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The Contribution of Digital Firms to Productivity Growth in the Manufacturing Sector: A Decomposition Approach

Author

Listed:
  • Simon Bruhn

    (Ilmenau University of Technology, Ilmenau, Germany)

  • Johanna Deperi

    (Universita degli Studi di Brescia, Italy
    Université Côte d'Azur, CNRS, GREDEG, France)

Abstract

We show that digital and non-digital firms differ significantly with respect to their contribution to productivity growth. Conducting a decomposition analysis on panel data of publicly listed U.S. manufacturing firms covering the 1990-2015 period, we demonstrate that (i) firmlevel productivity improvements of digital firms consistently exceed those of non-digital firms; (ii) the market selection process works more efficiently for digital firms; and (iii) the negative correlation between productivity changes and changes in market shares is decisively less pronounced for digital than for non-digital firms. We show that these observed differences in productivity growth can be linked to the idiosyncratic characteristics of digital firms, namely the profound exploitation of digital technologies, the scalability of digital business models and the complementarity of digital and labor investments.

Suggested Citation

  • Simon Bruhn & Johanna Deperi, 2022. "The Contribution of Digital Firms to Productivity Growth in the Manufacturing Sector: A Decomposition Approach," GREDEG Working Papers 2022-42, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2022-42
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    Keywords

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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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