The Return on Information Technology: Who Benefits Most?

Abstract

Information and communication technology (ICT) has continuously reshaped the way in which businesses operate. Yet opinions among economists about the returns to ICT, especially at the aggregate level, are divided. We exploit business-to-business transaction panel data from ICT producers to construct ICT capital stocks for a large sample of Belgian firms. This allows us to estimate the returns to ICT at the firm level and to investigate how firm-level ICT investments affected aggregate gross domestic product and productivity. We find large returns to ICT—more precisely, a firm investing an additional euro in ICT—increases value added by 1 euro and 35 cents on average. This marginal product of ICT investment increases with firm size and varies across sectors. Although we find substantial returns to ICT at the firm level, returns are much lower at the aggregate level. This is due to underinvestment in ICT (ICT capital deepening is low) and because firms with especially high returns are underinvesting.

Can intelligent manufacturing empower manufacturing? – an empirical study considering ambidextrous capabilities

“…In the literature, the impact of technology on enterprise performance presents different results: (1) IT payoff: technologies have positive effects on performance (Devaraj and Kohli, 2003;El-Tamimi et al, 2012;Brynjolfsson and McElheran, 2016;Ilmudeen et al, 2019;Zhang et al, 2019;Dhyne et al, 2020;Terence et al, 2020;Wei and Sun, 2021;Xuan and Zhang, 2021).…”

“…, 2012; Brynjolfsson and McElheran, 2016; Ilmudeen et al ., 2019; Zhang et al. , 2019; Dhyne et al ., 2020; Terence et al ., 2020; Wei and Sun, 2021; Xuan and Zhang, 2021). (2) IT paradox: the application of technology may not really improve performance (Sun et al.…”

Diversify or Not? – The Link Between Global Sourcing of ICT Goods and Firm Performance

“…Positive effects of digitalization are found already in the early 1990s, e.g. by Brynjolfsson and Hitt (1995) and are confirmed in studies by Cette et al (2022), Dhyne et al (2021), and Schivardi and Schmitz (2020). Some papers Moreover, the use of digital technologies such as the Internet or e-commerce applications might reduce information and coordination costs, thus reducing trade costs.…”

The return on human (STEM) capital in Belgium

“…Firms need skilled personnel to install and operate their ICT investments. Using Belgian data, Dhyne et al (2020) found such investments generate substantial productivity returns, but many firms still seem to be underinvested in ICT. Gal et al (2019) found that digital technologies might well have contributed to the growing dispersion in productivity performance across firms, and that laggard firms need more access to (digital) skills.…”

“…Nevertheless, we can still conclude that, particularly for the manufacturing sector, the elasticities are higher for large firms compared to all firms combined. This means that not only do large firms benefit more from ICT fixed investment (Dhyne et al 2020), but large firms also benefit more from human capital investment.…”