Our Motivation: Why doesn't the latest technology - be it computers in the 1980's or generative AI today - spark measurable productivity gains as soon as it is adopted?
Brynjolfsson and Hitt introduce the notion of complementary organizational investments to explain why productivity gains don't automatically follow from technology investments and why there is oftentimes a lag in observable effects.
Abstract: We explore the effect of computerization on productivity and output growth using data from 527 large U.S. firms over 1987–1994. We find that computerization makes a contribution to measured productivity and output growth in the short term (using 1-year differences) that is consistent with normal returns to computer investments. However, the productivity and output contributions associated with computerization are up to 5 times greater over long periods (using 5- to 7-year differences). The results suggest that the observed contribution of computerization is accompanied by relatively large and time-consuming investments in complementary inputs, such as organizational capital, that may be omitted in conventional calculations of productivity. The large long-run contribution of computers and their associated complements that we uncover may partially explain the subsequent investment surge in computers in the late 1990s.
Reference:
Brynjolfsson, E., & Hitt, L. M. (2003). Computing productivity: Firm-level evidence. Review of economics and statistics, 85(4), 793-808.