Wired for Innovation

Starting in 1995, productivity growth took off in the U.S. economy. In Wired for Innovation,Erik Brynjolfsson and Adam Saunders describe how information technology directly or indirectly created the lion's share of this productivity surge, reversing decades of slow growth. They argue that the turnaround in productivity reflects the delayed effects of the massive investments in business processes accompanying the large technology investments since the late 1990s. Companies with the highest level of returns to their technology investment did more than just buy technology: they invested in organizational capital to become digital organizations. Brynjolfsson and Saunders examine the real sources of value in the emerging information economy, including intangible inputs and outputs that have defied traditional metrics. For instance, intangible organizational capital is not directly observable on a balance sheet but amounts to trillions of dollars of value. Similarly, such nonmarket transactions of information goods as Google searches or Wikipedia edits are an increasingly large share of the economy yet virtually invisible in the GDP statistics. The authors, drawing on work done at MIT and elsewhere, show how to better measure the value of technology in the economy. They describe new methods that don't treat technology as just another type of ordinary capital investment but also measure complementary investments-including training and consulting-and the value of product quality, timeliness, variety, convenience, and new products. Innovation continues through booms and busts; this book provides a crucial guide for policy makers and economists who need to understand how information technology is transforming the economy and where it will create value in the coming decade.