DETERMINANTS OF IS-BUSINESS VALUE: AN INDUSTRY-LEVEL PERSPECTIVE ON THE EFFECT OF ICT INVESTMENTS IN ITALY

ABSTRACT After many years of research on the business value produced by Information Systems, the causal relationship between IS investments and business value remain partly a “grey box”. Specifically, there is limited knowledge on how industry-level productivity is affected by the capability of sectors to absorb IS knowledge. This knowledge gap is critical in the current era where IS are acknowledged to unleash growing economic divides between countries and sectors with different capabilities to create IS business value by absorbing IT-based innovation. In this study, we contribute to disentangle the multifaceted “IS business value” construct by analysing at the industry level the effects that IT spending has on labour productivity and on its components: output growth and input use efficiency. The empirical settings of our analysis are 231 three-digit industries in Italy between 2008 and 2016. We found that IT-spending significantly affects an overall growth in labour productivity that is triggered by a growth in output and a reduction in employment. On one hand, we found that the productivity growth effects due to employment reduction are more visible in sectors with high digital intensity. On the other, we found that in sectors producing information goods (e.g. software, R&D, consulting) IT-spending is associated with an output growth with a lack of a negative impact over employment. Our results confirm that industry is a relevant variable in IS research on business value due to the competitive and product-specific forces at play in an industry that shape the diffusion of IS-related innovation. In this vein, our results suggest that skill-biased technological change, standardization and geographical disaggregation of business process are more likely in sectors with a high digital intensity of operations, but not in sectors producing information goods and services.