We analyze the determinants of ICT investment and the impact of information technology on productivity and efficiency on a representative sample of small and medium sized Italian firms. In order to test the most relevant theoretical predictions from the ICT literature we evaluate the impact of investment in software, hardware and telecommunications of these firms on a series of intermediate variables and on productivity. Among intermediate variables we consider the demand for skilled workers, the introduction of new products and processes and the rate of capacity utilization. Among productivity measures we include total factor productivity, the productivity of labor, and the distance from the "best practice'' by using a stochastic frontier approach. Our results show that the effect of ICT investment on firm efficiency can be more clearly detected at firm level data by decomposing it into software and telecommunications investment. We find that telecommunications investment positively affects the creation of new products and processes, while software investment increases the demand for skilled workers, average labor productivity and proximity to the optimal production frontier. We interpret these results by arguing that ICT investment modifies the trade-off between scale and scope economies. While software investment increases the scale of firm operations, telecommunications investment creates a "flexibility option'' easing the switch from a Fordist to a flexible network productive model in which products and processes are more frequently adapted to satisfy consumers' taste for variety.

Becchetti, L., Londono Bedoya, D.a., & Paganetto, L. (2003). ICT investment, productivity and efficiency: Evidence at firm level using a stochastic frontier approach. In Journal of Productivity Analysis (pp.143-167) [10.1023/A:1025128121853].

ICT investment, productivity and efficiency: Evidence at firm level using a stochastic frontier approach

BECCHETTI, LEONARDO;PAGANETTO, LUIGI
2003

Abstract

We analyze the determinants of ICT investment and the impact of information technology on productivity and efficiency on a representative sample of small and medium sized Italian firms. In order to test the most relevant theoretical predictions from the ICT literature we evaluate the impact of investment in software, hardware and telecommunications of these firms on a series of intermediate variables and on productivity. Among intermediate variables we consider the demand for skilled workers, the introduction of new products and processes and the rate of capacity utilization. Among productivity measures we include total factor productivity, the productivity of labor, and the distance from the "best practice'' by using a stochastic frontier approach. Our results show that the effect of ICT investment on firm efficiency can be more clearly detected at firm level data by decomposing it into software and telecommunications investment. We find that telecommunications investment positively affects the creation of new products and processes, while software investment increases the demand for skilled workers, average labor productivity and proximity to the optimal production frontier. We interpret these results by arguing that ICT investment modifies the trade-off between scale and scope economies. While software investment increases the scale of firm operations, telecommunications investment creates a "flexibility option'' easing the switch from a Fordist to a flexible network productive model in which products and processes are more frequently adapted to satisfy consumers' taste for variety.
12th Villa Mondragone Conference on Knowledge Economy Information Technologies and Growth
FRASCATI, ITALY
JUN, 2000
Rilevanza internazionale
contributo
Settore SECS-P/01 - Economia Politica
English
ICT investment; Real options; Stochastic frontiers
Intervento a convegno
Becchetti, L., Londono Bedoya, D.a., & Paganetto, L. (2003). ICT investment, productivity and efficiency: Evidence at firm level using a stochastic frontier approach. In Journal of Productivity Analysis (pp.143-167) [10.1023/A:1025128121853].
Becchetti, L; Londono Bedoya, Da; Paganetto, L
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/2108/52245
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