Telecommunications technologies and regional development: theoretical considerations and empirical evidence

Peter Nijkamp and Roberta Capello

The Annals of Regional Science, 1996, vol. 30, issue 1, 7-30

Abstract: The paper provides an analysis of network externalities in the telecommunications sector and their effects on corporate and regional performance. It can essentially be regarded as part of the general theoretical reflection on the role of telecommunications in economic development, by emphasising the importance of telecommunications for future economic growth. However, the advantages derived from these technologies stem not only from the technological changes taking place in the sector, but also from their nature as interrelated technologies. This stems from the fact that when a new subscriber joins the network, the marginal costs of his entry are lower than the marginal benefits he creates for people (firms) already networked. This difference between marginal costs and benefits (in favour of the benefits) inevitably reflects on industrial performance and - via multiplicative effects - on regional performance. The paper presents an empirical part where an effort is made to measure telecommunications network externalities. Regional differences in the exploitation of network externalities emerge between firms located in the north and in the south of Italy.

Date: 1996
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