Impact of Information Technology Investments on Firm Productivity in Peripherals Countries: The Case of Portugal

IS/IT investments are seen has having an enormous potential impact on the competitive position of the firm, on its performance, and demand an active and motivated participation of several stakeholder groups. The shortfall of evidence concerning the productivity of IT became known as the ‘productivity paradox’. As Robert Solow, the Nobel laureate economist stated “we see computers everywhere except in the productivity statistics”. An important stream of research conducted all over the world has tried to understand these phenomena, called in the literature as «IS business value» field. However, there is a gap in the literature, addressing the Portuguese situation. No empirical work has been done to date in order to understand the impact of Information Technology adoption on the productivity of those firms. Using data from two surveys conducted by the Portuguese National Institute of Statistics (INE), Inquiry to the use of IT by Portuguese companies (IUTIC) and the Inquiry Harmonized to (Portuguese) companies (accounting data), this study relates (using regression analysis) the amounts spent on IT with the financial performance indicator Returns on Equity, as a proxy of firm productivity, of Portuguese companies with more than 250 employees. The aim of this paper is to shed light on the Portuguese situation concerning the impact of IS/IT on the productivity of Portuguese top companies. Empirically, we test the impact of IT expenditure on firm productivity of a sample of Portuguese large companies. Our results, based on firm-level data on Information Technology expenditure and firm productivity as measured by return on equity (1186 observations) for the years of 2003 and 2004, exhibit a negative impact of IT expenditure on firm productivity, in line with “productivity paradox” claimants.

“Productivity and Employment in Firm’s Acess to Public Funding to Support Innovation”

Innovation is at the heart of the Europe 2020 Strategy, in order to promote higher levels of employment and productivity. Special attention is given to increasing the effectiveness of innovation policy instruments, mainly as some authors found evidence that productivity could be negatively affected by subsidies. The aim of the study is to assess how the expected impact on firm productivity and employment is taken into account, when firms apply for public funding for innovation. The analysis is based on the case study of the Portuguese Innovation Incentive System in the Alentejo region. In order to understand which factors influence the public decision to financially support private investment, we estimated a logit model based on firms’ and applications’ characteristics, controlling for the macroeconomic environment. The results indicate that government preferences for promoting exports, exploiting firms R&D results and stimulating the level of qualified employment are shown to be more relevant than the impact on firm productivity. Furthermore, the cost to the government of new jobs created, measured at least by exemption of interest and financial charges on the loan, is almost twice as much for non-SMEs as for SMEs.