The current economic recession in the United States has challenged the sustainability of

the so-called "New Economy" productivity miracle. This paper introduces the idea that, in

addition to investment in information technology, changing workplace organization has been a

significant component of the turnaround in productivity growth in the U.S. during the 1990s.

Using a nationally representative sample of U.S. businesses surveyed in 1993 and 1996, we

examine the relationship between workplace innovations and establishment productivity to

assess the potential endurance of strong labor productivity growth into the future. Our work

goes beyond measuring the impact of computers on productivity and examines how other types

of workplace innovation such as self-managed teams, incentive pay, and employee voice are

related to labor productivity. These practices could explain a large part of the movement in

multi-factor productivity in the United States over the period 1993-1996. We also show how

these results are affected by the union status of a firm. While European countries have invested

in varying degrees in information technology, these results suggest additional dimensions to the

recent productivity growth in the US that may well have implications for productivity growth

potential in Europe.