Does Information Technology Lead to Smaller Firms?

Erik Brynjolfsson, Thomas W. Malone, Vijay Gurbaxani and Ajit Kambil
Additional contact information
Thomas W. Malone: Sloan School of Management, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142
Vijay Gurbaxani: Graduate School of Management, University of California, Irvine, California 92717
Ajit Kambil: New York University, New York, New York 10012

Management Science, 1994, vol. 40, issue 12, 1628-1644

Abstract: Many changes in the organization of work in the United States since 1975 have been attributed to the increased capabilities and use of information technology (IT) in business. However, few studies have attempted to empirically examine these relationships. The primary goal of this paper is to assess the hypothesis that investments in information technology are at least partially responsible for the important organizational change, the shift of economic activity to smaller firms. We examine this hypothesis using industry-level data on IT capital and four measures of firm size, including employees and sales per firm. We find broad evidence that investment in IT is significantly associated with subsequent decreases in the average size of firms. We also find that these decreases in firm size are most pronounced two to three years after the IT investment is made.

Keywords: information technology; firm size; downsizing; restructuring; computers (search for similar items in EconPapers)
Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (112)

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.40.12.1628 (application/pdf)

Related works:
Working Paper: Does Information Technology Lead to Smaller Firms? (1991)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:40:y:1994:i:12:p:1628-1644

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().