SET5 RC Most pre-1990 literature on business

[shrnayak]

Most pre-1990 literature on busi-

nesses’ use of information technology

(IT)—defined as any form of computer-

Line based information system—focused on

(5) spectacular IT successes and reflected

a general optimism concerning IT’s poten-

tial as a resource for creating competitive

advantage. But toward the end of the

1980’s, some economists spoke of a

(10) “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

(15) 1980’s, productivity (average output per

hour) rose at an average annual rate of

1.1 percent between 1973 and 1989, com-

pared with 2.4 percent in the preceding

25-year period. Proponents of IT argued

(20) 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

(25) 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

(30) service sector significantly, although mac-

roeconomic measures of productivity did

not reflect the improvement.

But some observers questioned why,

if IT had conferred economic value, it did

(35) not produce direct competitive advantages

for individual firms. Resource-based

theory offers an answer, asserting that,

in general, firms gain competitive advan-

tages by accumulating resources that are

(40) economically valuable, relatively scarce,

and not easily replicated. According to

a recent study of retail firms, which con-

firmed that IT has become pervasive

and relatively easy to acquire, IT by

(45) itself appeared to have conferred little

advantage. In fact, though little evidence

of any direct effect was found, the fre-

quent negative correlations between IT

and performance suggested that IT had

(50) probably weakened some firms’ compet-

itive positions. However, firms’ human

resources, in and of themselves, did

explain improved performance, and

some firms gained IT-related advan-

(55) tages by merging IT with complementary

resources, particularly human resources.

The findings support the notion, founded

in resource-based theory, that competi-

tive advantages do not arise from easily

(60) replicated resources, no matter how

impressive or economically valuable

they may be, but from complex, intan-

gible resources.

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Q22:

The passage is primarily concerned with

 

• describing a resource and indicating various methods used to study it
  
• presenting a theory and offering an opposing point of view
  
• providing an explanation for unexpected findings
  
• demonstrating why a particular theory is unfounded
  
• resolving a disagreement regarding the uses of a technology

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Q23:

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

 

• IT is not a resource that is difficult to obtain
  
• IT is not an economically valuable resource
  
• IT is a complex, intangible resource
  
• economic progress has resulted from IT only in the service sector
  
• changes brought about by IT cannot be detected by macroeconomic measures

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Q24:

The author of the passage discusses productivity in the retail industry in the first paragraph primarily in order to

 

• suggest a way in which IT can be used to create a competitive advantage
  
• provide an illustration of the “productivity paradox”
  
• emphasize the practical value of the introduction of IT
  
• cite an industry in which productivity did not stagnate during the 1980’s
  
• counter the argument that IT could potentially create competitive advantage

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Q25:

According to the passage, most pre-1990 literature on businesses’ use of IT included which of the following?

 

• Recommendations regarding effective ways to use IT to gain competitive advantage
  
• Explanations of the advantages and disadvantages of adopting IT
  
• Information about ways in which IT combined with human resources could be used to increase competitive advantage
  
• A warning regarding the negative effect on competitive advantage that would occur if IT were not adopted
  
• A belief in the likelihood of increased competitive advantage for firms using IT

IMO Qn22 the concern of the passage apears to be E . Kindly help on this

 

OA: C A B E

[cooltutu]

This may be one of the following explanation to the questions 22:

It speaks about the positive expectations of IT before the 1990 literature on business of IT and then it states about the unexpected finding in retail sector to quote the "productivity paradox" - then it goes about explaing the opinion of diff ppl.

 

So option C seems viable.

 

Please suggest your answers.

[jmdgirish]

Why is A E not a valid choice for the Q22 here. It is definitely resolving a disagreement on the use(yield) of IT.

 

Kindly help, am confused on this one.

 

Thanks and Regards,

Girish Malik

[Rohit Manglik]

Why option B in Q23 is wrong.

 

The author clearly states that "economically valuable, relatively scarce, and not easily replicate"