Understanding Information Technology Complementarities Using an Augmented Endogenous Growth Framework

The complex relationships between information technology investments and organizational practices have been the focus of intensive research in recent years. The research focus appears to have shifted to investigating the effects of various organizational practices and their interactions with information technology capital. There also is emerging evidence of recent emphasis on organizational factors and a greater shift toward IT complementarities in which value addition is linked to combining complementary organizational practices with IT investments. In this paper we focus on the contributions of IT use and organizational practices and their interactions. We use firm-level data to extend previous studies in three ways: (1) by using a large sample covering 3,299 firms spanning 11 industries, (2) by focusing on a large number of organizational practices, and (3) by augmenting the endogenous growth accounting framework with a data mining technique. Our findings indicate that the set of interrelated organizational practices that complement positively to IT use is different from the set of practices hindering IT use. We conclude that IT complementary factors that positively affect productivity growth do not necessarily have a reverse effect when they are reduced or removed. It appears that some organizational factors have asymmetrical effects on growth.