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The power of prediction: predictive analytics, workplace complements, and business performance
Name
11369_2021_224_ReferencePDF.pdf
Size
1.23 MB
Format
Adobe PDF
Checksum (MD5)
9064fee2ed87a78f0038f6ac216781a4
Author(s)
Brynjolfsson, Erik
Jin, Wang
McElheran, Kristina
Date Issued
September 22, 2021
Publisher
Palgrave Macmillan UK
Citation
Brynjolfsson, Erik, Jin, Wang and McElheran, Kristina. 2021. "The power of prediction: predictive analytics, workplace complements, and business performance."
Version
Author's final manuscript
Abstract
Abstract
Anecdotes abound suggesting that the use of predictive analytics boosts firm performance. However, large-scale representative data on this phenomenon have been lacking. Working with the Census Bureau, we surveyed over 30,000 American manufacturing establishments on their use of predictive analytics and detailed workplace characteristics. We find that productivity is significantly higher among plants that use predictive analytics—up to $918,000 higher sales compared to similar competitors. Furthermore, both instrumental variables estimates and the timing of gains suggest a causal relationship. However, we find that the productivity pay-off only occurs when predictive analytics are combined with at least one of three workplace complements: significant accumulation of IT capital, educated workers, or workplaces designed for high flow-efficiency production. Our findings support claims that predictive analytics can substantially boost performance, while also explaining why some firms see no benefits at all.
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1057/s11369-021-00224-5
