IT Capital in improving national innovation productivity: understanding IT productivity paradox through cognitive path-dependence model

Abstract

ABSTRACT This paper deals with the issue of IT productivity paradox and examines the influence of IT capital and IT institution on the national innovation productivity. Applying North’s neo-institutional economics, Hayek’s model of the mind, and Bandura’s explanation of learning we try to understand this relationship through the cognitive path dependence model. We perform our analysis using a data set of 137 countries and apply Partial Least Square (PLS) technique of Structural Equation Modeling (SEM); our finding suggests existence of strong IT institutions as an essential step to capitalize IT investments to national innovation productivity. The IT institutions of the nation fully mediate the relationship between IT capital and national innovation productivity. The study demonstrates a cognitive perspective to the subject of IT & development and brings about policy recommendation for diverse national scenarios.