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Telecommunications technologies and regional development: theoretical considerations and empirical evidence

  • Peter Nijkamp

    (Department of Economics, Free University, P.O. Box 7161, 1007 MC Amsterdam, The Netherlands)

  • Roberta Capello

    (Department of Economics, Politecnico of Milan, Piazza Leonardo da Vinci 32, I-20133 Milan, Italy)

The paper provides an analysis of network externalities in the telecommunications sector and their effects on corporate and regional performance. It can essentially be regarded as part of the general theoretical reflection on the role of telecommunications in economic development, by emphasising the importance of telecommunications for future economic growth. However, the advantages derived from these technologies stem not only from the technological changes taking place in the sector, but also from their nature as interrelated technologies. This stems from the fact that when a new subscriber joins the network, the marginal costs of his entry are lower than the marginal benefits he creates for people (firms) already networked. This difference between marginal costs and benefits (in favour of the benefits) inevitably reflects on industrial performance and - via multiplicative effects - on regional performance. The paper presents an empirical part where an effort is made to measure telecommunications network externalities. Regional differences in the exploitation of network externalities emerge between firms located in the north and in the south of Italy.

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Article provided by Springer in its journal The Annals of Regional Science.

Volume (Year): 30 (1996)
Issue (Month): 1 ()
Pages: 7-30

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Handle: RePEc:spr:anresc:v:30:y:1996:i:1:p:7-30
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