2.1.1 Information Technology

2.1.1.1What is Information Technology?

In ordinary discourse, information technology (IT) refers to everything that uses high technology for informational purposes, such as computers, the Internet, mobile phones, satellite dishes and other wireless communication tools. In economics, Machlup (1962) first assessed the existence of some “information machines” and “information services” used in the production and distribution of knowledge. The following is a more formal definition adapted from the Macmillan Dictionary of Information Technology (1985):

‘The acquisition, processing, storage and dissemination of information in all its forms (auditory, pictorial, textual and numerical) through a combination of computers, telecommunication, networks and electronic devices.’

More specifically, Freeman (1987) referred to information technology as:

‘A generic term for the widening array of electronic-based products and services generated out of the convergence in computer and telecommunications innovations.’

Clearly, defining information technology is not easy. While the concept is readily grasped, giving precision to the definition is difficult. IT can be understood as all means by which we collect, process, store, manipulate, analyze and communicate information. The means include the hardware devices (such as computers, computer networks, satellite dishes, fiber optic cables and microwave transmitters), the software which operates with the hardware devices, and the people with various levels of education, training and experience who are involved in the IT sector.

The Organization for Economic Cooperation and Development (OECD 1997) divided IT capital into three categories: (1) hardware (multi-user system, data communication equipment, PCs and workstations), (2) packaged software (system software and utilities, application tools, application solutions) and (3) services (professional services, support services).

In his voluminous dissertation, Porat (1977) elaborated on the “service side” of IT. He attempted to write a detailed description of what he called the “information economy.” Doing so, he identified “information producers,” “information processors,” “information distributors” and “information infrastructure occupations.” His classification was later used by the Organization for Economic Co-operation and Development in its listing of information occupations. “Information producers” are people creating knowledge including scientists or professional researchers. “Information processors,” including professors, use this raw knowledge to process it into more readable concepts. The “distributors,” including the media, contribute to the diffusion of this knowledge, which will be used by all workers in “information infrastructure occupations.” Similarly, the Bureau of Census (1997) defines the IT sector as encompassing three types of establishments: (1) those producing and distributing information and cultural products, (2) those providing the means to transmit or distribute these products as well as data or communications, (3) those processing data. In academic journals, authors often consider IT capital as a subset of nonresidential equipment. The Bureau of Economic Analysis (BEA 1998) lists different types of nonresidential producers’ durable equipment as seen in Figure 2.1. Based on this classification, researchers have distinguishably considered three measures of IT. The most restrictive definition is “Computers and peripheral equipment.” While “Office computing and accounting machinery” (OCAM) might be the most common measure of IT, “information processing equipment” (IPE) offers a broader measure of IT, and is the one I will use in this study.

Figure 2.1Distribution of Producers’ Durable Equipment

Thus, the concept of information technology is not well defined even though it is widely used today. It refers not only to physical high-tech devices but also to the people who use them for informational purposes. While it is often reduced to computer hardware, this study will use a wider definition for IT as information processing and related equipment.