Mika Maliranta (ETLA, The Research Institute of the Finnish Economy), Petri Rouvinen

PRODUCTIVITY EFFECTS OF ICT IN FINNISH BUSINESS

This report concludes the first phase of The economic effects of information and communication technology research project. Its primary objectives were to compile the necessary data, establish research links, and conduct preliminary analysis.

The findings show that widespread use of ICT is indeed quite recent. Contrary to what was believed in the midst of the 'new economy' boom, the increasing use of ICT is primarily a 'within firms' phenomenon, i.e., the contribution of restructuring to the observed changes in the aggregate ICT-intensity is rather marginal. Decompositions nevertheless suggest that experimentation and selection are quite intense among young ICT-intensive firms.

After controlling for industry and time effects as well as labor and other firm-level characteristics, the excess productivity of ICT-equipped labor ranges from eight to eighteen per cent. The effect is manifold in younger firms and in ICT-providing branches. The finding with respect to firm age is consistent with the need of ICT-complementing organizational changes. The finding on ICT-providing branches is not driven by the communications equipment industry but rather by ICT services. Overall, the ICT-induced excess productivity seems to be somewhat higher in services than in manufacturing. Manufacturing firms benefit in particular from ICT-induced efficiency in internal whereas service firms benefit form efficiency in external communication. We find weak evidence for the complementary of ICT and education.

Keywords: Productivity, information and communication technology, ICT, new economy

Session: 1a   Auditorium   Category: ICT - OECD Session

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