Information and communication technology adoption in micro and small firms: Can internet access improve labour productivity?

Abstract

The rapid spread of information and communication technologies (ICT) may increase firms’ productivity with important consequences for job creation and for economic growth. This article contributes to this discussion by analysing the impact of internet adoption on labour productivity and the mechanisms shaping this relationship in Peruvian micro and small manufacturing firms over the period 2011–2013. The article estimates a reduced form where labour productivity is a function of internet adoption and other explanatory factors. Internet adoption is instrumented using a measure of the availability of financial opportunities for micro and small firms in Peru. Findings indicate that internet adoption: (a) increases firms’ labour productivity; (b) reallocates employment away from temporary administrative workers and non‐remunerated workers and expands employment of permanent production workers; (c) leads to the formalization of labour relationships, to the implementation of new organizational practices and to the improvement of training measures. While changes in employment and formalization of workers are linked to labour productivity gains, increases in training measures and organizational changes do not generate any additional productivity increase. Policies oriented to promote the adoption of ICT in micro and small firms can be beneficial to close the productivity gap with larger firms in Peru. Moreover, policies directed to the formalization of the workforce can provide an extra benefit, i.e. additional labour productivity gains in firms adopting the internet. Finally, policies oriented to the development of digital skills are also important to ease the re‐employment of those workers losing their jobs and the achievement of additional productivity gains that new organizational practices can provide.

Factors Related to Information and Communication Technologies Adoption in Small Businesses in Colombia

“…The number of employees has a positive effect, thus, the greater the number of employees working in the company, the greater the willingness to embrace ICTs. This result is aligned with research by Lucchetti and Sterlacchini (2004), Galliano and Roux (2008), Battisti and Stoneman (2005), Khalifa (2016), Loukis, Arvanitis, and Kyriakou (2017) and Viollaz (2018), where it is shown that the larger the company, usually measured through the number of employees, the greater the willingness there is to adopt computer and communication technologies, and this is contrary to the work of Hollenstiein ( 2004) and Meyer (2011).…”

“…The age of the owner also has a negative sign, thus, the older they are, the lower the probability of adoption, since for each additional year the probability decreases by 0.7%. Regarding the previous variables, in the research by Viollaz (2018), it is found that the age of the company administrator does not show statistical signi cance, and if he is male, the probability increases. This last nding is different from the result obtained here.…”

“…Although there is no consensus about its impact on adoption, it should be highlighted that most of the studies are in favor of a positive effect on this decision. Thus, greater productive experience re ected in company durability would have an impact on embracing ICTs because companies would have a better vision of the need and advantages offered by new technologies, as opposed to the uncertainty or disinterest that younger companies may show (Viollaz, 2018;Khalifa, 2016;Youssef, Hadhri & M'Henni, 2011;Meyer, 2011;Dunne, 1994). Size Giuri, Torrisi, and Zinovyeva (2008) con rmed that the level of ICT investments, the total amount, and the amount per employee increase with the size of the company; moreover, large companies have a higher proportion of telecommunications investments.…”

Mobile Internet Use and Multidimensional Poverty: Evidence from A Household Survey in Rural China

“…In Italy, Colombo et al ( 2013 ) examined the effect of ICTs on productivity of small and medium enterprises (SMEs) and found that adopting advanced ICTs had a positive effect on SMEs’ productivity. With regard to labor productivity, some researchers found that access to the Internet improved firm labor productivity and expanded total employment, especially for micro and small firms (Paunov & Rollo, 2016 ; Viollaz, 2019 ). This is because adopting ICTs results in the formalization of a labor relationship, which improves labor productivity.…”

Are We Nearly There Yet?: New Technology Adoption and Labor Demand in Peru

“…In contrast, Internet availability in Brazil did not affect overall employment and even affect the demand of low-skilled workers by replacing routine tasks (Almeida, Corseuil, & Poole, 2017;Dutz, Mation, O'Connell, & Willig, 2017). Similarly, Internet adoption in Peru increased the demand for production workers with permanent contracts and decreased the demand for administrative workers with temporary contracts and non-remunerated workers (Viollaz, 2018). In Chile, the adoption of complex software increased the share of administrative and unskilled production workers and reduced the share of skilled production workers (Almeida, Fernandes, & Viollaz, 2017).…”