The economic impact of broadband access for small firms

Pantelis Koutroumpis and Danai Sarri

The World Economy, 2024, vol. 47, issue 4, 1642-1681

Abstract: This paper investigates the economic effects of improved broadband access at the firm level. Using a detailed micro data set from 2002 to 2017, we cover almost 20,000 small, medium and large Greek firms and test the relationship between their economic performance with the availability and use of broadband services at the postcode level. We trace the effect of increased access and speeds across industrial sectors and firm sizes. Our results highlight that increases in broadband speeds can improve the financial performance of adopting small firms (sales, profits and labour productivity) by 2% for every speed doubling beyond basic broadband access. Unlike other output metrics, small firms do not generate increasing shares of intangible capital through this adoption process. These effects, which remain strong across a range of robustness checks, suggest that the digital transition for small firms should focus on the causes of adoption (including training and skill development) and move beyond policies aimed at increased broadband availability alone.

Date: 2024
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