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Broadband adoption and firm productivity: evaluating the benefits of general purpose technology

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  • S. K. Majumdar
  • O. Carare
  • H. Chang

Abstract

We examine the relationship between the deployment of broadband, which we classify as a general purpose technology, and the productivity of the deploying firms using panel data that comprises information on all the major local exchange carriers in the United States telecommunications industry from 1995 to 2000. This relationship is an important indicator of the economic impact of new technology adoption. We provide a comprehensive analysis of the literature on general purpose technologies as well as on the economic consequences of information and communications technology diffusion and develop a framework to empirically assess the impact of broadband deployment on the productivity. Our results find a positive relationship between broadband deployment and the carriers' productivity and suggest that encouraging the deployment of broadband technologies, in addition to the benefits to consumers and firms at the receiving end of the new technology, create the potential for better technological efficiencies and increased productivity for the deploying firms. The benefits can be enhanced as the firms studied operate in two-sided markets where the network effects brought about by the multitude of interconnections can be substantial because of possible second-order spillovers of productivity. Copyright 2010 The Author 2009. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • S. K. Majumdar & O. Carare & H. Chang, 2010. "Broadband adoption and firm productivity: evaluating the benefits of general purpose technology," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(3), pages 641-674, June.
    • Handle: RePEc:oup:indcch:v:19:y:2010:i:3:p:641-674
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    Cited by:

    1. Juan Jung & Gonzalo Gómez-Bengoechea, 2022. "A literature review on firm digitalization: drivers and impacts," Studies on the Spanish Economy eee2022-20, FEDEA.
    2. Andrew Reeson & Lachlan Rudd, 2016. "ICT Activity, Innovation and Productivity: An Analysis of Data From Australian Businesses," Economic Papers, The Economic Society of Australia, vol. 35(3), pages 245-255, September.
    3. Elizabeth Mack & Alessandra Faggian, 2013. "Productivity and Broadband," International Regional Science Review, , vol. 36(3), pages 392-423, July.
    4. Michael Peneder & Julia Bock-Schappelwein & Matthias Firgo & Oliver Fritz & Gerhard Streicher, 2016. "Österreich im Wandel der Digitalisierung," WIFO Studies, WIFO, number 58979, February.
    5. Eva Hagsten & Patricia Kotnik, 2017. "ICT as facilitator of internationalisation in small- and medium-sized firms," Small Business Economics, Springer, vol. 48(2), pages 431-446, February.
    6. Lyu, Wenjing & Liu, Jin, 2021. "Artificial Intelligence and emerging digital technologies in the energy sector," Applied Energy, Elsevier, vol. 303(C).
    7. Madureira, António & den Hartog, Frank & Bouwman, Harry & Baken, Nico, 2013. "Empirical validation of Metcalfe’s law: How Internet usage patterns have changed over time," Information Economics and Policy, Elsevier, vol. 25(4), pages 246-256.
    8. Bashir, Sadaf & Sadowski, B. M., 2014. "General purpose technologies: A survey, a critique and future research directions," 25th European Regional ITS Conference, Brussels 2014 101443, International Telecommunications Society (ITS).
    9. Elizabeth A. Mack, 2014. "Broadband and knowledge intensive firm clusters: Essential link or auxiliary connection?," Papers in Regional Science, Wiley Blackwell, vol. 93(1), pages 3-29, March.
    10. Huang, Jiashun & Li, Weiping & Guo, Lijia & Hall, Jim W., 2022. "Information and communications technology infrastructure and firm growth: An empirical study of China's cities," Telecommunications Policy, Elsevier, vol. 46(3).
    11. Nadiri, M. Ishaq & Nandi, Banani & Akoz, Kemal Kivanc, 2018. "Impact of modern communication infrastructure on productivity, production structure and factor demands of US industries: Impact revisited," Telecommunications Policy, Elsevier, vol. 42(6), pages 433-451.
    12. Majumdar, Sumit K., 2016. "Debt and communications technology diffusion: Retrospective evidence," Research Policy, Elsevier, vol. 45(2), pages 458-474.
    13. Falk, Martin & Hagsten, Eva, 2021. "Impact of high-speed broadband access on local establishment dynamics," Telecommunications Policy, Elsevier, vol. 45(4).
    14. Jitendra Parajuli & Kingsley E. Haynes, 2015. "Broadband Internet and new firm formation: a US perspective," Chapters, in: Charlie Karlsson & Urban Gråsjö & Sofia Wixe (ed.), Innovation and Entrepreneurship in the Global Economy, chapter 9, pages 210-236, Edward Elgar Publishing.
    15. Remigiusz Kozlowski & Marek Matejun, 2015. "The identification of difficulties in using advanced technologies in the implementation of projects," International Journal of Business and Management, International Institute of Social and Economic Sciences, vol. 3(4), pages 41-60, November.
    16. Huwei Wen & Jinxia Zhan, 2023. "New-type infrastructure and total factor productivity: evidence from listed manufacturing firms in China," Economic Change and Restructuring, Springer, vol. 56(6), pages 4465-4489, December.
    17. Amir Manzoor, 2014. "Investigating the Factors Affecting Residential Consumer Adoption of Broadband in India," SAGE Open, , vol. 4(4), pages 21582440145, October.
    18. Christiaan Hogendorn & Brett Frischmann, 2017. "Infrastructure and General Purpose Technologies: A Technology Flow Framework," Wesleyan Economics Working Papers 2017-001, Wesleyan University, Department of Economics.
    19. Atif, Syed Muhammad & Endres, James & Macdonald, James, 2012. "Broadband Infrastructure and Economic Growth: A Panel Data Analysis of OECD Countries," EconStor Preprints 65419, ZBW - Leibniz Information Centre for Economics.
    20. Mack, Elizabeth A. & Rey, Sergio J., 2014. "An econometric approach for evaluating the linkages between broadband and knowledge intensive firms," Telecommunications Policy, Elsevier, vol. 38(1), pages 105-118.
    21. Lee, Yong Suk & Kim, Taekyun & Choi, Sukwoong & Kim, Wonjoon, 2022. "When does AI pay off? AI-adoption intensity, complementary investments, and R&D strategy," Technovation, Elsevier, vol. 118(C).
    22. Elizabeth A. Mack & Luc Anselin & Tony H. Grubesic, 2011. "The importance of broadband provision to knowledge intensive firm location," Regional Science Policy & Practice, Wiley Blackwell, vol. 3(1), pages 17-35, March.
    23. Marinella Boccia & Anna Maria Ferragina & Stefano Iandolo, 2022. "Follow the cloud! The impact of ICT on Italian provinces’ trade," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(4), pages 667-690, December.

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