ICT, Consulting and Innovative Capabilities

33 Pages Posted: 15 Apr 2009

See all articles by Daniel Cerquera

Daniel Cerquera

ZEW – Leibniz Centre for European Economic Research

Date Written: 2008

Abstract

This paper analyzes the impact of the decision to contract ICT consulting on firms' innovative incentives. The paper develops a theoretical model and estimates some of its implications for a sample of German firms. In particular, the paper estimates the average treatment effect of the decision to contract ICT consulting on firms' innovative incentives, considering the role of endogeneity and unobserved heterogeneity in the correlated random coefficient model. The paper shows three main results. First, the theoretical model shows that ICT consulting increases aggregate incentives to innovate. This result is not corroborated by the empirical application. ICT consulting does not aff ect neither the probability of introducing product or process innovations nor the number of such innovations. The empirical results show that ICT consulting affects negatively the value of the introduced product and processes innovation. Second, the theoretical model suggests that low productivity firms might evidence either lower, unaffected or higher incentives to innovate. The empirical application shows that low productivity firms exhibit higher incentives to innovate. Third, although the theoretical analysis shows that the lower the productivity level the more the incentives to contract ICT consulting, the empirical evidence is inconclusive on this matter. These results suggest that firms optimize their innovations portfolio through ICT consulting.

Keywords: ICT Consulting, Competition and Innovation

JEL Classification: D21, L13, O32

Suggested Citation

Cerquera, Daniel, ICT, Consulting and Innovative Capabilities (2008). ZEW - Centre for European Economic Research Discussion Paper No. 08-127, Available at SSRN: https://ssrn.com/abstract=1379609 or http://dx.doi.org/10.2139/ssrn.1379609

Daniel Cerquera (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

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