Corporate productivity and the stages of ICT development

A number of studies have considered the impact of Information and Communication Technology (ICT) on corporate productivity, including the relationship of ICT to corporate structure and business processes. Comparatively less attention, however, has been directed toward the relationship between corporate productivity and the various stages of ICT application development; to date, the only work in this direction has been the proposal of some conceptual frameworks for the development stages of ICT, and no empirical studies have been conducted. In this paper, using individual data from the 2006 Information and Communication Technology Survey conducted by Japan’s Ministry of Economy, Trade and Industry, we use estimated production functions to quantify how productivity changes with the stages of ICT development. When we classify ICT applications into four stages of sophistication— nonperforming ICT assets , section - wide system applications, company - wide system applications, and inter - corporate system applications—we find that the impact of ICT on productivity increases with each successive stage of sophistication. For instance, when we use a production function that assesses the impact of the ICT development stage on Total Factor Productivity (TFP), we find that companies that have developed company - wide system applications exhibit added-value productivity some 1.07-fold higher than companies that have only progressed as far as the development of section - wide system applications. We also find that companies that have developed inter - corporate system applications exhibit added-value productivity some 1.11-fold higher than companies with only company - wide system applications.