Impact of International Information Technology Transfer on National Productivity

Abstract

Researchers have widely postulated that the adoption of information technology (IT) products enhances global competitiveness and production efficiency as successful technological innovation replaces and improves traditional inputs and modes of production. This study suggests that when IT products are traded across borders, IT investment in an economy has a positive influence on the productivity of its import partner country. We provide empirical evidence for the positive effect of global IT diffusion on productivity through international trading of IT products. The results show a positive effect of foreign IT transfer on the recipient country’s productivity. In addition, we find that the effect of transferred IT is only significant when the source country is an IT-intensive or hi-tech export country. The results and implications are robust, even controlling for other important factors such as openness, innovative capacity, and IT infrastructure in addition to the transferred IT. Finally, a panel cointegration test—a recently developed advanced econometric method—is used to address the common problems of spurious relations that arise in regressions with nonstationary time-series data.

The impacts of information technology on total factor productivity: A look at externalities and innovations

“…Patent is commonly used for measuring a country's innovation capacity (Mansfield, 1985) and it is highly correlated with a country's R&D investments (Furman et al, 2002;Park et al, 2007). We also collected data on HDI from the Human Development Report Office and obtained data on FDI from the Euromonitor database.…”

“…IT services and IT-based product innovations may have a similar effect (Chou and Shao, 2014;Davenport et al, 2008). Park et al (2007) have extended the idea of IT-leveraged innovations to knowledge transfer across countries through international trade of IT goods. In this light, IT as a platform technology can complement innovations to generate synergies and enhance the technological level of production process (Shapiro and Varian, 1999).…”

Economic Integration, IT Intensity and the Aggregate Economic Impacts of IT Services Offshoring

“…However, firmlevel data is hard to collect due to confidential considerations. Park et al [44] commented that, in the research on IT and productivity, additional attention should be placed on macro-level analysis since the IT productivity paradox originated from the national and industry level, so there is still much to learn.…”

“…Yet, by using a log linear and additively separable production function, we are able to satisfy the key conditions that Nataf [39] proposed for the aggregation of production functions from the firm-level to the industry and economy levels. As Dewan and Kraemer [17] and Park et al [44] used a Cobb-Douglas production function to study impacts of IT capital on national productivity, our model is given by:…”

“…The growth rate g i of the investment capital flow is calculated with the earliest 10 years of investment data that we had available. We assumed that the depreciation rate δ i is 5%, based on Park et al [44]. Once we obtained the initial capital stock TotalCapital i0 , we then were able to compute the subsequent values of the capital stock series using the perpetual inventory method via the following relation with the country subscript suppressed: TotalCapital t = TotalCapital t-1 (1-δ i ) + InvFlow t-1.…”