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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, 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. Jitendra Parajuli & Kingsley E. Haynes, 2015. "Broadband Internet and new firm formation: a US perspective," Chapters,in: Innovation and Entrepreneurship in the Global Economy, chapter 9, pages 210-236 Edward Elgar Publishing.
    2. Eva Hagsten & Patricia Kotnik, 2017. "ICT as facilitator of internationalisation in small- and medium-sized firms," Small Business Economics, Springer, pages 431-446.
    3. 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.
    4. 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.
    5. Hornstein, Abigail S. & Hounsell, James, 2016. "Managerial investment in mutual funds: Determinants and performance implications," Journal of Economics and Business, Elsevier, vol. 87(C), pages 18-34.
    6. 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.
    7. 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).
    8. Mack, Elizabeth A. & Rey, Sergio J., 2014. "An econometric approach for evaluating the linkages between broadband and knowledge intensive firms," Telecommunications Policy, Elsevier, pages 105-118.

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