The recent economics literature has begun to recognise that ICT is a heterogeneous technology altering information storage, processing and communication in distinct ways. In this paper we use the arrival of a new communication technology, ADSL broadband, to study the effects of heterogeneous types of ICT on firm performance. To do so free from endogeneity bias, we construct instruments using postcode-level geographic variation in the infrastructure underlying broadband internetthe pre-existing telephone network. We show that after placing various restrictions on the sample, instruments based on the timing of ADSL broadband enablement and the cable distance to the local telephone exchange satisfy the conditions for instrument relevancy and validity. We find in turn, that ICT causally affects firm size (captured by either sales or employment) but not productivity.

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Differences in access to high-speed broadband between urban and rural locations are known as the ‘digital divide’. Governments around the world have committed to spending considerable amounts of money to alleviate disparities in broadband infrastructure. However, to date, there is limited causal evidence for broadband and firm performance with even less of an understanding on whether the effects are distinct between firms located in urban versus rural localities. In this article, we exploit geographical discontinuities in broadband availability across the UK to capture the causal effects on firms on both sides of this divide. We find for both urban and rural firms that broadband causes an increase in their size, but not labor productivity. In addition, we find evidence that these size effects are strongest for urban firms, but for both urban and rural firms, the effects are concentrated in knowledge-intensive industries.

The growing investment in robotics is an important aspect of the increasing digitalisation of economy. Economic research has begun to consider the role of robotics in modern economies, but the empirical analysis remains overall limited. The empirical evidence of effects of robotics on employment is mixed, as shown in the review in this chapter. The effects of robots on economies go further than employment effects, as there are impacts for the organisation of production in global value chains. These change the division of labour between richer and poorer economies. Robotics may reduce offshoring of activities from developed economies towards emerging economies. Global spreading of automation with robotics can lead to faster de-industrialisation in the development process. Low-cost jobs in manufacturing may increasingly be conducted by robots such that fewer jobs than expected may be on offer for humans even if industries were to grow in emerging economies.

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