Topic

The Importance of Software in the IT Investment Mix: Findings based on Australian Data

The complex relationships between information technology (IT) investments and business value have been the focus of intensive research in recent years. Our focus is on the differential contributions of hardware and software capital and their interactions with labor capital.  We analysed industry-level Australian (ABS) data on IT-using industries in the private sector by treating IT hardware and IT software as two distinct classes of IT capital using log-linear Cobb Douglas production function approach. Our findings indicate that the impacts of software are significantly different in comparison with hardware and that the productivity benefits attributable to IT are largely due to the interactions between software and labour inputs. We conclude that software investment is increasingly the key to productivity growth in the IT-using world. Some of implications of the research for managerial complementarities will be discussed.

About Joseph Davis

Director of Language Technologies & Knowledge Management Research Laboratory, School of Information Technologies, University of Sydney, Sydney, Australia

Email: jdavis@it.usyd.edu.au   

Web: http://www.cs.usyd.edu.au/~jdavis/   

Prof. Joseph Davis is the Director of the Language Technologies and Knowledge Management Research Laboratory at the School of Information Technologies, the University of Sydney.  His primary areas of research focus include knowledge management and ontologies, data mining, and the economics of information technologies.