IT use and firm productivity
Growth Analysis previously developed a measure of digital intensity in firms, which can be used to compare use of digital applications between industries. This study, IT use and firm productivity, extends previous work to improve the measure.
The Swedish government adopted a digitalisation strategy in 2017. One of the objectives of this strategy is that firms adopt digital applications that improve productivity. In this paper, we try to identify an indicator that can measure progression towards this objective.
We find that use of enterprise resource planning (ERP) software can be used as a proxy for the degree of digitalization in firms, since use of this application is coupled with the use of other digital applications. We find that firms that use ERP software are more productive than firms that do not use such software. The productivity premium of using ERP software varies between industries. The industry level productivity premium is positively correlated with the share of firms in the industry that uses ERP software.
We also investigate the correlation productivity of other digital applications. We find that use of ERP software and use of Customer Relationship Management (CRM) software is positively correlated with productivity. We propose that the use of these two key technologies can be used as an indicator of digitalization in firms.
We recommend that the questions on use of ERP and CRM software are regularly collected as part of the survey ICT usage in industries since they can be used as indicators of digital intensity that are relevant for economic growth.