Prevalent in the IT literature is the concept of the productivity paradox. This states that the effects of IT investment seem to show up everywhere except those that measure productivity (firm performance). Owing to the extremely competitive nature of the motor carrier industry, money must be well spent and provide the carrier with performance gains to survive. In this study, two measures of IT spending, physical capital and human capital, are used to examine whether IT investment does indeed affect carrier performance. Performance is measured as a level of firm efficiency (sales/employee). Results are significant and have important implications. The level of physical assets (computers) that a firm uses has a direct and positive impact on firm efficiency. However, the more human capital (programmers) a firm hires to develop software, the worse the efficiency of the firm. This suggests that perhaps motor carriers should invest in off-the-shelf IT packages as opposed to creating their own. Finally, the interaction of the two variables and sales was looked at to determine their effect as firms grow. The interaction of physical IT capital and firm size showed that as the firm grows, the effect of physical IT capital grows, suggesting that it may be an antidote to firm bureaucracy.


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