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

Motu Working Paper No. 09-15

45 Pages Posted: 18 May 2010

See all articles by Arthur Grimes

Arthur Grimes

Motu Economic and Public Policy Research Trust

Cleo Ren

Motu Economic and Public Policy Research Trust

Date Written: October 2009

Abstract

Fast internet access is widely considered to be a productivity-enhancing factor. Internet access speeds vary regionally within countries and even within cities. Despite articulate pleas for network upgrades to accelerate internet access, there is little rigorous research quantifying benefits to individual firms that arise from upgraded internet connectivity. We use a large New Zealand micro-survey of firms linked to unit record firm financial data to determine the impact that differing types of internet access have on firm productivity. Propensity score matching is used to control for factors, including the firm’s (lagged) productivity, that determine firms’ internet access choices. Having matched firms, we examine the productivity impacts that arise when a firm adopts different types (speeds) of internet connectivity. Broadband adoption is found to boost productivity but we find no productivity differences across broadband type. The results provide the first firm-level estimates internationally of the degree of productivity gains sourced from upgraded internet access.

Keywords: Internet, broadband, productivity

JEL Classification: O33

Suggested Citation

Grimes, Arthur and Ren, Cleo, The Need for Speed: Impacts of Internet Connectivity on Firm Productivity (October 2009). Motu Working Paper No. 09-15, Available at SSRN: https://ssrn.com/abstract=1604247 or http://dx.doi.org/10.2139/ssrn.1604247

Arthur Grimes (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

19 Milne Terrace
Island Bay
Wellington 6002
New Zealand

Cleo Ren

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand

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