Broadband Internet Access Makes Firms More Innovative

The effective use of modern information and communication technologies requires a high-performance broadband infrastructure. The European Commission (EU 2020 strategy) and the German government (broadband strategy) call for a massive expansion of broadband internet access. A current ZEW study supported by Deutsche Telekom AG indicates that broadband internet access gives significant impulses to firms in Germany and makes them more innovative. In the early phase of the DSL expansion from 2001 to 2003, firms using broadband internet access were able to increase the probability of realizing product and process innovations by 25 percentage points on average. Broadband internet gave impulses for innovations particularly in the service sector.

Around 4,500 firms in the manufacturing industry and selected service sectors with at least five employees were surveyed all over Germany. Deutsche Telekom AG provided data on DSL availability in Germany. The study analysed the period from 2001 to 2003 because clear differences between firms using broadband internet access and firms using dial-up internet access were visible in this early phase of the DSL expansion.

The ZEW findings show that broadband internet access significantly prompted the realization of product and process innovations. Between 2001 and 2003, firms using broadband internet were 25 percentage points more likely to realise at least one process innovation or product innovation. Broadband internet access has given strong impulses on the development of new and considerably improved processes, products and services and has thus considerably contributed to the competiveness of firms in Germany.

Today, new services like cloud computing need high-speed broadband internet access to operate. Against the background of the ZEW findings, it can be expected that faster internet access will give further impulses to the firms’ innovation activities. However, empirical research will have to validate this assumption.

For further information please contact

Prof. Dr. Irene Bertschek, Phone: +49 (0)621/1235-178, E-Mail: bertschek@zew.de