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.