THE PRODUCTIVITY IMPACT OF IT DEPLOYMENT:AN EMPIRICAL EVALUATION OF ATMINTRODUCTION

The service industries in general and financial services in particular have been disproportionatelylarge investors in information technology. However, critics have suggested that the productivityeffects of this investment have been negligible, a serious outcome given the importance of the servicesector in the modern economy. This issue is part of a wider failure of many empirical studies to find arobust empirical association between increasing inputs of information technology capital andmeasured output, the so-called “IT productivity paradox”. While a number of possible explanationshave been advanced for this, it is clear that measurement difficulties attaching to IT inputs areparticularly problematic. This paper seeks to circumvent some of these problems by an examinationof the impact of a single homogeneous embodied IT application, the automatic teller machine (ATM),on productivity. It uses an unbalanced panel of UK building societies over the years 1981-93, aperiod corresponding to the diffusion of the ATM across the sector...