Innovation and productivity in services and manufacturing: The role of ICT investment

Several studies have highlighted ICT as a driver of firm productivity in developed countries. However, the evidence about the impacts of ICT on services and manufacturing and particularly for developing countries is scarce. This paper focuses on understanding the determinants of investments in ICT at firm level and how this adoption ultimately affects innovation and productivity of Uruguayan services firms vis a vis manufacturing. Results show that ICT investments are more subject to economies of scale than other types of investments, are important for obtaining product or process innovations in services and its absence conspires against non-technological (organisational or marketing) innovations. Both ICT and other innovation investments are positively associated with productivity in services but only ICT affect productivity in manufacturing. Interestingly, the absence of investment in ICT is associated with lower levels of productivity.

Keywords: ICT, Innovation, Productivity, Uruguay

JEL Classification: O31, O32, D22, O38