Digital vulnerability and performance of firms in developing countries

Joël Cariolle, Maëlan Le Goff () and Olicier Santoni

Working papers from Banque de France

Abstract: This paper provides evidence of large positive effects of Internet use on local firm performance, using a sample of some 30,000 firms from 38 developing and transition countries. We adopt an IV approach emphasizing firm s digital vulnerability to seismic shocks upon the telecommunications submarine cable network, and find that a 10% increase in Internet incidence raises by 36% their total annual sales, by 26% sales per worker, by 12% the number of permanent workers. Contrary to other studies on the effect of ICT adoption on trade, we do not find significant evidence on firms exports. A greater use of Internet by manufactures is also found to increase their number of production (unskilled) workers in a larger extent than non-production workers, which nuances recent evidence on a skilled-biased digital revolution. The concern for omitted variable bias, reverse causality or measurement error is lowered by proceeding to a wide range of restrictions upon the sample composition and the instrument set calibration, and by controlling for location, sector, year, country-by-year fixed effects.

Keywords: ICT; Internet; Submarine Cables; Seismic Shocks; Firm Performance. (search for similar items in EconPapers)
JEL-codes: F02 L25 L96 O11 O18 O33 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2019
New Economics Papers: this item is included in nep-cse, nep-eff and nep-pay
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:709

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