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The Need for Speed: Impacts of Internet Connectivity on Firm Productivity

Author

Listed:
  • Arthur Grimes

    () (Motu Economic and Public Policy Research & University of Waikato)

  • Cleo Ren

    (Motu Economic and Public Policy Research)

  • Philip Stevens

    () (Ministry of Economic Development)

Abstract

Fast internet access is widely considered to be a productivity-enhancing factor. Internet access speeds vary regionally within countries and even within cities. Despite articulate pleas for network upgrades to accelerate internet access, there is little rigorous research quantifying benefits to individual firms that arise from upgraded internet connectivity. We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. Propensity score matching is used to control for factors, including the firm’s (lagged) productivity, that determine firms’ internet access choices. Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type. The results provide the first firm-level estimates internationally of the degree of productivity gains sourced from upgraded internet access.

Suggested Citation

  • Arthur Grimes & Cleo Ren & Philip Stevens, 2009. "The Need for Speed: Impacts of Internet Connectivity on Firm Productivity," Working Papers 09_15, Motu Economic and Public Policy Research.
  • Handle: RePEc:mtu:wpaper:09_15
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    File URL: http://motu-www.motu.org.nz/wpapers/09_15.pdf
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    References listed on IDEAS

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    Keywords

    Internet; broadband; productivity;

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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