ᅠᅠMost 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 1980s, 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 1980s, 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 1990s 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. ᅠᅠBut 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 RC38000-01.02 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 RC38000-03.02 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 RC38000-02.02 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 RC38000-06.02 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 5 RC38000-04.02 5. Which of the following best describes the content of the first paragraph? (A) It presents two explanations for the success of IT. (B) It provides evidence that decreases in productivity will continue. (C) It presents reasons for a decline in productivity. (D) It demonstrates the effect IT has had on productivity. (E) It contrasts views concerning the degree of IT's success. 6 RC38000-05.02 6. The passage suggests that the recent study of retail firms discussed in the second paragraph supports which of the following conclusions regarding a firm's competitive advantage? (A) Human resources alone are more likely to contribute to competitive advantage than is IT alone. (B) Human resources combined with IT are more likely than human resources alone to have a negative effect on competitive advantage. (C) Human resources combined with IT often have a negative effect on competitive advantage. (D) IT by itself is much more likely to have a positive effect than a negative effect on competitive advantage. (E) The positive effect of IT on competitive advantage increases with time. 7 RC38000-07.02 7. The author of the passage implies that toward the end of the 1980s, some economists described which of the following as a “ productivity paradox ”? (A) Investments in IT would not result in increases in productivity until the 1990s. (B) Investments in IT did not lead to expected gains in productivity. (C) Productivity in the retail industry rose less rapidly than did productivity in other industries. (D) The gains in productivity due to the introduction of IT were not reflected in macroeconomic measures of productivity. (E) Most gains in productivity occurred in the service sector and were therefore particularly difficult to measure. 8 RC38000-08.02 8. According to the passage, the recent study of retail firms discussed in the second paragraph best supports which of the following assessments of IT's potential? (A) Even when IT gives a firm a temporary competitive advantage, that firm is unlikely to continue to achieve productivity gains. (B) The competitive advantages conferred by a firm's introduction of IT are outweighed by IT's development costs. (C) A firm's introduction of IT is less likely to limit its ability to achieve productivity gains than to enhance that ability. (D) Although IT by itself is unlikely to give a firm a competitive advantage, IT combined with other resources may do so. (E) Although IT by itself is unlikely to give a firm a competitive advantage, a firm that does not employ IT cannot achieve a competitive advantage.

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Most pre-1990 literature on businesses' use of information technology

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anish777

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20 Jun 2023, 08:07

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Hi experts
I want to understand in detail as why option C is the right answer choice for Q1 ? I have marked ans C as I felt that the author was more inclined towards providing a solution to the apparent paradox, rather than providing a different opinion ( as in B).
At the same time, the author did put forward a theory ( the beliefs of a particular community regarding technology in business in 1980s). He mentioned the point of the people who actually advocated this belief and then finally he mentioned a differing view, which in turn, resolves the paradox.
Is my analysis correct or there is something else to this that I should keep in mind ?
Thanks

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22 Jun 2023, 23:07

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anish777

The most important thing here is that, as you've said, C more accurately describes the purpose of the passage. However, we can also eliminate B as definitively wrong. First, it's not clear that anything in paragraph 1 constitutes a theory. The first sentence just says that people were optimistic, and from there the passage dives into the central problem. As for the second part, it isn't an opposing view to the optimism in p1. Rather, it's an explanation of the paradox that cropped up.

Make sure that your criteria for selection go beyond "I can find a part of the passage that seems to fit with this." Rather, the real question is "Does this accurately describe the scope and intent of the passage?" Ideally, the right answer sounds like something you would have predicted (or did predict!), even if it uses different language than you would choose.

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03 Jul 2023, 06:41

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avigutman, AndrewN,MartyTargetTestPrep , RonTargetTestPrep
dear experts,
I can understand B is the correct , but I am not sure what's wrong with A,

in the passage:
despite huge IT investments, most notably in the service sectors, productivity stagnated.

Does it mean productivity did not increase?

appreciate your help.

thanks in advance.

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08 Jul 2023, 15:50

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zoezhuyan

Hello, zoezhuyan. It has been a while. For some reason, your query came through the general Request Expert Reply portal, not through a mention. Also, RonTargetTestPrep is no longer linked with an account. All of that said, I am unsure what question you may be referencing at the top of your post. However, I will say that stagnated in the context of the sentence you quoted does mean did not increase. The word has a negative connotation, as though something bad or unforeseen has prevented a positive anticipated or potential outcome from occurring. Here, the huge IT investments would have been expected to lead to increased productivity, but that, apparently, was not what happened.

If you are still hanging around the forum, good luck with your continued studies.

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29 Aug 2024, 13:19

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bb , Bunuel , GMATNinja , anyone pls just explain why question 5 is E and not D.

thanks in advance

Bunuel could you pls fix the paraghaph structure. everything is so spaced out i cant understand where the paraghaphs end and start

thanks in advance

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29 Aug 2024, 13:50

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chini

Question 5 is answered in this post.

P.S. Fixed the formatting.

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19 Nov 2024, 21:11

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can someone explain why C) is incorrect for Q-5?

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miag

can someone explain why C) is incorrect for Q-5?

Please view this answer of Q5, before you read further.

As for C - please keep the summary of the first para in mind when you answer this. The para presents both the views - pro-IT/anti-IT. Does the para confidently tell you why the productivity decreased? Especially, do you think its author's views that help explain the decrease in productivity?

NO! Author merely presents both the views, without agreeing with either of them, in fact, author ends with another question that the productivity numbers are not reflected in Macroeconomic measures which further reduces the support for Choice C.

Finally, think of the "function"/"purpose" of the passage and check if it agrees with the Option C.

Hope this helps!

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The problem I have with this question RC38000-01.02 and the debate about whether or not the answer is C is that all the answers are bad. And i got 7/8 right I dont think that there is a lack of understanding present. But my issue with number 1 is that nothing was "unexpected." I think most people know that too much of a good thing is a bad thing and I would equate a paradox to a theory way more than I would with something unexpected. They then go on to explain exactly why it happened? so is it unexpected or are the managers making huge investments beyond their needs just dumb (I would say thats way more likely if we are thinking about the real world). Reading comprehension problems are inherently ridiculous after a certain level of difficulty. You can either agree with the question writer or not but when you get something like that wrong you dont leave thinking okay that's fair, you leave thinking that was a terrible question. i.e. RC38000-01.02

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The trick to improving at this point is to dig into the questions you miss until you're convinced that only one answer can be right. I can relate to the frustration, but C is the only answer that comes close to being supported, and we do not have to rely on what "most people know" or what exactly a paradox is. There's certainly no proof here that "too much of a good thing is a bad thing," nor is that needed for the answer. The solution is much simpler than that, and it always has to be! The kind of issues you're bringing up are just not what we're being asked to do on RC.

Let's look at how we might sum up the author's overall point. Despite a broad emphasis on IT success, we see that some firms invested heavily in IT without any corresponding increase in productivity. If these investments were valuable, why didn't they increase productivity? The author looks to resource-based theory for the answer: easily-replicated resources don't give advantage, even if they are valuable. Taken in today's terms, that might mean "Your company isn't going to succeed just because you use AI. Everyone else can easily do that, too."

So the author is looking to explain a disconnect between investment and result. C correctly says that the author is "providing an explanation." Why are the findings described as "unexpected"? Because the investments were made with an eye toward creating an advantage, and most of the existing literature emphasizes that those advantages do occur. That's why the term "paradox" was used; it seemed odd to observers that big investments didn't seem to yield anything. Further, in the second paragraph, observers wonder why investments that were valuable didn't create an advantage. This reflects an underlying assumption that they SHOULD have created advantage. So the "productivity paradox" described in p1 is showing an unexpected result: folks thought that these investments would help much more than they did.

As for the others, A and E seem to refer to tech broadly, without referencing the specific issue at hand. B says that there are competing theories, but there aren't. The only theory mentioned is "resource-based theory," and no one is opposing it. D fails for the same reason--no theory is getting knocked down here. We might use some of this data to oppose one theory or another, but the author isn't doing that at all in the passage, so that can't be their primary concern.

Quote:

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Hi, thank you for this explanation. The first paragraph does provide some numbers on productivity so won't that count as showing the "effect" in quantitative terms?

GMATNinja

Question 5

Saasingh

Any explanation for Q5 ? Didn't find any in above comments.

I was confused between D and E. Even though I chose right, but I ain't sure how to reject D as it seems pretty close too.

Let’s think about the author’s purpose throughout the first paragraph:

First, the author introduces IT and describes the typical pro-IT approach in pre-1990 literature.
Then, he/she describes an alternative, less-optimistic view (anti-IT) on the impact of IT and gives an example.
Finally, the author describes the response of the pro-IT group to the anti-IT group.

With that in mind, the question asks that we identify an answer choice describing the content of the first paragraph. Here’s (D):

Quote:

(D) It demonstrates the effect IT has had on productivity.

The biggest problem with (D) is that the first paragraph does NOT demonstrate the effect of IT on productivity. Rather, it debates the effect of IT on productivity. For the paragraph to demonstrate IT’s effect on productivity, it would have to show what effect IT has. But the paragraph does not show the impact of IT. Instead, it introduces a debate on what impact IT has had. This is different than actually demonstrating or showing the impact. And the first paragraph does not show what impact IT ACTUALLY had. It merely discusses what effect IT MAY have had. Eliminate (D).

I hope that helps!

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To call something an effect of something else, we have to know that there is a causal relation between the two things. However, the whole point of paragraph one is that we don't know whether the weak gains in productivity that the passage cites are because of IT or not. The passage is raising the question: did IT cause growth to slow down, or did it prevent growth from dropping? In fact, did it have any causal relationship to growth in productivity at all? The point here is that we can't tell from the numbers, so we can't call this an "effect" of IT, any more than we can call it an "effect" of my birth in the 1970s.

soumyab12

Hi, thank you for this explanation. The first paragraph does provide some numbers on productivity so won't that count as showing the "effect" in quantitative terms?

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Understood, this is helpful. Thanks!

DmitryFarber

soumyab12

Hi, thank you for this explanation. The first paragraph does provide some numbers on productivity so won't that count as showing the "effect" in quantitative terms?