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Beyond information technology and productivity paradox: Analysing the channels of impact at the firm-level

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  • Khanna, Rupika
  • Sharma, Chandan

Abstract

This paper explores the effects of innovational investments in information technology (IT) on the productivity performance of firms. We employ a micro-level dataset of 3582 firms from Indian manufacturing spanning 1998 to 2016 to identify some critical channels through which IT investments may impact productivity. We find a significant impact of inter-industry network spillovers, suggesting that the convenience drawn from IT assets transmits to firms in other sectors of the economy without the recipient firms paying for it. These spillovers are higher for firms in the top 50 percentile of the industry in terms of their IT assets. Our results also show strong complementarities between IT, R&D, and disembodied technology purchased by the firm. We find that these technological inputs offer a synergistic effect on productivity. Our results also highlighted that these synergies vary by ownership and export status. IT also seems to mitigate the diminishing gains to R&D as firms scale their R&D effort. Overall, we show that IT investments not only provide crucial productivity returns but also synergize other technological investments to produce superior overall gains.

Suggested Citation

  • Khanna, Rupika & Sharma, Chandan, 2024. "Beyond information technology and productivity paradox: Analysing the channels of impact at the firm-level," Technological Forecasting and Social Change, Elsevier, vol. 203(C).
    • Handle: RePEc:eee:tefoso:v:203:y:2024:i:c:s0040162524001653
    DOI: 10.1016/j.techfore.2024.123369
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