Does IT Level the Playing Field for Small Establishments? Evidence from Manufacturing

Abstract

We examine whether information technology investments benefit from economies of scale. Using U.S. Census non-public microdata, we examine the productivity benefits of IT investments for over 11,000 manufacturing plants over a nine year period. We find evidence that large plants exhibit differential productivity benefits from IT investments relative to smaller plants. These differences are robust to a range of alternative estimators and cannot be explained by cross-sectional variance in firm size, plant and firm age, and position in the supply chain. The results have important implications for small plants that firm-level studies have been unable to reveal.

Keywords: information technology, productivity, electronic commerce, plant size, economies of scale, manufacturing, total factor productivity