IT AND PRODUCTIVITY IN U.S. MANUFACTURING: DO COMPUTER NETWORKS MATTER?

The link between information technology and productivity is clear. Yet how computers affect productivity is not well understood. Ours is the first study using data for approximately 30,000 U.S. manufacturing plants to examine the effect of computer networks on productivity. We find a positive and significant relationship between computer networks and plant labor productivity. Plants with lower productivity in earlier periods are also more likely to have a computer network, supporting the hypothesis that plants use networks to catch up. The positive network effect remains significant when we account for endogenous computer networks. (JEL L6, O3)