Do investments in information technology (IT) substitute for jobs and non‐<scp>IT</scp> capital expenditures?

Abstract We investigate whether process innovation as proxied by information technology (IT) reduces jobs and investments. We find a negative relationship between IT and production workers and IT and non‐IT capital expenditures. However, we find a positive relationship between IT, skilled labor, and the pay of the remaining production workers. We also find that output and productivity increase with IT. It appears that IT leads to changes in the type of work. The implication of the findings is that the concern expressed by some that IT will substantially replace jobs is misplaced.