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Understanding Budgets, Investments, and Productivity of IT vis-à-vis Other Resources Using Partial Adjustment Models
Akhilesh Chandra, The University of Akron
Nirup M Menon, University of Texas at Dallas
Birendra (Barry) K Mishra, University of California Riverside
ABSTRACT. This paper examines the budgets of IT and four other input factors. These five input factors differ from each other in business uncertainty, environmental instability, innovation index, and product life cycle, so that their productivity impact is expected to differ significantly. We hypothesize an adaptive relationship between past and current budgets, and past and current investments for these input factors. The adaptive model, based on a partial adjustment model, is used to reveal the productivity expected by the central budgeting authority. The results show a distinct difference in patterns between budgeted and actual spending across input categories. The productivity contribution for IT differs from its realized productivity reported in literature. These results signal a need for formal research for the innovative design of budgets by incorporating productivity expectations, variable fiscal periods, and flexible targets to account for variation across input factors.
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