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The Contribution of Digital Firms to Productivity Growth in the Manufacturing Sector: A Decomposition Approach

Simon Bruhn and Johanna Deperi
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Simon Bruhn: Ilmenau University of Technology, Ilmenau, Germany
Johanna Deperi: Universita degli Studi di Brescia, Italy

No 2022-42, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: We show that digital and non-digital firms differ significantly with respect to their contribution to productivity growth. Conducting a decomposition analysis on panel data of publicly listed U.S. manufacturing firms covering the 1990-2015 period, we demonstrate that (i) firmlevel productivity improvements of digital firms consistently exceed those of non-digital firms; (ii) the market selection process works more efficiently for digital firms; and (iii) the negative correlation between productivity changes and changes in market shares is decisively less pronounced for digital than for non-digital firms. We show that these observed differences in productivity growth can be linked to the idiosyncratic characteristics of digital firms, namely the profound exploitation of digital technologies, the scalability of digital business models and the complementarity of digital and labor investments.

Keywords: Digital firms; industry dynamics; productivity growth; decomposition; labor reallocation (search for similar items in EconPapers)
JEL-codes: E24 J24 L11 L25 O33 O47 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2022-12
New Economics Papers: this item is included in nep-bec, nep-eff, nep-hrm and nep-sbm
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