Benchmarking the IT productivity paradox: Recent evidence from the manufacturing sector

The production of information services is modeled using Data Envelopment Analysis (DEA) to assess the impact of information technology (IT) on productivity within the manufacturing sector. The performance issues of interest include: (1) investigating the relationship between resource allocation of IT budgets and costs such as labor (the inputs) to productivities achieved (the outputs); (2) benchmarking the relative IT-business value created in this manufacturing sector. These issues are examined by using performance data collected from Compustat™ databases and Information Week™ (IW) surveys of corporate IT executives. The results show that, through scale efficiencies, even efficient firms can improve their performance by reducing certain investments. Overall characteristics of efficient firms are provided so that other firms may emulate them in an effort to achieve benchmarked performance levels.