Abstract

This paper examines the impact of the information and communications technologies (ICT) on production technical efficiency in a wide range of industries in Italy. Technical efficiency, defined as the firm's distance from the production efficient frontier, often make up an important component of productivity. Assessing the role of ICT in the organization and control of production processes may be of primary interest for those firms that are trying to rationalize their production techniques. The examined survey of firms (the Italian Istat annual survey on economic accounts of enterprises with at least 20 employees), offers an opportunity to test the hypothesis that ICT, in both hardware and software components, can positively influence the production performance. The analysis is carried out within industries defined by the OECD STAN database to ease international comparability of the empirical results obtained. Technical efficiency of each individual firm is measured by means of data envelopment analysis, a non-parametric technique that is well known in the field of operations research. Correlation between ICT and technical efficiency is examined using cross-sectional regressions run on firm-level data within each industry. The main conclusion is that this correlation is not significantly rejected in the majority of the industrial sectors considered. In general, positive correlations are not rejected in all four groups of industries defined on the basis of R&D intensity of production. However, technical efficiency does not seem to be affected by ICT in a significant share of high R&D intensity industries. This paradoxical result can be explained by noting that almost all firms in these industries operate at high relative levels of technical efficiency and there are little margins for further efficiency gains through further increases in ICT intensity of production within the present technology. On the other hand, firms operating in less R&D intensive industries have greater opportunities to increase technical efficiency by using ICT more widely.