The Importance of ICT for the Knowledge Economy: A Total Factor Productivity Analysis for Selected OECD Countries

Science, technology and innovation have become key factors contributing to economic growth in both advanced and developing economies. In the knowledge economy, information circulates at the international level through trade in goods and services, direct investment and technology flows, and the movement of people. Information and communication technologies (ICT) have been at the heart of economic changes for more than a decade. ICT sector plays an important role, notably by contributing to rapid technological progress and productivity growth. Firms use ICTs to organize transnational networks in response to international competition and the increasing need for strategic interaction. As a result, multinational firms are a primary vehicle of the everspreading process of globalization. New technologies and their implementation in productive activities are changing the economic structure and contributing to productivity increases in OECD economies. Economic competitiveness depends on productivity level and in the knowledge economy, ICT sectors determine the productivity level. As a result , we can say that the power of economic competitiveness of a country depends on the productivity of its ICT sector. There are two ways to improve the TFP of ICT and to improve the power of competitiveness. First of all, if the selected countries solve their inefficiency problem by reallocation of resources, they can improve their TFP of the ICT sector and as a result they can be more competitive. Secondly, the technological improvement in these countries creates an expectation about increasing TFP of ICT sector for future. If there will be a sustainable technological improvement by innovation, it will cause a sustainable increase in the TFP of ICT sector and as a result it will cause a sustainable increase in competitiveness.