Sunday, March 1, 2015

Information and communication technology

Advances in the field of information and communication technologies (ICT) have driven a new technological revolution that has modified not only the ways of doing business but also the ways of performing daily household activities. Due to its widespread applications, ICT has been classified as a General Purpose Technology (GPT), exactly like electrification and other great inventions of the past (Jovanovic and Rousseau 2005, O'Mahony and Vecchi 2005, Venturini
2009). As a GPT, ICT is characterized by considerable technological progress, pervasive use in a wide range of economic sectors, as well as by the ability to boost complementary innovations and to generate spillover effects (Bresnahan and Trajtenberg, 1995, Lipsey et al. 2005). These characteristics have produced positive productivity effects throughout the economy and ICT is now recognised as an important determinant of productivity growth especially if coupled with investments in other intangible assets such as R&D, organizational and human capital (P.L., 2005) (Brynjolfsson and Hitt 2000, 2003, Kretschmer 2012).  
Spillovers are the increased efficiency of transactions among firms using ICT technology. Rowlatt (2001) argue that the use of electronic data interchange, internet-based procurement systems and other inter-organisational information systems produces a reduction in administrative and search costs, and a better supply chain management. Brynjolfsson et al. (2002) present some case studies showing how ICT makes it possible for firms to interact with others in a faster and more efficient way. Electronic transfer of payments and invoices, automated inventory replenishment, on-line markets for placing and receiving orders have all improved efficiency, and consumers have benefited from increasing product variety and convenience. Interactions with other firms are therefore the source of another type of spillover often associated with ICT, i.e. 'network externality', whereby the efficiency of products or services increases as they are adopted by more users (Atrostic and Nguyen 2005).  

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