ABSTRACT
This chapter shows that it is possible to understand better the impact of information technology (IT) investment by decomposing it into software, hardware and telecommunication investment. It presents a review of the literature with a brief illustration of the theoretical predictions and the main empirical findings on the relationship between IT technology and productivity. The chapter also presents descriptive empirical evidence on the intensity of investment in hardware, software and telecommunications in a representative sample of more than 4,000 Italian firms between 1995 and 1997 showing how IT investment is affected by industry, geographical and qualitative firm characteristics. It analyses the impact of IT investment on multifactor productivity. The chapter also analyses the effects of IT investment on several intermediate variables such as capacity utilization, new product or process introduction and white collars hiring rates at firm level. It presents several estimates which evaluate the association between IT investment and non-random deviations from the 'efficiency frontier'.
