ICT, Innovation, a...

ICT, Innovation, and Economic Growth in Transition Economies

A Multi-country Study of Poland, Russia, and the Baltic Countries

infoDev study finds that ICT plays an important role in facilitating the modernization and improved economic performance of firms in transition economies.

ICT, Innovation and Productivity Growth

There have been significant debates about the impact of new ICTs on economic performance and competitiveness in general, and on productivity, efficiency, and innovation in particular. Notably, in seeking an explanation for the acceleration in productivity and economic growth experienced in many industrialized countries in the latter half of the 1990s and early 2000s, many economists have looked at the development, application, and utilization of ICT as a critical factor. It has been argued that ICT represents a new ‘General Purpose Technology’, with the potential of transforming economic processes into a “New Economy,” generating a sustained increase in economic growth through processes of technological development and innovation. Hence, at firm level, the expectations are of greater efficiency, lower costs, and access to larger and new markets, while governments see the application and use of ICT as generating higher national productivity, job creation, and competitiveness.

In response to these developments, a number of studies have tried to assess the economic impact of ICT on firms and countries. The emphasis in these studies has been on the impact of ICT in OECD countries, in particular the United States and Western Europe. The findings of these studies suggest that ICT has contributed greatly to productivity growth and competitiveness in the OECD countries in the last decade. More recent studies have focused in greater detail on the processes of application and use of ICT within firms.

ICT in Transition Economies: a mULTI-COUNTRY STUDY

The ICT dynamics in transition economies are at a stage when one can apply lessons learned from the United States and old European Union (EU) member states both at corporate and government levels. Meanwhile, the nature of the transition economies of Central and Eastern Europe might require tailoring of the lessons learned from Western Europe and the United States, and perhaps even new approaches to policies for ICT adoption and utilization.

To advance understanding of these issues, both in the transition economies and more broadly, infoDev commissioned this multi-country study of ICT, innovation and economic growth, that addresses the need for collecting more revealing data on ICT utilization and its impact at the firm level, the need for more rigorous analysis of how ICT investment and use affects innovation, and the need for better understanding of how this complex translates into productivity increases and enhanced competitiveness. Accordingly, the main research questions of the study are as follows:

  • What is the contribution of ICT utilization to the economic performance of firms?
  • What is the contribution of ICT utilization to innovation in firms?
  • What are the enablers, barriers, and constraints for ICT utilization at firm level in transition countries?

The present study derives its purpose from the context outlined above and aims to achieve the following:

  • It looks beyond the ICT dynamics in terms of ICT investment and technological evolution.
  • It selects firms in transition economies as the subject of analysis since little is known on the economic effects of ICT for this unit of analysis within a transition context. The choice of the subject of analysis is further supported by the fact that there are still ample opportunities in transition countries for positive intervention at corporate and government levels.
  • It builds on the research carried out on the role and impact of ICT in OECD countries in order to provide a comparative basis. For this purpose, the questionnaire used in the OECD EBIP study has been adapted and applied.

Methodology

In answering the central research questions of the study, the project has adopted a new and innovative methodology that identifies the impact of ICT at firm level. More specifically, the methodology adopted for this project is an Electronic Business Survey (EBS) that allows us to collect data at firm level, and place the application and utilization of ICT within its proper context. Such a methodology has allowed us to take account of the context specificity of the utilization of ICT within different sectors and firms. In contrast, many existing studies of the impact of ICT have looked at national, regional, or sectoral impacts as their unit of analysis.

Key findings

  • ICT plays an important role in facilitating the modernization and improved economic performance of firms in transition countries.
  • ICT in itself is often insufficient for improving economic performance. Rather, a range of complementary factors are required, e.g., organizational change and new marketing strategies.
  • ICT use among firms in transition countries is primarily geared towards improved production and transaction processes, e.g., organizational change and improved marketing, rather than the development of new or improved products.
  • There are significant sectoral differences in the role and scope of ICT use. The greater the information intensity of production and transaction processes, the greater the scope for applying and using ICT.
  • Promoting the application and use of ICT for improved economic performance requires policies tailored to the individual sectors of the economy.

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