Productivity breakdown of the information and computing technology industries across countries

Abstract

In this paper, we measure productivity growth of the information and computing technology (ICT) industries in 14 Organization for Economic Cooperation and Development countries over the 13-year period of 1978–1990. The ICT industries are the providers of essential information technology (IT) capital goods. This macro-level analysis seeks to find out how productively such IT capital goods are provided. The basic unit of analysis employed is the Malmquist Total Factor Productivity (TFP) index. The Malmquist TFP index is then decomposed into three constituent elements accounting for different sources of productivity growth: technological progress, efficiency change, and change in economies of scale. The approach of measurement is based on the concept of distance functions and employs the non-parametric frontier method of data envelopment analysis. Our results indicate that each country's ICT industry manifests its own particular patterns in various performance measures. Among the 14 countries examined, 10 had witnessed productivity growth in their ICT industries. Overall, these ICT industries are found more productive than other industries when compared with previous research. Further analyses reveal that (1) most of the productivity growth measured is due to technological progress; (2) efficiency change exerts a relatively small positive effect on productivity growth; and (3) the change in scale economies unfavourably affects productivity for most countries. Finally, practical implications for formulating IT policy are drawn from our results, and topics are identified for future research.

Keywords:

• information and computing technology
• data envelopment analysis
• Malmquist productivity index
• technical change
• efficiency
• economies of scale

Acknowledgements

This research is supported by the Dean's Award for Excellence Summer Grant Program funded by the Dean's Council of 100, The Economic Club of Phoenix, and the Alumni of the WP Carey School of Business at Arizona State University. We wish to thank the anonymous reviewers, Pieter Ribbers, Tridas Mukhopadhyay, John Wilson, and the attendees at the 2002 PACIS and the 2003 HICSS for their constructive comments on an earlier draft of this paper.