Why Information Should Influence Productivity

After offering a brief historical overview, this article presents a broad set of hypotheses in an effort to connect information to productivity. There are three contributions from this work. First, it distills observations from a diverse literature as prelude to exploring these theories empirically. Second, it applies two concrete models of information value, relating them to the economic definition of productivity, while considering how network structure influences information flow. Third, examples from an ongoing empirical study illustrate each hypothesis to give it practical significance. Interested readers may also test precise interpretations of these theories in an online simulation environment of networked societies.

[1]  Marshall W. Van Alstyne,et al.  Electronic Communities : Global Village or Cyberbalkans ? , 1996 .

[2]  M. Spence.  Job Market Signaling , 1973 .

[3]  Manfred Kochen,et al.  On the economics of information , 1972, J. Am. Soc. Inf. Sci..

[4]  R. Radner,et al.  Economic theory of teams , 1972 .

[5]  P. Romer.  Increasing Returns and Long-Run Growth , 1986, Journal of Political Economy.

[6]  Z. Griliches.  Research Costs and Social Returns: Hybrid Corn and Related Innovations , 1958, Journal of Political Economy.

[7]  W. Powell,et al.  Interorganizational Collaboration and the Locus of Innovation: Networks of Learning in Biotechnology. , 1996 .

[8]  C. Shapiro,et al.  Network Externalities, Competition, and Compatibility , 1985 .

[9]  A. Chandler,et al.  Regional Advantage: Culture and Competition in Silicon Valley and Route 128 , 1994 .

[10]  B. Kogut,et al.  Knowledge and the Speed of the Transfer and Imitation of Organizational Capabilities: An Empirical Test , 1995 .

[11]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[12]  Martin Suter,et al.  Small World , 2002 .

[13]  D. Teece,et al.  DYNAMIC CAPABILITIES AND STRATEGIC MANAGEMENT , 1997 .

[14]  Murray Milgate,et al.  Allocation, information, and markets : the New Palgrave , 1989 .

[15]  Sanford J. Grossman,et al.  The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration , 1986 .

[16]  Erik Brynjolfsson,et al.  An incomplete contracts theory of information, technology and organization , 1991 .

[17]  M E J Newman,et al.  Identity and Search in Social Networks , 2002, Science.

[18]  Wayne E. Baker,et al.  The Social Structure of a National Securities Market , 1984, American Journal of Sociology.

[19]  S. Winter,et al.  An Evolutionary Theory of Economic Change.by Richard R. Nelson; Sidney G. Winter , 1987 .

[20]  Jay R. Galbraith.  Designing Complex Organizations , 1973 .

[21]  D. Crane.  SOCIAL STRUCTURE IN A GROUP OF SCIENTISTS: A TEST OF THE “INVISIBLE COLLEGE” HYPOTHESIS* , 1977 .

[22]  P. L. Broadhurst.  The interaction of task difficulty and motivation: The Yerkes Dodson law revived. , 1959 .

[23]  S. Rangan.  The Problem of Search and Deliberation in Economic Action: When Social Networks Really Matter , 2000 .

[24]  B. Wernerfelt,et al.  A Resource-Based View of the Firm , 1984 .

[25]  D. North.  Competing Technologies , Increasing Returns , and Lock-In by Historical Events , 1994 .

[26]  Oz Shy,et al.  The Economics of Network Industries , 2002 .

[27]  J. Bain.  Barriers to new competition , 1957 .

[28]  Boyan Jovanovic,et al.  Learning By Doing and the Choice of Technology , 1994 .

[29]  B. Kogut,et al.  What Firms Do? Coordination, Identity, and Learning , 1996 .

[30]  J. Pratt.  RISK AVERSION IN THE SMALL AND IN THE LARGE11This research was supported by the National Science Foundation (grant NSF-G24035). Reproduction in whole or in part is permitted for any purpose of the United States Government. , 1964 .

[31]  S. Winter.  Knowledge and Competence as Strategic Assets , 1987 .

[32]  K. Arrow.  Economic Welfare and the Allocation of Resources for Invention , 1962 .

[33]  Nicholas M. Allix.  Book Review: Communities of Practice: Learning, Meaning, and Identity , 2000 .

[34]  Ephraim F. Sudit,et al.  Productivity measurement in industrial operations , 1995 .

[35]  D. Teece.  Knowledge and Competence as Strategic Assets , 2004 .

[36]  Ronald S. Burt,et al.  Structural Holes: The Social Structure of Competition. , 1994 .

[37]  Linda Argote,et al.  Organizational Learning Curves: A Method for Investigating Intra-Plant Transfer of Knowledge Acquired Through Learning by Doing , 1991 .

[38]  M. Klein.  Information politics , 1985 .

[39]  Jie Wu,et al.  Small Worlds: The Dynamics of Networks between Order and Randomness , 2003 .

[40]  M. Shubik,et al.  A Behavioral Theory of the Firm. , 1964 .

[41]  E. Brynjolfsson,et al.  Computing Productivity: Firm-Level Evidence , 2003, Review of Economics and Statistics.

[42]  R. T. Beaty,et al.  The competitive challenge , 1993 .

[43]  K. Weick.  Small wins: Redefining the scale of social problems. , 1984 .

[44]  P. David.  The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox , 1990 .

[45]  Stephen E. Margolis,et al.  Network externality : an uncommon tragedy , 1994 .

[46]  M. Rothschild,et al.  Increasing risk: I. A definition , 1970 .

[47]  Jon M. Kleinberg,et al.  The small-world phenomenon: an algorithmic perspective , 2000, STOC '00.

[48]  K. R. Conner,et al.  A Resource-Based Theory of the Firm: Knowledge Versus Opportunism , 1996 .

[49]  Stan J. Liebowitz,et al.  The Fable of the Keys , 1990, The Journal of Law and Economics.

[50]  J Swanson,et al.  Business Dynamics—Systems Thinking and Modeling for a Complex World , 2002, J. Oper. Res. Soc..

[51]  Morten T. Hansen,et al.  The Search-Transfer Problem: The Role of Weak Ties in Sharing Knowledge across Organization Subunits , 1999 .

[52]  C. Prahalad,et al.  The Core Competence of the Corporation , 1990 .

[53]  Mark S. Granovetter.  The Strength of Weak Ties , 1973, American Journal of Sociology.

[54]  K. Eisenhardt.  Agency Theory: An Assessment and Review , 1989 .

[55]  E. Brynjolfsson,et al.  Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending , 1996 .

[56]  Thomas H. Davenport,et al.  Book review:Working knowledge: How organizations manage what they know. Thomas H. Davenport and Laurence Prusak. Harvard Business School Press, 1998. $29.95US. ISBN 0‐87584‐655‐6 , 1998 .

[57]  J. Barney.  Is the Resource-Based “View” a Useful Perspective for Strategic Management Research? Yes , 2001 .

[58]  Kevin Crowston,et al.  The interdisciplinary study of coordination , 1994, CSUR.

[59]  J. Stiglitz.  The Contributions of the Economics of Information to Twentieth Century Economics , 2000 .

[60]  Jaak Jurison,et al.  Productivity , 2002, Encyclopedia of Information Systems.

[61]  J. Hirshleifer.  The Private and Social Value of Information and the Reward to Inventive Activity , 1971 .

[62]  Erik Brynjolfsson,et al.  Could the Internet Balkanize Science? , 1996, Science.

[63]  Paul Israel,et al.  The Sources of Innovation , 1990 .

[64]  Steffen Bayer,et al.  Business dynamics: Systems thinking and modeling for a complex world , 2004 .

[65]  W. Arthur,et al.  INCREASING RETURNS AND LOCK-IN BY HISTORICAL EVENTS , 1989 .

[66]  Zvi Griliches,et al.  Productivity, R&D, and Basic Research at the Firm Level in the 1970s , 1985 .

[67]  Mark S. Granovetter.  Economic Action and Social Structure: The Problem of Embeddedness , 1985, American Journal of Sociology.

[68]  Dale A. Stirling,et al.  Information rules , 2003, SGMD.

[69]  George Hendrikse,et al.  The Theory of Industrial Organization , 1989 .

[70]  W. Mitchell,et al.  Coalition Formation in Standard-Setting Alliances , 1995 .

[71]  A. Hargadon.  Organizations in Action:Social Science Bases of Administrative Theory (Book) , 2003 .

[72]  Stanley Wasserman,et al.  Social Network Analysis: Methods and Applications , 1994 .

[73]  M. Castells.  The Internet Galaxy , 2001 .

[74]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[75]  Bill Lehr,et al.  Information technology and its impact on firm-level productivity: evidence from government and private data sources, 1977-1993 , 1999 .

[76]  Stuart E. Madnick,et al.  Why Not One Big Database? Principles for Data Ownership , 1995, Decis. Support Syst..

[77]  Marshall W. van Alstyne,et al.  Valuing Information & Instrumental Goods , 1998, ICIS.

[78]  Jack Hirshleifer,et al.  Where Are We in the Theory of Information , 1973 .

[79]  M. Castells.  The rise of the network society , 1996 .

[80]  Joseph Farrell,et al.  Decentralization, Duplication, and Delay , 1990, Journal of Political Economy.

[81]  J. Pratt.  RISK AVERSION IN THE SMALL AND IN THE LARGE11This research was supported by the National Science Foundation (grant NSF-G24035). Reproduction in whole or in part is permitted for any purpose of the United States Government. , 1964 .

[82]  D. Jorgenson.  Information Technology and the U.S. Economy , 2001 .

[83]  D. Teece.  ECONOMIES OF SCOPE AND THE SCOPE OF THE ENTERPRISE , 1980 .

[84]  Stephen D. Oliner,et al.  The Resurgence of Growth in the Late 1990s: Is Information Technology the Story? , 2000 .

[85]  Wanda J. Orlikowski,et al.  Learning from Notes: organizational issues in groupware implementation , 1992, CSCW '92.

[86]  G. Huber.  Organizational Learning: The Contributing Processes and the Literatures , 1991 .

[87]  B. Kogut,et al.  Knowledge of the Firm, Combinative Capabilities, and the Replication of Technology , 1992 .

[88]  O. Hart,et al.  Property Rights and the Nature of the Firm , 1988, Journal of Political Economy.

[89]  D. Teece.  Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy , 1993 .

[90]  Andrew B. Hargadon,et al.  Technology brokering and innovation in a product development firm. , 1997 .

[91]  Lorin M. Hitt,et al.  Productivity, Business Profitability, and Consumer Surplus: Three Different Measures of Information Technology Value , 1996, MIS Q..

[92]  Samuel Abrams.  Differentiation and integration. , 1996 .

[93]  J. Tirole.  The Theory of Industrial Organization , 1988 .

[94]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[95]  P. Lawrence,et al.  Differentiation and Integration in Complex Organizations , 1967 .

[96]  P. Romer.  Endogenous Technological Change , 1989, Journal of Political Economy.

[97]  J. Stiglitz,et al.  The Architecture of Economic Systems: Hierarchies and Polyarchies , 1984 .

[98]  Thomas M. Cover,et al.  Elements of Information Theory , 2005 .

[99]  K. Arrow.  The limits of organization , 1974 .

[100]  Duncan J. Watts,et al.  Collective dynamics of ‘small-world’ networks , 1998, Nature.

[101]  James G. March,et al.  Learning from samples of one or fewer* , 1991 .

[102]  James D. Adams,et al.  Fundamental Stocks of Knowledge and Productivity Growth , 1990, Journal of Political Economy.

[103]  A. Mas-Colell,et al.  Microeconomic Theory , 1995 .

[104]  Andrew B. Whinston,et al.  Document-centered information systems to support reactive problem-solving in manufacturing , 1995 .

[105]  D. Watts,et al.  Small Worlds: The Dynamics of Networks between Order and Randomness , 2001 .

[106]  Michael X Cohen,et al.  Harnessing Complexity: Organizational Implications of a Scientific Frontier , 2000 .

[107]  Herbert A. Simon,et al.  The Sciences of the Artificial , 1970 .

[108]  Barry M. Staw,et al.  Threat-rigidity effects in organizational behavior: A multilevel analysis. , 1981 .

[109]  Kim B. Clark,et al.  Design Rules: The Power of Modularity , 2000 .

[110]  M. Lynne Markus,et al.  Power, politics, and MIS implementation , 1987, CACM.

[111]  Wanda J. Orlikowski,et al.  Learning from Notes: organizational issues in groupware implementation , 1992, CSCW '92.

[112]  John R. Anderson,et al.  The Transfer of Cognitive Skill , 1989 .