Recent Applications of Economic Theory in Information Technology Research

Yannis Bakos, University of California, Irvine
Chris F. Kemerer, Massachusetts Institute of Technology


Academicians and practitioners are becoming increasingly interested in the economics of Information Technology (IT). In part, this interest stems from the increased role that IT now plays in the strategic thinking of most large organizations, and from the significant dollar costs expended by these organizations on IT. Naturally enough, researchers are turning to economics as a reference discipline in their attempt to answer questions concerning both the value added by IT and the true cost of providing IT resources.

This increased interest in the economics of IT is manifested in the application of a number of aspects of economic theory in recent information systems research, leading to results that have appeared in a wide variety of publication outlets. This article reviews this work and provides a systematic categorization as a first step in establishing a common research tradition, and to serve as an introduction for researchers beginning work in this area. Six areas of economic theory are represented: information economics, production economics, economic models of organizational performance, industrial organization, institutional economics (agency theory and transaction cost theory), and macroeconomic studies of IT impact. For each of these areas, recent work is reviewed and suggestions for future research are provided.

Copyright © 1992 by Yannis Bakos and Chris F. Kemerer