Are ICT, Human Capital and Organizational Capital Complementary in Production? Evidence from Italian Panel Data

Information and communication technologies (ICT) are believed to play a central role in determining productivity, especially when ICT investments are complemented in investments in Organizational Capital and Human Capital. In this paper we explore the ICT-Organizational Innovation-Human Capital complementarities issue for the Manufacturing sector in Italy. We use data from the 7th, 8th and 9th waves of the "Indagine sulle Imprese Manifatturiere Italiane", which contains information on ICT investments, organizational innovations, the skill composition of the work-force and on many other variables (measured at the firm level). From these three waves we create an unbalanced panel, and we take the wave-to-wave variation in the log of productivity and regress it on a series of explanatory variables, including ICT investment, the presence of organizational innovations, the skill composition of the work force and their interactions. On these differenced data we run OLS and find no evidence of the complementary hypothesis between ICT investment and organizational innovations, which is per se an interesting result, given that for many other (European) countries there exists significant evidence of complementarity. This is perhaps due to 1) the focus on manufacturing firms and 2) the fact that most firms in our dataset are medium-small firms (i.e. organizational change is more complementary with ICT investment for large firms). Our data also signal that the skill composition of the work-force is a strong determinant of productivity (either alone or when interacted with other potentially complementary assets). Finally, ICT investment is a complement to human capital in stimulating productivity growth.