Information technology, organizational change and firm productivity: A panel study of complementarity effects and clustering patterns in Manufacturing and Services

Organizational complementarities are an essential factor in the process of creating business value from information technology (IT) investments. Organizational change (OC) is an important complementarity. This paper investigates complementarities between IT capital and OC initiatives of the firm. It analyzes the productivity impact of different clusters of IT and OC in the manufacturing and services sectors of the economy. Three dimensions of OC are studied: process, structure, and boundary changes. Two distinct econometric approaches are applied to a unique and detailed sample of 32,619 firm-level observations in the Netherlands for the period 1994-2006. The results reveal that the productivity effect of IT significantly increases when technology investments are accompanied by relevant organizational changes. The observed complementarity effects between IT and OC are stronger for services than for manufacturing firms. The effects become stronger if different types of change are combined with each other and form clusters. In contrast to IT capital, non-IT capital and OC exhibit a substitutability relationship. As to another finding of the research, IT seems to play a dual role with respect to change: generating or stimulating it and complementing or supporting it. The first role is more dominant among manufacturing, while the second is among services firms.