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Broadband infrastructure, ICT use and firm performance: Evidence for UK firms

Timothy DeStefano, Richard Kneller () and Jonathan Timmis ()

Journal of Economic Behavior & Organization, 2018, vol. 155, issue C, 110-139

Abstract: The recent economics literature has begun to recognise that ICT is a heterogeneous technology altering information storage, processing and communication in distinct ways. In this paper we use the arrival of a new communication technology, ADSL broadband, to study the effects of heterogeneous types of ICT on firm performance. To do so free from endogeneity bias, we construct instruments using postcode-level geographic variation in the infrastructure underlying broadband internet – the pre-existing telephone network. We show that after placing various restrictions on the sample, instruments based on the timing of ADSL broadband enablement and the cable distance to the local telephone exchange satisfy the conditions for instrument relevancy and validity. We find in turn, that ICT causally affects firm size (captured by either sales or employment) but not productivity.

Keywords: ICT; Broadband; Firms; Instrumental variable (search for similar items in EconPapers)
JEL-codes: D22 D24 O33 (search for similar items in EconPapers)
Date: 2018
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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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