The effects of ICTs and complementary innovations on Australian productivity growth

Abstract

Australia experienced both rapid uptake of ICTs and strong productivity growth in the 1990s. Growth accounting has established some links between the two, but the existence of productivity gains from complementary product and process innovations remained uncertain. Analysis in this paper using firm-level data from the Australian Business Longitudinal Survey shows positive and significant links between ICT use and productivity growth in manufacturing and a range of service industry sectors. Firm-characteristics were found to be important in identifying businesses using ICTs while significant interactions were also found between ICT use and complementary organisational characteristics (including skill, improved business practices and business restructuring) in raising productivity. Transition dynamics and time lags were of importance. After an initial productivity boost associated with the uptake of selected ICTs, productivity effects were estimated to have tapered off over time. Thus, the study suggests that the ultimate productivity effect of a new innovation is a step up in levels, rather than a permanent increase in the rate of growth. Show more