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ICT labor, software usage, and productivity: firm-level evidence from Turkey

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Abstract

This paper examines the impact of information and communication technology (ICT) on firm-level productivity in Turkey using a novel longitudinal data set. We combine two firm-level data sets compiled by the Turkish Statistical Institute and construct an unbalanced panel data set covering the period 2007–2014. Our data set matches firms in the ICT Usage in Enterprises Survey to the Annual Industry and Service Statistics Survey that includes data on production factors and firm characteristics. We estimate production functions augmented by ICT labor, software investments, and indicators for the usage of enterprise system applications including ERP, CRM, and SCM. Our results confirm that there is a positive relationship between firm-level productivity and ICT use. Empirical findings support the complementarity hypothesis between ICT labor and software usage variables. This result implies that the productivity contribution of ICT labor is larger in firms using specialized software. Accordingly, firms need to invest in ICT labor to reap the benefits from enterprise software investments. We also estimate our models using sub-samples based on size and sector. While the elasticity of ICT labor is higher in small and medium-size firms, larger firms have greater marginal product than smaller firms. Our results also suggest that the strength of the link between ICT and productivity may be different across sectors. In particular, we find that the productivity contribution of ICT labor is higher in the services than the manufacturing sector.

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Notes

  1. For more extensive reviews of the literature, we refer to a conventional narrative review by Cardona et al. (2013) and three meta-analyses; Stiroh (2005), Polak (2017), and Stanley et al. (2018).

  2. Evenson and Westphal (1995) define organization capital as a technological asset that encompasses “the knowledge used to combine human skills and physical capital into systems for producing and delivering want-satisfying products”. According to Li et al. (2017) organization capital is “the body of knowledge and business processes and systems that facilitates the match between labor and physical production facilities”. Organizational capital has, therefore, both tangible and intangible components that enable inputs to be more productive. Efficient use of ICTs, in particular software applications, can be instrumental in increasing the value of organizational capital.

  3. Our choice of the proxy for ICT labor is motivated by data. In the ICT usage survey, the number of computer using employees is missing in two years, 2012 and 2014. Thus, to increase the number of observations we use the number of internet using employees as a proxy for ICT labor. We note that the two labor variables, computer-users and internet-users, are highly correlated.

  4. We used the Stata routines written by Rovigatti and Mollisi (2016, 2018). For details and practical examples, we refer to Rovigatti and Mollisi (2018).

  5. The ICT Use survey is conducted annually since 2007 and conforms to the guidelines suggested by the European Commission’s Eurostat. Firm-level survey data sets are confidential and only available for academic use in designated research centers in Turkish Statistical Institute.

  6. We also used 7.5% and 30% depreciation rates for tangible and intangible assets, respectively, but results were qualitatively the same and very similar in magnitude.

  7. To save space, we only present the estimation results from the extended productivity model with interaction terms. The results without the interaction terms are very similar to baseline results and available upon request.

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Acknowledgements

This study is part of a project funded by the Yildiz Technical University Scientific Research Project Committee (project no 2013-02-01-KAP01) in Istanbul, Turkey. The econometric analyses in this project have been carried out at the data analysis center in the Turkish Statistical Institute’s Istanbul Regional Administration. We thank the TurkStat administration and staff for their help and hospitality. We also thank two anonymous referees and the editor for helpful comments and suggestions. The analysis and conclusions in this work are the sole responsibility of the authors.

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  1. Department of Economics, Yildiz Technical University, Istanbul, Turkey

    Hüseyin Taştan & Feride Gönel

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  1. Hüseyin Taştan
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Appendix

Appendix

Tables 7–9

Table 7 GLS estimation results using ICT labor share
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Table 8 GLS estimation results for manufacturing and services firms
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Table 9 GLS estimation results for SMEs in manufacturing and services
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Taştan, H., Gönel, F. ICT labor, software usage, and productivity: firm-level evidence from Turkey. J Prod Anal 53, 265–285 (2020). https://doi.org/10.1007/s11123-020-00573-x

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