Dynamic Influences of FDI and R&D Expenditures on IT Business Value: An Empirical Test from China

Abstract

Information technology (IT) has become common in various economic and social fields, accompanied by the objective of facilitating the development of human society. However, the business value of IT has always been uncertain, with the IT “productivity paradox” problem becoming a core research topic. Previous studies on this issue have largely ignored the influences of national characteristics, such as foreign direct investment (FDI) and research and development (R&D) expenditure, on the business value of IT. To address this research gap, this study examined the dynamic influences of FDI and R&D expenditures on the business value of IT. Based on the assumption that the adjustment speed of economic growth is affected by both FDI and R&D expenditures, we established a partial adjustment model of dynamic adjustment speed and the individual and combined effects of FDI and R&D expenditures during the period from 2000 to 2017 to empirically examine the economic performance of China and its “productivity paradox” problem. The findings revealed that the individual and combined effects of FDI and R&D expenditures significantly improved the adjustment speed and economic performance of China during that period, that IT significantly influenced economic growth but did not improve economic performance, and that an IT “productivity paradox” existed in China at that time. In addition, IT-driven changes in economic performance could be compensated for or replaced by FDI and R&D expenditures, suggesting that these two factors have a substitutive or complementary effect on IT-driven changes. Therefore, the business value of IT business value was not determined by IT itself; rather, the important effects of national macroscopic factors, including FDI and R&D expenditures, must be taken into account.