Industry productivity dynamics, ICT intensity and firm performance Evidence for the Netherlands

Transcription

1 Industry productivity dynamics, ICT intensity and firm performance Evidence for the Netherlands Michael Polder, Hugo de Bondt and George van Leeuwen

2 Introduction Reallocation, entry, exit important for aggregate dynamics (e.g. Bartelsman and Doms, 2000) ICT affects business processes competition innovation and makes firms potentially more responsive to economic shocks 2

3 Introduction Therefore, research questions: 1. Do we find differences in industry dynamics (firm turnover, productivity) according to their ICT intensity? 2. Do we find differences in the distribution of firm performance according to industry ICT intensity? 3

4 Contribution Improved identification of entry and exit for the Netherlands Results are based on sample weighting using population information New evidence on relation between dynamics and technology 4

5 Data Business Register (BR) Population of firms Identification of births and deaths Production statistics (PS) EUKLEMS: ICT intensity measure (user cost of ICT over value added) Deflators (Method to make consistent time-series) Data period:

6 ICT intensity (ICT user cost/value added), EUKLEMS NACE t16 17t19 21t22 27t28 30t33 34t35 36t37 60t63 71t74 AtB C E F H J M N O 6

7 64 E J 71t74 O N 70 C M 51 H 52 F 60t63 36t37 17t19 21t22 AtB t t33 27t t L Demography telecom government 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% average percentage of continuers average percentage of entry average percentage of exit Firm turnover rate ranges from 8% to 30% 7

8 Firm-level productivity Production statistics, 20+ firms sample weighting industry size class status year weights: population count / sample count Labour productivity growth (differences) (Volume) Growth of value added per worker Possible extension to multifactor productivity growth Generic outlier correction Sets growth of 1st and 99th percentile of productivity distribution to zero 8

9 Industry-level productivity Griliches-Regev decomposition: within = ((θ 1i + θ 0i )/2)(P 1i P 0i ) i between = θ 1i θ 0i i ( P 1i+P 0i 2 P 1+P 0 2 ) entry = i θ 1i (P 1i (P 1 +P 0 )/2) exit = i θ 0i (P 0i (P 1 +P 0 )/2) 9

10 Industry-level productivity: result of bottom-up calculation Consumer manufacturing ICT goods and services Intermediate manufacturing Other production Distribution Finance and Business Investment goods, excluding hightech Personal services Nb. 20+ firms, only true entry/exit/continuing, weighted 10

11 Labour productivity growth decomposition ( ) Nb. 20+ firms, only true entry/exit/continuing, weighted 11

12 Crisis: cleansing? (Increased positive effect of exit) 12

13 Distribution: misallocation? (large negative contribution of between) 13

14 Decomposition by ICT intensity Negative productivity growth in low ICT-intensive industries due to misallocation (possibly lack of competition) 14

15 Decomposition by ICT intensity (Re-)Allocation and cleansing in high ICT intensive seems more efficient 15

16 Decomposition by ICT intensity Overall low contributions of new firms: entry barriers? (But underestimated ) 16

17 ICT intensity and distribution of firm performance Characteristics of ICT intensive markets: High fixed costs, low marginal costs (digital/information goods) Network effects and externalities Increased rate of experimentation and innovation Consequences for distribution of firm performance concentration of markets spread in performance volatility + increased market efficiency? 17

18 ICT intensity and distribution of firm performance Characteristics of ICT intensive markets: High fixed costs, low marginal costs (digital/information goods) Network effects and externalities Increased rate of experimentation and innovation Consequences for distribution of firm performance concentration of markets Herfindahl spread in performance Standard deviation, interquartile range volatility Churn + increased market efficiency? Covariance productivity and size (OP) 18

19 ICT intensity and distribution of firm performance dependent variable level first differences Level first differences Herfindahl index of: Gross output * 0.26 Value added 0.75 ** *** 0.20 Persons employed Churn of: Gross output * Value added * Persons employed Interquartile range of: Gross output ** 0.45 Value added ** 0.38 Persons employed Labour productivity 0.23 ** 0.24 * 0.23 *** 0.08 Allocative Efficiency 8.24 *** ** 2.06 Year and industry dummies yes yes yes yes Leave out standard deviation, not much significance (outliers?) 19

20 ICT intensity and distribution of firm performance dependent variable level first differences Level first differences Herfindahl index of: Gross output * 0.26 Value added 0.75 ** *** 0.20 Persons employed Churn of: Gross output * Value added * Persons employed Interquartile range of: Gross output ** 0.45 Value added ** 0.38 Persons employed Labour productivity 0.23 ** 0.24 * 0.23 *** 0.08 Allocative Efficiency 8.24 *** ** 2.06 Year and industry dummies yes yes yes yes Concentration: relation for output, stronger pre-crisis (level) 20

21 ICT intensity and distribution of firm performance dependent variable level first differences Level first differences Herfindahl index of: Gross output * 0.26 Value added 0.75 ** *** 0.20 Persons employed Churn of: Gross output * Value added * Persons employed Interquartile range of: Gross output ** 0.45 Value added ** 0.38 Persons employed Labour productivity 0.23 ** 0.24 * 0.23 *** 0.08 Allocative Efficiency 8.24 *** ** 2.06 Year and industry dummies yes yes yes yes Volatility: becomes stronger as ICT increases, mainly crisis 21

22 ICT intensity and distribution of firm performance dependent variable level first differences Level first differences Herfindahl index of: Gross output * 0.26 Value added 0.75 ** *** 0.20 Persons employed Churn of: Gross output * Value added * Persons employed Interquartile range of: Gross output ** 0.45 Value added ** 0.38 Persons employed Labour productivity 0.23 ** 0.24 * 0.23 *** 0.08 Allocative Efficiency 8.24 *** ** 2.06 Year and industry dummies yes yes yes yes Spread: relation for productivity, output (especially pre-crisis, level) 22

23 ICT intensity and distribution of firm performance dependent variable level first differences Level first differences Herfindahl index of: Gross output * 0.26 Value added 0.75 ** *** 0.20 Persons employed Churn of: Gross output * Value added * Persons employed Interquartile range of: Gross output ** 0.45 Value added ** 0.38 Persons employed Labour productivity 0.23 ** 0.24 * 0.23 *** 0.08 Allocative Efficiency 8.24 *** ** 2.06 Year and industry dummies yes yes yes yes Allocative efficiency: higher in ICT intensive industries 23

24 Summary of regression findings Higher ICT intensity is associated with higher spread and concentration more so pre-crisis (possibly due to exit of lower tail firms) increased turbulence more so in crisis improved overall allocation of employment 24

25 Summary Within-firm productivity changes dominant in aggregate productivity changes but there are industries where exit and reallocation non-negligible especially in the crisis (e.g. evidence of cleansing effect through exit) Reallocation and cleansing in high ICT intensive industries seem more efficient low ICT intensive industries: indications of misallocation this follows from both the decomposition and the regression analysis Higher ICT intensity is associated with higher concentration, increased dispersion, and turbulence 25

26 Extensions Multifactor productivity growth, employment growth Longer differences Alternative decomposition methods Alternative weighting methods Data for small firms? 26