A comparison of approaches to the measurement of IT value

The measurement of information technology (IT) by calculating key ratios of IT intensity and relating them to key ratios of firm performance is compared with a more rigorous approach to cost functions based on microeconomic theory. Both procedures are applied to the same set of data from the banking industry. The results show that reasoning about IT impact based on key ratios may be misleading, especially when the figures are only calculated for a cross-section of the data.<<ETX>>

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