Information and communication technologies (ICT) have spread throughout firms and are a necessary condition for the digitization process. These technologies are mainly related to the electronic transmission of information and are expected to improve firms' productivity. The causal demonstration of this effect is difficult, but as a starting point in the analysis it is usual to evaluate the correlation between the variables of interest, in this case, the degree of ICT adoption and the level of productivity in the firm.

The multiple dimensions underlying ICT and the fact that firms adopt them at different times and in different combinations recommends the utilization of a proxy that summarizes the adoption of these technologies in each firm. The first component generated from a principal component analysis adequately reduces the dimensionality of this information. Considering productivity as GVA per worker and comparing its distributions for firms with values for the first principal component below the median (low ICT adoption) and above the median (high ICT adoption), the latter is shifted to the right. This very simple analysis, which does not consider the heterogeneity between firms, shows that those with greater adoption of ICT perform better than the rest. Results hold when a measure of total factor productivity is considered.

For more details, see Amador and Silva (2023), “The impact of ICT adoption on productivity: Evidence from Portuguese firm-level data”, Banco de Portugal Working paper nº 7. 

Prepared by João Amador. The analyses, opinions and findings expressed above represent the views of the authors and not necessarily those of Banco de Portugal or the Eurosystem.

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