Technical Report A role of investment in intangibles : How can IT make it?

Shinozaki, Akihiko

Description
The purpose of this paper is to demonstrate that the Japanese economy has fumbled their chance to reap the benefits of investment in information technology due to a reluctance to carry out drastic corporate reforms in business processes and human resource management associated with the introduction of new technology. For this purpose, we first review Solow’s productivity paradox and the new economy in the U.S., and then we compare these with the Japanese economy based on growth accounting analysis and an estimation of production function models. On top of that, we illustrate a series of firm-level questionnaire surveys to examine the decisive role of investment in intangibles, i.e., reforming organizational structures and human resource management, in line with IT investment. These analyses yield two observations. First, Japan’s investment in IT has been stagnant over the last two decades in spite of its potential to contribute to productivity improvement and consequent economic growth. Second, there is a strong complementary relationship between drastic corporate reforms and positive outcomes from IT investment, which Japanese firms have been fumbling. The results of this research suggest that the inertia of Japan’s integrated corporate system persists in the midst of innovation in information technology. Therefore, the Japanese private business sector needs to make an intense effort into investing in intangibles, i.e., a drastic redesign of business processes and human resource management in order to achieve the maximum effect of investments in information technology.
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http://catalog.lib.kyushu-u.ac.jp/handle/2324/1661974/InfoCom_DP_02_201507.pdf

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