Beyond globalization: Localized returns to IT infrastructure investments

This paper reports evidence of localized returns to the massive information-processing technology (IT) investments made during the 1980s. It uses two indicators of regional economic performance: (1) real per capita personal income growth; and (2) real output-per-worker growth. After introducing controls for a variety of human capital variables and broader regional business base and population dynamics, we find that the larger a region's installed base of networked IT systems, the more vigorous were the industry-mix shifts underlying regional output-per-worker gains. However, this effect is powerfully mediated by regional economic scale. No evidence of IT-induced income gains was found. These findings lend support for a reconsideration of the conventional wisdom that IT technologies have as their primary influence the erosion of the significance of time, space and place in an economy. Instead, the returns to such IT investments are powerfully mediated by their marked spatial distribution.