Joined: 10 Apr 2012
Location: United States
Concentration: Technology, Other
WE: Project Management (Telecommunications)
, given: 324
Most pre-1990 literature on businesses’ use of information [#permalink]
25 Aug 2013, 21:58
Most pre-1990 literature on businesses’ use of information technology(IT)—defined as any form of computer-based information system—focused on spectacular IT successes and reflected a general optimism concerning IT’s potential as a resource for creating competitive advantage. But toward the end of the 1980’s, some economists spoke of a “productivity paradox”: despite huge IT investments, most notably in the service sectors, productivity stagnated. In the retail industry, for example, in which IT had been widely adopted during the 1980’s, productivity (average output per hour) rose at an average annual rate of 1.1 percent between 1973 and 1989, compared with 2.4 percent in the preceding 25-year period. Proponents of IT argued that it takes both time and a critical mass of investment for IT to yield benefits, and some suggested that growth figures for the 1990’s proved these benefits were finally being realized. They also argued that measures of productivity ignore what would have happened without investments in IT—productivity gains might have been even lower. There were even claims that IT had improved the performance of the service sector significantly, although macroeconomic measures of productivity did not reflect the improvement.
But some observers questioned why, if IT had conferred economic value, it did not produce direct competitive advantages for individual firms. Resource-based theory offers an answer, asserting that, in general, firms gain competitive advantages by accumulating resources that are economically valuable, relatively scarce, and not easily replicated. According to a recent study of retail firms, which confirmed that IT has become pervasive and relatively easy to acquire, IT by itself appeared to have conferred little advantage. In fact, though little evidence of any direct effect was found, the frequent negative correlations between IT and performance suggested that IT had probably weakened some firms’ competitive positions. However, firms’ human resources, in and of themselves, did explain improved performance, and some firms gained IT-related advantages by merging IT with complementary resources, particularly human resources. The findings support the notion, founded in resource-based theory, that competitive advantages do not arise from easily replicated resources, no matter how impressive or economically valuable they may be, but from complex, intangible resources.
1)The passage is primarily concerned with
(A)describing a resource and indicating various methods used to study it
(B)presenting a theory and offering an opposing point of view
(C)providing an explanation for unexpected findings
(D)demonstrating why a particular theory is unfounded
(E)resolving a disagreement regarding the uses of a technology
2)The passage suggests that proponents of resource-based theory would be likely to explain IT's inability to produce direct competitive advantages for individual firms by pointing out that
(A)IT is not a resource that is difficult to obtain
(B)IT is not an economically valuable resource
(C)IT is a complex, intangible resource
(D)economic progress has resulted from IT only in the service sector
(E)changes brought about by IT cannot be detected by macroeconomic measures
3)The author of the passage discusses productivity in the retail industry in the first paragraph primarily in order to
(A)suggest a way in which IT can be used to create a competitive advantage
(B)provide an illustration of the "productivity paradox"
(C)emphasize the practical value of the introduction of IT
(D)cite an industry in which productivity did not stagnate during the 1980's
(E)counter the argument that IT could potentially create competitive advantage
4)According to the passage, most pre-1990 literature on businesses' use of IT included which of the following?
(A)Recommendations regarding effective ways to use IT to gain competitive advantage
(B)Explanations of the advantages and disadvantages of adopting IT
(C)Information about ways in which IT combined with human resources could be used to increase competitive advantage
(D)A warning regarding the negative effect on competitive advantage that would occur if IT were not adopted
(E)A belief in the likelihood of increased competitive advantage for firms using IT
OA to follow. Appreciate if a GMAT Coach can help me understand the right answer for the first question
Last edited by guerrero25
on 26 Aug 2013, 00:36, edited 1 time in total.