AND STILL AGAIN MORE ON ICT AND DEVELOPMENT

The following are published as WIDER Discussion Papers from the United Nations University World Institute for Development Economic Research:
http://www.wider.unu.edu/


The Corporate Digital Divide: Determinants of Internet Adoption
Abstract: “This paper shows how organizational, technical, and environmental factors affected firm decisions to adopt Internet technologies during the early years of the commercialization of the Internet. Organizations that had made prior investments in client/server networks had a higher likelihood of Internet adoption, however investments in proprietary or platform-specific client/server technologies raised the cost of switching from legacy systems. Small firms and those that were geographically concentrated were less likely to adopt. The study shows that organizations commonly adopted access and intranet technologies together, and suggests that low adaptation costs characterized the rapid diffusion of these early Internet technologies.” By Christopher Forman, October 2002. (PDF, 144KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-89.pdf

Digital Divideand Growth Gap: A Cumulative Relationship
Abstract: “This paper, using a cumulative growth model and a catch-up model, verifies the cumulative relationship between IT investment and economic growth, and then examines whether this relationship enlarges the differences in the economic growth among OECD countries. We observe the following results: first, those countries making a rapid progress in IT capital formulation enhance labour productivity faster than the average OECD member countries. Second, non-IT capital has larger impacts on the economy than IT capital. Third, those countries with relatively lower productivity levels can reduce the gap using knowledge spillovers from advanced countries. Fourth, IT investment and expansion increase labour productivity in OECD member countries. Fifth, countries with a solid infrastructure and skilled human resources increase IT investment even more actively. Lastly, the cumulative relationship between IT investment and productivity is shown to be valid and thus this might enlarge the disparity between countries according to the economic possibilities provided by IT investment. By Youngsoo Lee, Jeonghun Oh, and Hwanjoo Seo, October 2002. (PDF, 194KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-88.pdf

Economic Development Potential through IP Telephony for Namibia
Abstract: “The aim of this study is to evaluate the economic development potential for Namibia through IP telephony. First, background information on the telecommunication sector in Namibia is given. Then, the link between the ICT sector and GDP growth is being investigated. Granger causality tests indicated unilateral causality from GDP growth to telecommunications investment. Due to the small sample size, the causality tests could only be carried out for a lag length of 4, i.e. one year. The analysis might have yielded different result using a larger sample and a longer lag length. The potential impact of IP telephony for Namibia is evaluated using mainly descriptive means due to the lack of data availability. The conclusions drawn from this study are that IP telephony will affect developing countries sooner or later. IP telephony addresses two of the four cost factors of distance. It can make it cheaper to search for trading partners and reduce the cost of managing and monitoring distant production facilities. IP telephony offers the opportunity to improve competitiveness and to attract foreign direct investment, but it also poses the threat of being left behind if opportunities are not seized. In the final analysis, the paper argues that developing countries might be able to gain a comparative advantage by implementing IP telephony sooner rather than later.”.By Albertus Aochamub, Daniel Motinga, and Christoph Stork, August 2002. (PDF, 733KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-84.pdf

ICT Opportunities and Challenges for Development in the Arab World
Abstract: “This paper examines the status of ICT in the Arab world and the potential opportunities and challenges that ICT is expected to create for development in the region. The analysis shows that, despite the recent growth in the demand for ICT, it has a very limited market in the Arab region, as indicated by the lukewarm demand, limited supply and low investments in comparison to the world total. The diffusion of ICT is characterized by a market concentration in the richer Gulf countries and the wide difference between these and other Arab countries in terms of demand, supply, price and the intensity of the services. The analysis also shows that the diffusion of ICT in the Arab world significantly increases in relation to economic growth (as measured by GDP per capita). However, the influence of human capital development (as measured by average years of schooling) is somewhat doubtful. As highlighted by the study, ICT has the potential to impose the so-called ‘creative destruction’ process in the Arab world. On the one hand, ICT has the potential to induce productivity growth, employment, human resources, skills and capabilities, knowledge-based economy and hence economic development. On the other hand, ICT may introduce challenges with regard to intensified competition, inequality as well as the elimination of some unskilled jobs, thus negatively influencing the region’s development.” By Samia Satti O. M. Nour, September, 2002. (PDF, 167KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-83.pdf

Competing in the Digital Economy?: The Dynamics and Impacts of B2B E-commerce on the South African Manufacturing Sector
Abstract: “This paper explores the current state of play and likely future direction of business-to-business electronic commerce in the South African manufacturing sector. The empirical evidence presented draws on 120 firm-level interviews, and 31 personal interviews with industry experts. The research findings highlight the fact that B2B e-commerce is in an inchoate stage of development in the South African manufacturing sector, with sociotechnical factors and contemporary market dynamics heavily influencing its evolutionary trajectory. Overly optimistic and technicist approaches to e-commerce do not take into account the real world of global trade and production networks and the position of South African manufacturing firms within it. The paper concludes that e-commerce development in the South African manufacturing sector is likely to be a cumulative, incremental and path-dependent process, that takes the form of the steady accumulation of tacit capability, rather than a sequence of discrete acts of technology building. Note that in the context of this paper, ‘digital economy’ refers to economic transactions and economic functions that are governed and executed digitally, i.e. through the convergence of digital computing and telecommunications.” By Sagren Moodley, August 2002. (PDF, 321KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-79.pdf

Growth of ICT and ICT for Development: Realities of the Myths of the Indian Experience
Abstract: “While there is an increasing realization of the potential that IT offers for human welfare, IT-induced productivity and growth are confined to the developed world. It is argued that even though the international digital divide is a reality, there are certain specific characteristics of the new technology that leave scope for mitigating, if not totally bridging, the gap when appropriate policies are in place. During the last decade India has attempted to profit from the growth of ICT through export-oriented growth strategy, and the issue of ICT in development has not received the attention it deserves. The paper highlights the perils of the strategy followed by India and underlines the need to focus on development through ICT. The study shows that the unprecedented export performance of India’s software has to be seen in the context of the national system of innovation that evolved during the last five decades when the state played a proactive role. Also, the country’s high export growth cannot be attributed entirely to the market oriented policies of the 1990s. Higher growth rates in exports notwithstanding, it is shown that net export earnings have been much lower. While the low net export earnings reduced the possibility of real appreciation, the boom in the IT sector is likely to have had an adverse influence, at least in the short run, on other sectors competing for skilled manpower because of the resource movement effect. Thus while an IT-induced development strategy could have been instrumental in enhancing efficiency, competitiveness and growth, export-oriented IT growth strategy seems to have enabled other countries to become more efficient and competitive. The export-oriented growth strategy also had an adverse effect on the innovative performance of firms. The findings of the paper tend to underscore the need to recognize the complementary role of the domestic market in promoting innovation and exports on the one hand and IT-induced productivity, competitiveness and growth on the other. Hence there is need for a policy that focuses on ICT for development. This in turn calls for comprehending the social marginal product of a dollar worth of IT exports vis-à-vis its domestic consumption.” By K. J. Joseph, August 2002. (PDF, 409KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-78.pdf

The New Economy and Developing Countries: Assessing the Role of ICT Diffusion
Abstract: “Using data from developing countries, this paper explores the nature and direction of the links between ICT diffusion and per capita income, trade and financial indicators, education, and freedom indicators. Internet hosts, Internet users, personal computers and mobile phones represent indicators of ICT. The Gompertz model of technology diffusion is used to study ICT dissemination. The results show that income and government trade policies influence ICT diffusion. Depending on the ICT indicator, freedom indices may or may not affect ICT diffusion. Moreover, only personal computers and Internet hosts seem to have a positive influence on income. Contrary to expectations, ICT diffusion does not seem to enhance education.” By Mina N. Baliamoune, August 2002. (PDF, 292KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-77.pdf

Impact of Technology on the Competitiveness of the Indian Small Manufacturing Sector: A Case Study of the Automotive Component Industry
Abstract: “This paper endeavours to study the impact of technology on the competitiveness of the Indian small-scale automotive component units. The effect of technology is measured by directly introducing it in the production function along with the conventional inputs. For the purpose of analysis, we have taken sales turnover which reflects competitive strength of firms as a dependent variable instead of output. Three technology variables representing transformation (mechanization), organization and information aspects of technology are taken along with the three conventional inputs, i.e., capital, labour and materials as explanatory variables. Empirical analysis of the paper is based on the unitlevel data collected through the primary survey of a sample of units located in and around Delhi. Results of the study indicate that a higher degree of mechanization in terms of the use of NC machines has a significant positive impact on the sales turnover, followed by materials, labour and capital.” By T. A. Bhavani, August 2002. (PDF, 398KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-76.pdf

The Internet and Economic Growth in Least Developed Countries
Abstract: “A discussion of the theory of technology and economic growth suggests potentially negative implications for the impact of the Internet on developing countries. Technology in general is undoubtedly central to the growth process, but economists define technology in very broad terms. The impact of any particular, invented, technology is likely to be small. This theoretical perspective is supported by the empirical evidence regarding the limited impact of past ‘information revolutions’ on least developed countries (LDCs) and the present impact of the Internet on advanced economies. Furthermore, LDCs appear ill-prepared to benefit from those opportunities that the Internet does present—they lack the physical and human capital, along with the institutions required to exploit the e-economy. Finally, even more optimistic forecasts of the Internet’s global economic impact are small in scale compared to the challenge of development. This has some significant implications for development policy.” By Charles Kenny, August 2002. (PDF, 250KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-75.pdf

Does Internet Connectivity Affect Export Performance? Evidence from Transition Economies
Abstract: “Over the past few years, many commentators have suggested that the Internet is one of the forces driving globalization. This paper tries to assess one aspect of these claims, looking at whether Internet access appears to affect the export performance of enterprises in low- and middle-income economies in Eastern Europe and Central Asia. The papers finds that even after controlling for self-selectivity bias and for factors that might affect both exports and Internet connectivity, enterprises with Internet access appear to export more than similar enterprises without access. Further, Internet access appears to affect industrial and service enterprises to similar degrees.By George R. G. Clarke, August 2002. (PDF, 85KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-74.pdf

Developing Countries in the New Economy: The Role of Demand-side Initiatives
Abstract: “Past breakthroughs in communication technology—the invention of the printing press and the telegraph—led to major economic upheavals. What are the implications of the more recent information and communication technologies (ICTs) for the developing world? Optimists believe that modern ICTs will allow developing countries to catch up with the developed world, while pessimists claim that the growing digital divide will reinforce economic divergence. One significant lesson from history is that mere access to new technology is not sufficient for economic transformation. The presence of so-called network effects makes the outcome sensitive to patterns of demand and usage of new technologies. This may make a case for demand-side initiatives, include government sponsorship of, and direct participation in, new technologies. The paper uses examples to highlight the key issues and specify some policy conclusions.” By Sandeep Kapur, August 2002. (PDF, 178KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-73.pdf

Inter-Country Variations in Digital Technology in Africa: Evidence, Determinants, and Policy Applications
Abstract: “While much attention has been focused on the so-called ‘digital divide’ between Africa and the industrialized world, very scant attention has been devoted to the wide variations in the levels of digitalization of African countries. Whereas countries such as South Africa, Mauritius, Namibia, Botswana, Cape Verde and Seychelles have made substantial progress in digitalizing their economies, others are very far behind the international frontiers of information technology (IT). The digital divide within Africa is made even more exasperating when one realizes that countries with the same socioeconomic characteristics have tended to have differential access to IT. Using five measures of IT, this paper explores and documents the differences in the levels of digitalization of 54 African countries. Based on these indicators, a composite index of digitalization is constructed for each country, and the index is in turn used to rank the countries according to their levels of access to IT. After identifying a benchmark index of IT access, African countries are classified into six groups that reflect different levels of IT access. A multiple regression analysis of a cross-sectional data set for 51 African countries is used to investigate the extent to which the differences in the levels of digitalization of African countries are correlated with economic indicators such as urbanization, the stock of human capital, the rate of economic growth, the flow of foreign direct investment (FDI), and the openness of the economy. Based on the results of the regression analysis and the experiences of the more digitalized countries, the paper proposes policy measures that would help accelerate the digitalization of the continent.” By Steve Onyeiwu, July 2002. (PDF, 296KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-72.pdf

The Market Place for Ideas: An Analysis of Knowledge Diffusion in Academic Journals
Abstract: “The thought that the academy might function like a ‘market place for ideas’ has been influential in the economics of science and is increasingly so in the philosophy of science/economic methodology literature. This paper contributes to this literature by examining one respect in which the academy may or may not resemble a market for ideas: it provides an empirical study of the diffusion of ideas within the academic community. In particular, it is concerned with the following questions:
i) Is the pattern of diffusion in the academic community similar to that found in industry studies on the diffusion of new techniques of production?
ii) Is the rate of diffusion faster in the academy or in industry?
iii) Has the pattern of diffusion in the academy changed over time?”
By Shaun Hargreaves Heap and Ashok Parikh, July 2002. (PDF, 140KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-71.pdf

The New Economy in Europe, 1992-2001
Abstract: “Despite the fast catching-up in ICT diffusion experienced by most EU countries in the last few years, information technologies have so far delivered little productivity gains in Europe. In the second half of the past decade, growth contributions from ICT capital rose in six EU countries only (the UK, Denmark, Finland, Sweden, Ireland and Greece). Quite unlike the United States, this has not generally been associated to higher labour or total factor productivity growth rates, the only exceptions being Ireland and Greece. Particularly worrisome, the large countries in continental Europe (Germany, France, Italy and Spain) showed stagnating or mildly declining growth contributions from ICT capital, together with definite declines in TFP growth compared to the first half of the 1990s. It looks like that the celebrated ‘Solow paradox’ on the lack of correlation between ICT investment and productivity growth has fled the US to migrate to Europe.” By Francesco Daveri, July 2002. (PDF, 107KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-70.pdf

The Impacts of Knowledge Interaction with Manufacturing Clients on KIBS Firms Innovation Behaviour
Abstract: “Knowledge-intensive business services (KIBS) have been posited to play a critical role as innovation agent and knowledge broker in the new economy. While a substantial part of the literature on KIBS stresses their function as an innovation agent to their clients’ innovation process and their contributions to knowledge transfer and diffusion in innovation systems, little attention has been paid to the internal innovation dynamics of KIBS firms. However, the interactive service relationship between KIBS firms and their clients is essentially a bilateral learning process that is supposed to also expand the innovation capabilities of KIBS firms. Based on a sample of 181 KIBS firms in Singapore, we investigate the specific impacts of client linkages on KIBS firms’ innovation behaviour. We find that KIBS firms that engage in providing innovation support to manufacturing clients exhibit higher level of innovation behaviour. However, client size is not a significant determinant of KIBS innovation. These results are further confirmed by the importance of social capitals and spatial proximity for KIBS firms’ successful innovation support provision to manufacturing clients.” By Poh-Kam Wong and Zi-Lin He, July 2002. (PDF, 240KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-69.pdf

E-business and Export Behaviour: Evidence from Indian Firms
Abstract: “The paper identifies and analyses the factors that influenced the export performance of firms in the post-liberalization era of the Indian economy. The study is based on primary data collected from fifty-one firms located in the national capital region. Entrepreneurial characteristics, historical data of firms, and other firm-specific factors such as size of operation, export intensity, international orientation, wage rates, and profit margins were included in the analysis. The findings of the study suggest that the performance of firms that have adopted more advanced e-business tools has been better than others in international markets, as also that size of operation has played an important role in the export performance of firms. It is found that export-oriented firms employ more skilled workforce and the labour productivity of these firms is higher than others.” By K. Lal, July 2002. (PDF, 83KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-68.pdf

New Economy in Growth and Development
Abstract: “The benefits from the New Economy should accrue as improvements in productivity and economic growth. But while the use of information and communication technology seems to have had a substantial impact on the performance of the United States economy, the evidence for other countries is much weaker. This study does not find any significant correlation between ICT investment and economic growth in the period 1985-99 for a sample of 42 countries for which ICT spending data are available. Even more surprisingly and in contrast with some previous studies, the relationship is not statistically significant for the subsamples of industrial or high-income countries either. There are at least three possible explanations for this apparent ‘productivity paradox’. The most obvious one is the fact that not many countries, other than the US, have yet invested much in ICT. The second reason is that even if they have done so, they may not have invested enough in complementary infrastructure, like education and skills, in order to reap the benefits from ICT investment. Technology by itself is not a solution to any development problem; it only provides an opportunity. The third and the most controversial explanation is that the neoclassical method applied in assessing the benefits may not capture the most essential aspects of the New Economy or the ICT revolution. The benefits may not lie in the supply side of the economy but instead in the demand side.” By Matti Pohjola, July 2002. (PDF, 303KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-67.pdf

The 'New Economy' and Economic Growth in Transition Economies
Abstract: “The contribution of the ‘new economy’ to economic growth in developing countries has so far been minimal. Despite the recent hype, the ‘old economy’ will for long be the fundamental force behind economic growth in transition economies. Nonetheless, in the longer run the ‘new economy’ offers great potential for faster economic growth in postsocialist economies. Realizing this potential is however not automatic. It can be left unharnessed if there is no suitable institutional infrastructure, which would allow for adoption, diffusion, and productive use of information and communication technologies (ICT). The paper constructs a New Economy Indicator (NEI) measuring the level of preparedness of transition economies for harnessing the potential of ICT to accelerate the long-term economic growth and catching-up with developed countries. In the NEI ranking Slovenia scored the highest, followed by the Czech Republic and Hungary. Albania, Bosnia and Herzegovina, and FR Yugoslavia occupy the bottom of the table. Similarity of the NEI results with the Global Competitiveness Report 2001 suggests that fundamentals responsible for the development of both the ‘new’ and the ‘old’ economy are largely the same. Hence, there is no ‘new’ or ‘old’ economy: there is only one economy where old recipes for development still apply.” By Marcin Piatkowski, July 2002. (PDF, 302KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-62.pdf

One Third of the World's Growth and Inequality
Abstract: “This paper studies growth and inequality in China and India—two economies that account for a third of the world’s population. By modelling growth and inequality as components in a joint stochastic process, the paper calibrates the impact each has on different welfare indicators and on the personal income distribution across the joint population of the two countries. For personal income inequalities in a China-India universe, the forces assuming first-order importance are macroeconomic: growing average incomes dominate all else. The relation between aggregate economic growth and within-country inequality is insignificant for inequality dynamics.” By Danny Quah, March 2002. (PDF, 260KB)
http://www.wider.unu.edu/publications/dps/dps2002/dp2002-38.pdf