Big Data and Productivity: No Automatic Relationship
Research
22.11.2024
ZEW Analyses Relationship Between Big Data and Productivity
Hopes that big data will boost labour productivity have not been fully realised so far. A study by ZEW Mannheim shows: The effect of big data on labour productivity depends primarily on the extent of data analysis. The researchers examined official company data from statistics authorities in Germany and the Netherlands for the study.
“The availability of data and computing capacity has increased at a high pace in recent years, enabling companies to perform big data analytics,” explains the study’s co-author Robin Sack, member of ZEW’s “Digital Economy” Research Unit.
Different factors as productivity drivers
“Simply carrying out big data analytics is not going to result automatically in productivity gains, though. For instance, in Germany and the Netherlands labour productivity increases as a function of the intensity with which big data analytics is performed. This means that if different types of large datasets are used, e.g. sensor, location or social media data, significantly higher productivity effects are observed in companies,” explains Sack. “But other factors also play a role: Generally, productivity gains brought about by new digital technologies tend to be more visible in large firms than in smaller ones. Besides, it takes time until new technologies are broadly adopted throughout the economy and used in a productivity-enhancing way.”
The fact that new digital technologies do not immediately result in productivity gains is not a new phenomenon. When new information and communication technologies rapidly spread across the economy as early as in the 1970s and 1980s, as well as in the 2000s, the big push failed to materialise at first. “Even then, people already referred to the ‘productivity paradox’. We know from the past that it can take years or even decades for new technologies to unfold their full positive potential,” adds Sack.
Comparison of the use of big data in Germany and the Netherlands
Big data analytics are applied to varying degrees in Germany and the Netherlands. In the 2016 sample, 19 per cent of German companies with more than 250 employees used big data. After a jump to 36 per cent in 2018, the share of large companies fell again to 32 per cent in 2020. Overall, big data was less frequently used by small and medium-sized enterprises.
By contrast, the share of Dutch enterprises using big data is much higher: Close to 44 per cent of companies with more than 250 employees worked with big data as early as in 2016. This portion rose to more than half of the large companies in 2017 and has remained constant at this level. In 2020, over 56 per cent of the large companies in the Netherlands used big data.
About the study
ZEW researchers conducted a microeconometric study on the relationship between big data analytics and company productivity. Big data analytics comprises the evaluation of data from intelligent devices and sensors and of social media and location data. Productivity in this context is the value added divided by the number of employees. For the analysis the study draws on official statistics from German and Dutch authorities for the years 2016 to 2020.
