Picking up speed: Does ultrafast broadband increase firm productivity?

Abstract

We estimate whether there are productivity gains from ultrafast broadband (UFB) adoption and whether any gains are higher when firms undertake complementary organisational investments. Using an IV strategy based on proximity to schools (that were targeted in the UFB roll-out), we find that the average effect of UFB adoption on employment and (labour and multifactor) productivity is insignificantly different from zero, even for firms in industries where we might expect the returns to UFB to be relatively high. Conversely, we find that firms making concurrent investments in organisational capital specifically for the purpose of getting more from their ICTs appear to experience higher productivity growth, at least in first-difference specifications. Firms making these joint (UFB-organisational) investment decisions are significantly more likely to report other positive outcomes from their ICT investments, consistent with the identified relationship with productivity being causal.