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The need for speed: impacts of internet connectivity on firm productivity

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  • Arthur Grimes

    ()

  • Cleo Ren
  • Philip Stevens

Abstract

Fast internet access is widely considered to be a productivity-enhancing factor. Internet access speeds vary regionally within countries and even within cities. Despite articulate pleas for network upgrades to accelerate internet access, there is little rigorous research quantifying benefits to individual firms that arise from upgraded internet connectivity. We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. Propensity score matching is used to control for factors, including the firm’s (lagged) productivity, that determine firms’ internet access choices. Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type. The results provide the first firm-level estimates internationally of the degree of productivity gains sourced from upgraded internet access.

(This abstract was borrowed from another version of this item.)

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Bibliographic Info

Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 37 (2012)
Issue (Month): 2 (April)
Pages: 187-201

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Handle: RePEc:kap:jproda:v:37:y:2012:i:2:p:187-201

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Web page: http://www.springerlink.com/link.asp?id=100296

Related research

Keywords: Broadband; ICT adoption; Internet; Productivity; Propensity score matching; O33;

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References

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  6. Fabling, Richard & Grimes, Arthur & Stevens, Philip, 2008. "A Comparison of Qualitative and Quantitative Firm Performance Measures," Occasional Papers 08/4, Ministry of Economic Development, New Zealand.
  7. Arthur Grimes & Cleo Ren & Philip Stevens, 2009. "The Need for Speed: Impacts of Internet Connectivity on Firm Productivity," Working Papers, Motu Economic and Public Policy Research 09_15, Motu Economic and Public Policy Research.
  8. Maliranta, Mika & Rouvinen, Petri, 2004. "Informational Mobility and Productivity - Finnish Evidence," Discussion Papers, The Research Institute of the Finnish Economy 919, The Research Institute of the Finnish Economy.
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  10. Shane Greenstein & Ryan C. McDevitt, 2009. "The Broadband Bonus: Accounting for Broadband Internet's Impact on U.S. GDP," NBER Working Papers 14758, National Bureau of Economic Research, Inc.
  11. Marion Debruyne & David J. Reibstein, 2005. "Competitor See, Competitor Do: Incumbent Entry in New Market Niches," Marketing Science, INFORMS, INFORMS, vol. 24(1), pages 55-66, December.
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  13. Chris Forman & Avi Goldfarb & Shane Greenstein, 2009. "The Internet and Local Wages: Convergence or Divergence?," NBER Working Papers 14750, National Bureau of Economic Research, Inc.
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  15. Goldfarb, Avi, 2006. "The (teaching) role of universities in the diffusion of the Internet," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 24(2), pages 203-225, March.
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Citations

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Cited by:
  1. Kim, Younjun & Orazem, Peter F., 2012. "Broadband Internet and Firm Entry: Evidence from Rural Iowa," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington, Agricultural and Applied Economics Association 124879, Agricultural and Applied Economics Association.
  2. Mok, Penny & Mason, Geoff & Stevens, Philip & Timmins, Jason, 2012. "A Good Worker is Hard to Find: Skills Shortages in New Zealand Firms," Occasional Papers 12/5, Ministry of Economic Development, New Zealand.
  3. Atif, Syed Muhammad & Endres, James & Macdonald, James, 2012. "Broadband Infrastructure and Economic Growth: A Panel Data Analysis of OECD Countries," EconStor Preprints 65419, ZBW - German National Library of Economics.
  4. Haller, Stefanie A. & Lyons, Sean, 2012. "Broadband adoption and firm productivity: evidence from Irish manufacturing firms," MPRA Paper 42626, University Library of Munich, Germany.
  5. Bert Sadowski, 2014. "Business ICT Adoption and Open Access: The Example of SMEs at Industrial Parks in the Netherlands," Working Papers, Eindhoven Center for Innovation Studies 14-04, Eindhoven Center for Innovation Studies, revised Feb 2014.
  6. Procter, Roger, 2011. "Echanching Productivity: Towards an Updated Action Agenda," Occasional Papers 11/1, Ministry of Economic Development, New Zealand.
  7. Arthur Grimes & Cleo Ren & Philip Stevens, 2009. "The Need for Speed: Impacts of Internet Connectivity on Firm Productivity," Working Papers, Motu Economic and Public Policy Research 09_15, Motu Economic and Public Policy Research.
  8. Richard Fabling & Arthur Grimes, 2009. "The "suite" smell of success: complementary personnel practices and firm performance," Reserve Bank of New Zealand Discussion Paper Series DP2009/13, Reserve Bank of New Zealand.
  9. Bronwyn HOWELL & Arthur GRIMES, 2010. "Productivity Questions for Public Sector Fast Fibre Network Financiers," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(78), pages 127-146, 2nd quart.
  10. Bertschek, Irene & Niebel, Thomas, 2013. "Mobile and more productive? Firm-level evidence on the productivity effects of mobile internet use at the early stage of diffusion," ZEW Discussion Papers 13-118, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

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