Information and Communication Technologies (ICT) and economic performance

We are examining the direct impact of Information and Communication Technologies (ICTs) on productivity and whether this relationship varies by firm size, ownership, industry, region and time. For example, is the impact of ICT on performance larger for US multinationals than for domestic UK firms? We will also examine "complementarities" between IT, skills and innovation. For example, does IT have a larger impact on productivity in environments where workers are more skilled?

With support of the European Commission we have built a panel of ICT matched to the population of private and public firms in Europe that tracks the types of hardware and software used. This covers all sectors of the economy and all sizes of company. This has enabled us to analyse the role of ICT in affecting the productivity, profitability and market value of firms. We combined this technology information with our organization and management survey information to show that the returns to ICT are zero or even negative in badly managed firms.

We have written a major report on the Economic Impact of ICT led by Mirko Draca. Download Report (PDF)

This is part of a broader set of policy-related work on ICT funded by the European Commission see: http://ec.europa.eu/information_society/newsroom/cf/itemdetail.cfm?item_id=5789



We are also interested in what determines the pattern of ICT diffusion. For example, what role, if any, has the tax system played in the introduction of new technologies? What other policies (such as Broadband roll-out) are important? Can these different policies be used as "natural experiments" to test the causal impact of ICT on performance?

One factor affecting the diffusion of new technologies may be competition arising from trade. We are examining the impact of the rise of China to look at "trade induced technical change".

         

With ONS (funded by BIS) we are separately examining the establishment level impact of hardware and software investments on productivity. We have found a strong association between hardware investments and productivity. We find that IT accounts for a substantial part of the higher productivity enjoyed by US multinationals who appear not only to spend more on IT, but importantly get a much bigger 'bang per buck' of their IT spending. Further, this affect is particularly strong in the sectors that have enjoyed a productivity acceleration in the US since 1995 (the 'ICT intensive sectors' such as wholesale, retail). For more information on this ONS/CEP workstream see:

• Americans Do I.T. Better: US Multinationals and the Productivity Miracle

Are US firms really better at investing and managing their IT? Through the interdisciplinary Box Centre, we are investigating the mechanisms through which ICT can enable improvements in organisational performance. For further information on BOX - the laboratory for innovation research - see the EDS Innovation Research Programme and its discussion papers and reports.

A long-standing focus of CEP is the impact of technological change on the labour market. The increase in inequality in the UK and other countries is closely linked to changing technologies that increase the demand for workers of different types of skills. For a recent overview of these issues see: Inequality, Technology & Trade: 21st Century Evidence and Has ICT Polarized Skill Demand? Evidence from Eleven Countries over 25 Years

Discussion papers on ICT and productivity include:

• Nick Bloom, Raffaella Sadun and John Van Reenen, Americans Do I.T. Better: US Multinationals and the Productivity Miracle
• Gustavo Crespi, Chiara Criscuolo and Jonathan Haskel, Information Technology, Organisational Change and Productivity Growth: Evidence from UK Firms
• Raffaella Sadun and John Van Reenen Information Technology and Productivity: It ain't what you do it's the way that you do I.T.
• Nicholas Oulton and Sylaja Srinivasan, Productivity Growth and the Role of ICT in the United Kingdom: An Industry View, 1970-2000
• Ralf Martin, Globalisation, ICT and the Nitty Gritty of Plant Level Datasets

A summary of the evidence on IT and productivity is available in CEP Discussion Paper 749