Whatever happened to the new economy?

By Bill Lewis, Diana Farrell, Mike Nevens, Lenny Mendonca, Vincent Palmade, Greg Hughes, James Manyika, Heino Fabender, Eric Labaye, Shyam Lal, Roger Roberts

Reports of the New Economy's demise have been greatly exaggerated. Evidence from both the US and Europe indicates that IT was and is important to productivity growth, but that its primary role is as an enabler of innovation and competition.

The shift from embrace to repudiation of a "new economy" has been rapid and dramatic. Before the NASDAQ bubble burst, assertions abounded that IT and the Internet were changing everything.

Today, with the technology sector mired in a deep slump, hyperbole has given way to despair. The truth lies somewhere in between. But where?

MGI's paper, "Whatever Happened to the New Economy?," distills insights from more than two years of research into the relationship between IT and labor productivity across 20 sectors in the US, France, and Germany. Taken as a whole, MGI's work shows both that the new economy was misunderstood in the past, and that recent reports of its demise have been greatly exaggerated. Our intent is to put the new economy into perspective and to identify ways that technology enables innovation and thereby creates lasting economic value.

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