US firms get more for their IT bucks

Businesses that invest in IT reap significant productivity gains, according to researchers at the London School of Economics, but how the technology is used, and how the business is organised is just as important.

The researchers evaluated data from more than 7,500 companies in the UK. They found that US-owned firms in the UK not only use more ICT than both domestic firms and other multinationals, but they also use it more effectively.

When a US-owned firm doubles its IT spend, it tends to see productivity gains of around five per cent, the researchers say. For domestic firms, the same increase in outlay only leads to a productivity increase of four per cent.

The LSE contends that this is because US firms are better managed than local UK firms, and that the structure of the companies is "conducive to getting the most out of ICT", according to the university's press material.

The LSE researchers say that there are signs that more US-style business practices are being adopted in the UK and across Europe, and argue that the cultural barriers should not be overstated because of the potential benefits.

The study, led by Professor John Van Reenen from the LSE's Centre for Economic Performance, was carried out in tandem with the Office of National Statistics (ONS), and was sponsored by the DTI.

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