This paper reports the puzzling results of a study which examined IT capital investmentand productivity at three of the largest IT user sites in the U.S. for the period 1970-1990: SocialSecurity Administration (SSA), Internal Revenue Service (IRS), and the Federal Bureau ofInvestigation (FBI). Based on detailed IT investment, employment, and output data over twentyyears, we found that only one agency had achieved significant productivity benefits, a secondagency had modest results, and a third agency achieved no results whatever. These resultscannot be explained by traditional theories of productivity of how productivity is produced.We argue that IT-induced productivity results not simply from strategic choice, nor theoperation of the invisible hand in the market place, nor simply from keen managers adjustingtheir organizations to an quot;objectivequot; environment. Instead we propose instead a new theory inwhich productivity benefits derive from a larger macro-culture enacted by powerful institutionsin an organizational field. We extend this analysis to the larger economy and examine how thisnew theory helps us understand recent claims that IT is finally having positive productivitybenefits at the sector level, and also helps us understand how the current fascination with reengineeringand downsizing may be a self-fulfilling prophecy