The Impact of Information Systems Investment and Management on Business Performance in Greece

The impact of information and communication technologies (ICT) investment on business performance has been a major research subject for long time. Until the mid 1990s there was little empirical evidence of a positive and statistically significant relation between ICT investment and business performance (ICT Productivity Paradox). Subsequent research, conducted mainly in a few highly developed countries, provided some empirical evidence of a statistically significant positive contribution of ICT investment to some measures of business performance, which increases if ICT investment is complemented by ’co-investments’ that create some complementary ‘intangible assets’, such as new work practices, business processes, organizational structures and skills. In this paper is presented the first study of the impact of information systems (IS) investments on business performance in Greece, based on firm-level data collected through a questionnaire-based survey in cooperation with the Federation of Greek Industries. In this study we also examine whether there is complementarity between IS investment and a set of IS management factors. It is concluded that in Greece IS spending by firms as a percentage of their sales revenue is lower than in the highly developed countries. Also, using econometric models based on the Cobb Douglas production function, we conclude that IS investments in Greece make a positive and statistically significant contribution to firm output and labour productivity, but not to the return on assets. Moreover it was found that the average marginal productivities of ICT capital and ICT labour expenses in Greece are higher than in the highly developed countries; also they are much higher than the average marginal productivities of the non-ICT capital and the non-ICT labour expenses respectively. Finally it was found that there is complementarity between IS investment and the examined set of IS management factors with respect to firm output and labour productivity; therefore the combination of IS investment with these IS management factors results in additional increase of firm output and labour productivity beyond the individual effect of IS investment.