Productivity in the Service Sector: Businesses with Experience in Innovation Benefit to a Greater Extent from ICT

The use of Information and Communication Technologies (ICT) increases the productivity of service providers in Germany. The extent to which productivity increases, however, depends on the strategies used, and how much experience the individual business has in terms of innovation.

It is primarily businesses which already have experience of implementing new processes (process innovations), which benefit from the use of ICT. These are the findings of a current study carried out by the Centre for European Economic Research (ZEW) in Mannheim, on behalf of the Baden-Württemberg Stiftung.

As various studies show, many businesses use ICT solutions to improve their business processes and organisation. ZEW took a representative sample of over 1,200 business-related service providers and businesses from the fields of trade and logistics in Germany, and analysed the relation between innovation activities and the implementation of ICT using data from 1994 to 1999. The study, based on the Mannheim Innovation Panel, indicated that businesses with experience of innovation were particularly able to increase productivity to a significant degree by investing in ICT. Businesses which have already implemented process innovations in the past are quicker to recognise the potential gains from implementing new technologies in their businesses. The employees in these businesses also tend to be more flexible and accept that these new technologies are likely to boost competitiveness.

A further finding of the study is that although businesses with experience in innovation activities are able to implement ICT solutions more productively than other businesses, they do not have an advantage when it comes to other investments. The increasingly widespread use of ICT in the past few years has therefore increased the difference in productivity between innovative and conservative businesses in the service sector.

Contact

Dr. Thomas Hempell, E-mail: hempell@zew.de