Productivity Paradox

Productivity Paradox : Implications and Challenges

Introduction

One theory that focuses on the relationship of productivity and information technology is the productivity paradox or the Solow computer paradox . The paradox was developed from the observation , if not aphorism , made by economist Robert Solow that "You can see the computer age everywhere but in the productivity statistics (Greenan et al 2002 ,

. 42 . The objective of this is to evaluate the significance of the paradox in today 's industries . Conditions and constraints to support or contradict the productivity paradox will be determined

from the studies and related literature . At the end of the study , the will be able to discuss the mechanics of the theory and determine its relevance today

Understanding the Paradox

The productivity paradox states that as new information technology is introduced to the business process , there is a tendency for work productivity to diminish (McGovern , 2001 . This contradicts the motivation for technology which is supposed to increase productive competencies . The observations to support the paradox were made based on process and productivity analysis made on the 1970 's focus automation of business processes which have not yielded productivity and at times have been seen as the cause of process lags (Cohen et al . 2004 . If the paradox is true , then technological upgrading can become detrimental to productivity

One of the evidence to support the idea has been the decline in growth disproportionate with investments in information technology since the 1960 's which coincides with the advent of mechanization and digitization of business processes (Berman et al , 200 . Also , computers and information processing equipment represent a very small percentage of capital stock and gross domestic products in general (Cohen et al 2004 . This relates to the founding premise of the paradox that cites is absence in productivity analysis or productivity statistics as originally observed by Solow (Greenan et al , 2004

Developing Solutions

Advocates of information and technology development claim that the paradox was invalid , citing that technology was not the reason for the reduction in productivity but macroeconomic conditions and industrial developments as the main cause (Castells , 2000 . By the late 1990 's , a significant number of economists such as Paul David , Dan Sichel and Erik Brynjolfsson have developed studies to determine the validity of the productivity paradox (Hempell , 2005 . Explanations for the decline in productivity included the need for a technology to be prevalent before its true productivity can be measured . In such a scenario , then late adaptors of a technology , such as less technically driven economies , are less vulnerable to productivity paradoxes because by the time they gain access to technologies , there are already significant software and applications available

For example , In David 's study , he concluded that the lag in productivity in computer automation develops from the lack of channels where the technology can be used . Consider voice over internet protocol communications (VOIP ) from the perspective of information technology industries . The use of IP protocols was traditionally focused on data transmission but with the development...