ICT Diffusion and Firm-level Performance : Case Studies For Belgium [ Working Paper 08-03 - 21/06/2003]

In the empirical literature, the missing link between ict investments and increa-ses in firm performance is organisational change. This paper aims to assess the impact of ict at firm-level in Belgium, by means of case studies with 220 firms in four sectors: banking, machinery, printing/publishing and transport. The chosen sectors were ict-intensive in 1995, have enjoyed productivity growth during the 1995-2000 period and were probably ready for reorganisation at the time of the interviews.

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Authors

Christian Huveneers (A)

A : Author, C : Contributor

Publication type

Working Papers

The Working Paper presents a study or analysis conducted by the Federal Planning Bureau on its own initiative.

Half of the firms interviewed reported that the adoption of ict has primarily impacted their internal organisation and that some effects of ict on internal organisation have been detected, specifically upskilling of the workforce and electronic communication of information between firms' different departments; this kind of communication is a precondition for interaction between workers and departments within the firm.

The distinction between tangible and intangible, with respect to the diffusion of ict, is not very sharp in the sample. True, the intangible service sectors (banking and transport) use ict network technologies more intensively, but machinery, as a physical and tangible sector, is the most intensive user of cad/cam (Computer-aided design/Computer-aided manufacturing) and of the so-called erp, i.e. Enterprise Resource Planning, the best-known example of which is the German software sap.

Process innovation has been studied through the interaction between ict use and twelve different business functions. Rates of diffusion along the value chain have been computed for eight ict technologies. The results suggest that process innovation due to ict is likely in the sample.

The responding firms report that ict use has a positive impact on sales and pro-duct innovation (new products and customisation). The relevance of these answers has been examined. As regards product innovation, the correlation with ict use seems to be robust, since process innovation is likely in the sample, and since half of firms attribute the launching of new products over the last few years to their electronic capability. This raises hopes of increased efficiency in the future for firms using ict in the four sectors that were studied.

As regards sales, more than half of the firms in the sample increased their sales, of which 29% attribute it to ict. This may explain why we observe an increase in costs for about 60% of the firms in the sample.

There are indications of switching costs and lock-in in the sample, leading to virtual integration.

Firms were also asked about the factors which hampered the diffusion of ict, in view of the policies to be adopted to foster ict use. The most frequent answers from firms were:

The lack of competence within the company and the cost of training in ict (1 in 4 firms).
Concerning infrastructure and technology: the high set-up cost (1 in 9 firms) and the inadequate level of ict equipment used by customers and suppliers (1 in 7 firms).
The price of telecommunications services (1 in 11 firms).
Certain failures of the firm's internal organisation (1 in 20 firms).

Firms said that they were expecting some policy measures, specifically further liberalization of the telecommunication sector (1 in 6 firms), e-government actions (1 in 7 firms) and better standardisation and safety of b2b transactions (1 in 15 firms).