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Competition makes IT better: Evidence on when firms use IT more effectively

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  • Iacovone, Leonardo
  • Pereira-López, Mariana
  • Schiffbauer, Marc

Abstract

We study how technology upgrading through investment in information and communication technologies (IT henceforth) influences firm performance in the context of a developing country. We rely on a novel firm-level data set covering a large sample of Mexican manufacturing companies with detailed information on IT. We show that the impact of IT investment is only positive for firms that were exposed to an exogenous competitive shock due to the increase in competition from China after its WTO accession. We argue that incentives provided by competition are key in leading firms to make more effective use of the new information technologies. We also find evidence that these results are driven by the complementarity between IT investments and organizational or process changes within firms, specifically under the incentives of heightened international competitive pressures.

Suggested Citation

  • Iacovone, Leonardo & Pereira-López, Mariana & Schiffbauer, Marc, 2023. "Competition makes IT better: Evidence on when firms use IT more effectively," Research Policy, Elsevier, vol. 52(8).
    • Handle: RePEc:eee:respol:v:52:y:2023:i:8:s0048733323000707
    DOI: 10.1016/j.respol.2023.104786
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    Cited by:

    1. Rita K. Almeida & Ana M. Fernandes & Mariana Viollaz, 2017. "Does the Adoption of Complex Software Impact Employment Composition and the Skill Content of Occupations? Evidence from Chilean Firms," CEDLAS, Working Papers 0214, CEDLAS, Universidad Nacional de La Plata.
    2. Leonardo Iacovone & Mariana Pereira-López & Marc Schiffbauer, 2017. "ICT Use, Competitive Pressures, and Firm Performance in Mexico," The World Bank Economic Review, World Bank, vol. 30(Supplemen), pages 109-118.
    3. Mariana Viollaz, 2017. "ICT Adoption in Micro and Small Firms: Can Internet Access Improve Labor Productivity?," CESifo Working Paper Series 6839, CESifo.

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    More about this item

    Keywords

    Firms; IT; Productivity; Competition; Mexico;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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