ICT Activity, Innovation and Productivity: An Analysis of Data From Australian Businesses

Abstract

Longitudinal firm level data are used to examine the short‐term impact of information and communications technology (ICT) investment and innovation on Australian businesses. ICT activity is found to be correlated with increased rates of innovation across all aspects of business. Firms which increase their ICT investment are also more likely to subsequently report increased productivity, though this effect does not appear to be causal. IT investment was most clearly associated with increased productivity and profitability in the manufacturing, construction and transport industry sector. The results suggest that the impact of ICT investment within a firm is mediated by broader innovations in business practice.