Estimating the Value of Information Technology in the Productivity of the Transport Sector

Abstract

This paper expands a methodology, originally formulated for calculating the firm-level business value of Information Technology (IT), to that for a whole sector and applies it experimentally for the transport sector using statistical databases for several countries in Europe. The term “business value” means the quantified impact of a given technology, in this case, Information Technology, on the productivity of a sector or firm as measured by a given “yardstick” (e.g., sales, revenue, and many others). This is important to know in order to justify investments in a given technology or technological sector and for policy formulation or regulation. This paper proposes a novel methodology for calculating the business value of IT in a given sector. This is the first time that such a task is attempted because in the past most research was focused on calculating the business value at firm-level. The suggested methodology is then applied by use of panel data from the statistical records of national statistics for the transport sector. The results show that infrastructural investment in Information Technology has an impact on the transport sector’s output, in terms of its annual production value, of the order of 5–6%. Through sensitivity tests and a discussion of the results, it is estimated that the actual impact may probably be a bit higher but not much higher (in any case, something below the 10% figure). The application also shows that the suggested methodology can be applied for the estimation of the impact of any other technology or service on any given economic sector. Finally, a possible future conceptual model is presented for the expansion of the methodology to a more global and integrated level considering the interaction from other sectors as well as other technological and environmental factors.