In search of productivity growth: firm-level effects of ICT and innovation in the Netherlands

Using Dutch firm-level data for the period 1994-1998, the document shows that ICT and other types of innovation have the potential to remain important sources of productivity growth, especially if we account for ICT-spillovers and the interaction between ICT and innovation. Indeed, the rebound of Total Factor Productivity (TFP) growth in the second half of the previous decade as reported in Van der Wiel (2001a) seems to be related to the boom of investment in ICT.

The firm-level results do point to a sizable direct contribution of ICT to Dutch labour productivity growth. However, this contribution is likely to be biased upwards if the analysis ignores other sources of productivity that are correlated with ICT use. By including ICT spillovers explicitly in a production-function model, it is shown that the (direct) contribution of ICT capital deepening to labour productivity growth is lower but still significant. In so doing, we have also been able to reconcile the different pieces of empirical evidence in the literature regarding the contribution of ICT to productivity growth at different levels of aggregation. For the Netherlands, it is shown that, after accounting for ICT spillovers, the results on firm-level data are more in line with those reported in growth-accounting studies on higher levels of aggregation. Nevertheless, our econometric results provide deeper insights than the growth-accounting studies by demonstrating that the contribution of ICT spillovers to productivity growth in the years of the ICT boom was probably substantial.

We have found support for the assumption that ICT enhances the innovation performance of firms, thereby contributing to labour productivity growth in a more indirect way. Moreover, we show that the contribution of ICT-capital deepening is higher when firms combine ICT use and technological innovations on a more permanent basis. Finally, our results also indicate that the potential of many firms to catch up their ICT endeavour may boost (aggregate) labour productivity growth further.

The publication is in Dutch.