ICT and Firm-Level Performance in Thailand: Findings of the Productivity and Investment Climate Survey

This paper investigates the relationship between ICT and firm performance. While the hype concerning the “New Economy” has largely subsided, the evidence concerning the economic impact of ICT has strengthened, largely through the use of firm-level data that empirically demonstrates a strong relationship between information and communication technology (ICT) and measures of firm performance, including total factor productivity. It draws on the Productivity and Investment Climate Survey (PICS) of 1,385 firms conducted from early 2004 to early 2005 by the Royal Thai Government and World Bank. Based on existing literature, this paper, extracted from the larger Investment Climate Assessment conjectures that ICT Impacts firm performance through three main channels: skills, innovation and networking (1) Telecommunication investments influence the creation of new products and/or processes by making information about market preferences more available to the firm and reducing the time it takes to covert knowledge of consumer preferences to products. (2) ICT enables networking, which reduces search, contracting and coordination costs. (3) ICT can enable firms to participate in regional and global production networks. PICS data for Thailand suggest that ICT use is strongly correlated with innovation, even when controlling for firm size, exporters, foreign ownership, and industry. Those firms who used email were far more likely to spend on R&D, introduce new products, markets and technologies. Firms that had a website were far more likely to enter new markets, file patents and introduce new technologies. However, the skills and networking channels have not appeared to increase firm-level performance. The paper explores some of the possible causes and raises some potential recommendations on ways to overcome these barriers. ICT and Firm-Level Performance in Thailand This paper investigates the relationship between ICT and firm performance. While the hype concerning the “New Economy” has largely subsided, the evidence concerning the economic impact of ICT has strengthened, largely through the use of firm-level data that empirically demonstrates a strong relationship between information and communication technology (ICT) and measures of firm performance, including total factor productivity. 1 This paper is drawn from the upcoming Thailand Investment Climate Assessment, a joint publication of the World Bank and the National Economic and Social Development Board.