Productivity & information and communication technology (ICT)-The explanations behind the paradox of ICT

The study examines the link between investments in Information and Communication Technology (ICT) and productivity. In the literature, this relationship has been questioned. This paper reviews the research on the relationship between productivity and investment in ICT and seeks to understand the explanations behind the paradox of ICT. By classifying each study by its level of analysis (country, sector, company and project), the review of the literature put into perspective the main evidence of research in the field. From this exercise, a number of conclusions are drawn. First, although the link between ICT and productivity can sometimes be difficult to prove summary empirically, it seems increasingly clear in the literature that this link exists and manifests itself in the direction expected. On the other hand, despite the obvious potential for value creation of information technologies, it seems that their effect can be felt only in the presence of additional investments, including in human capitals and restructuring of knowledge and process. These evidences are drawn from studies at the micro level (company and project) that have allowed us to understand the interactions and forces and to identify investments in ICT as a necessary but not sufficient f or growth of productivity.

The second section provides an overview of the situation in Mumbai in terms of investment in ICT. The first observation is that Mumbai shows a marked delay in this type of investment, which could explain its poor performance in terms of growth of labour productivity. Then, by decomposing the ratio of investment in ICT on the number of workers, it is possible to identify sources of delay investment. The results show that the main obstacle of Mumbai on its investments is its level of wealth that is at a lower level than in India and Bangalore in particular. This finding, although interesting, does not provide a solution because wealth depends in part on investments in ICT and investments depend on wealth. A second analysis is done and looking to see if Mumbai's industrial structure may be one reason that explains the delay of investment. Indeed, if Mumbai specialises in areas where the needs for ICT are smaller, it is quite normal that the overall level of investment is lower than other regions specialised in sectors intensive ICT. However, according to our results, the Mumbai industrial structure explains in the best case, a small part of the gap between investments in India and Mumbai. This leaves a significant amount of uncertainty surrounding the key reasons behind the investment in Mumbai and provides additional motivation for that particular attention be paid to the case of Mumbai.