Where do Investments in Telecoms Come from? Developing and Testing a Framework of Sustained Economic Impact of Investments in Information and Communication Technologies

The framework of neoclassical growth accounting is widely used to estimate the impact of investments in information and communication technologies (ICT) on the macroeconomic bottom line. Results of multiple investigations presented evidence that investments in ICT have a positive impact on such measure of macroeconomic outcome as gross domestic product. Thus, it is not surprising that less developed countries of the world often turn to investments to ICT as one of the sources of a sustained economic development. But sustainability of economic growth is predicated on the sustainability of the sources of growth, such as investment capital and labor. The question of how annual investments in ICT are sustained is an important one, and yet it was not given much research consideration. This is, in part, due to the absence of a theoretically sound framework outlining mechanisms of investments → outcomes → reinvestments process. In this study, we synthesize a consistent with the framework of neoclassical growth accounting model allowing for investigating the process by which various microeconomic outcomes of investments in ICT are associated with re-investments in ICT. We test the proposed model using techniques of structural equation modeling with the data on investments in telecoms (a common subset of investments in ICT) in the context of transition economies. The results of the investigation support the notion of cyclical relationship between investments in ICT and economic outcomes [Qureshi, S. (2013). What is the role of mobile phones in bringing about growth? Information Technology for Development, 19(1), 1–4] and offer valuable insights to decision- and policy-makers tasked with the responsibility of improving the impact of investments in ICT.