ICT infrastructure in firms and online sales

Abstract

This study investigates whether the underlying information and communication technology (ICT) infrastructure of firms affects the development of online sales, based on a novel micro-aggregated panel dataset encompassing a large group of European countries. The dataset includes continuous measures of online sales activities, as well as of standard production function input variables. Dynamic System GMM estimations show positive and significant associations between the proportion of firms selling online and the ICT infrastructure, measured as the proportion of broadband internet connected employees. The magnitude of the effect is stronger in the group of manufacturing than in the service firms, but in both industries, there is a threshold beyond which the positive effects of the infrastructure diminish. In addition, there is evidence that improvements in the infrastructure lead to a stronger effect on medium-sized and large rather than on small firms.