The implications of network use, production network externalities and public networking programmes for firm's productivity

Abstract

Empirical study reported in this paper explores the impacts of a firm's own use of network technologies, the other firms' use of compatible technologies and the firm's participation in the industry-level networking programme on its productivity. Empirical analysis of a database from among the firms in the Finnish electrical and electronics industry suggests a clear presence of production network externalities in the production function of the firms. We do not find support for the expected positive relationship between the firm's own use of advanced communications technologies and its output and productivity. The firm's participation in the industry-specific networking programme instead seems to give it some strategic advantage in terms of higher productivity compared to the other firms. It seems that in order to obtain non-negligible gains from new communications technologies, mere learning-by-using may not be sufficient; a firm has to actively facilitate learning and promote strategic use of communications technologies. Our estimation results suggest that this goal of public diffusion support programmes might be reached by industry-specific network programmes that support the introduction and strategic use of new network technologies in the firms.