The Need for Speed: Impacts of Internet Connectivity on Firm Productivity

Broadband access is widely considered to be a productivity-enhancing factor, but there are few firm-level estimates of its benefits. We use a large micro-survey of firms linked to longitudinal firm financial data to determine the impact that broadband access has on firm productivity. Propensity score matching is used to control for factors, including the firm"s own lagged productivity, that determine a firm"s internet access choice. Instrumental variables estimates are employed as a robustness check.

Results indicate that broadband adoption boosts firm productivity by 7-10%; effects are consistent across urban versus rural locations and across high versus low knowledge intensive sectors.

Citation

Grimes, Arthur, Cleo Ren and Philip Stevens. 2012. "The Need for Speed: Impacts of Internet Connectivity on Firm Productivity," Journal of Productivity Analysis, 37:2, pp. 187-201.