Most pre-1990 literature on businesses' use of
⠀⠀⠀ information technology (IT)—defined as any form of
⠀⠀⠀ computer-based information system—focused on
⠀⠀⠀ spectacular IT successes and reflected a general
(5)  optimism concerning IT's potential as a resource
⠀⠀⠀ for creating competitive advantage. But toward the
⠀⠀⠀ end of the 1980s, some economists spoke of a
⠀⠀⠀ “productivity paradox”: despite huge IT investments,
⠀⠀⠀ most notably in the service sectors, productivity
(10) stagnated. In the retail industry, for example, in
⠀⠀⠀ which IT had been widely adopted during the 1980s,
⠀⠀⠀ productivity (average output per hour) rose at an
⠀⠀⠀ average annual rate of 1.1 percent between 1973 and
⠀⠀⠀ 1989, compared with 2.4 percent in the preceding
(15)  25-year period. Proponents of IT argued that it takes
⠀⠀⠀ both time and a critical mass of investment for IT
⠀⠀⠀ to yield benefits, and some suggested that growth
⠀⠀⠀ figures for the 1990s proved these benefits were
⠀⠀⠀ finally being realized. They also argued that measures
(20)  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 service sector
⠀⠀⠀ significantly, although macroeconomic measures of
(25)  productivity did not reflect the improvement.
⠀⠀⠀⠀⠀⠀⠀⠀But some observers questioned why, if IT had
⠀⠀⠀ conferred economic value, it did not produce
⠀⠀⠀ direct competitive advantages for individual firms.
⠀⠀⠀ Resource-based theory offers an answer, asserting
(30)  that, in general, firms gain competitive advantages
⠀⠀⠀ by accumulating resources that are economically
⠀⠀⠀ valuable, relatively scarce, and not easily replicated.
⠀⠀⠀ According to a recent study of retail firms, which
⠀⠀⠀ confirmed that IT has become pervasive and
(35)  relatively easy to acquire, IT by itself appeared to
⠀⠀⠀ have conferred little advantage. In fact, though little
⠀⠀⠀ evidence of any direct effect was found, the frequent
⠀⠀⠀ negative correlations between IT and performance
⠀⠀⠀ suggested that IT had probably weakened some
(40)  firms' competitive positions. However, firms' human
⠀⠀⠀ resources, in and of themselves, did explain improved
⠀⠀⠀ performance, and some firms gained IT-related
⠀⠀⠀ advantages by merging IT with complementary
⠀⠀⠀ resources, particularly human resources. The findings
(45)  support the notion, founded in resource-based theory,
⠀⠀⠀ that competitive advantages do not arise from easily
⠀⠀⠀ replicated resources, no matter how impressive or
⠀⠀⠀ economically valuable they may be, but from complex,
⠀⠀⠀ intangible resources.

1. The passage is primarily concerned with

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

RC38000-01.02



2. 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

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

RC38000-03.02



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

(A) suggest a way in which IT can be used to create a competitive advantage
(B) provide an illustration of the "productivity paradox"
(C) emphasize the practical value of the introduction of IT
(D) cite an industry in which productivity did not stagnate during the 1980's
(E) counter the argument that IT could potentially create competitive advantage

RC38000-02.02



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

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

RC38000-06.02



5. Which of the following best describes the content of the first paragraph?

A. It presents two explanations for the success of IT.
B. It provides evidence that decreases in productivity will continue.
C. It presents reasons for a decline in productivity.
D. It demonstrates the effect IT has had on productivity.
E. It contrasts views concerning the degree of IT's success.

RC38000-04.02



6. The passage suggests that the recent study of retail firms discussed in the second paragraph supports which of the following conclusions regarding a firm's competitive advantage?

A. Human resources alone are more likely to contribute to competitive advantage than is IT alone.
B. Human resources combined with IT are more likely than human resources alone to have a negative effect on competitive advantage.
C. Human resources combined with IT often have a negative effect on competitive advantage.
D. IT by itself is much more likely to have a positive effect than a negative effect on competitive advantage.
E. The positive effect of IT on competitive advantage increases with time.

RC38000-05.02



7. The author of the passage implies that toward the end of the 1980s, some economists described which of the following as a “productivity paradox” (see line 8)?

A. Investments in IT would not result in increases in productivity until the 1990s.
B. Investments in IT did not lead to expected gains in productivity.
C. Productivity in the retail industry rose less rapidly than did productivity in other industries.
D. The gains in productivity due to the introduction of IT were not reflected in macroeconomic measures of productivity.
E. Most gains in productivity occurred in the service sector and were therefore particularly difficult to measure.

RC38000-07.02



8. According to the passage, the recent study of retail firms discussed in the second paragraph (lines 33–63) best supports which of the following assessments of IT's potential?

A. Even when IT gives a firm a temporary competitive advantage, that firm is unlikely to continue to achieve productivity gains.
B. The competitive advantages conferred by a firm's introduction of IT are outweighed by IT's development costs.
C. A firm's introduction of IT is less likely to limit its ability to achieve productivity gains than to enhance that ability.
D. Although IT by itself is unlikely to give a firm a competitive advantage, IT combined with other resources may do so.
E. Although IT by itself is unlikely to give a firm a competitive advantage, a firm that does not employ IT cannot achieve a competitive advantage.

RC38000-08.02