ICT Capital Spending, ICT Sector, and Firm Productivity: Evidence from Indonesian Firm-Level Data

Chaikal Nuryakin, Faisal Rachman, Ashintya Damayati, Nia Kurnia, and Moslem Afrizal


This study examined the impact of ICT on firm productivity in Indonesia. Using unbalanced panel data of medium and large manufacturing firms, we performed two kinds of estimation. The first estimation is Cobb-Douglas production function with output as the dependent variable. Capital was  grouped into non-ICT capital and ICT capital in order to determine the impact of ICT on firm’s output creation. The second estimation used total factor  roductivity as the dependent variable, where TFP was estimated using Levinsohn-Petrin productivity estimator. As other internal and external  factors were added to the regression as control variable, the study provides early evidence that while the impact of R&D and innovation still needs to  be further elaborated, ICT capital may have a positive, but not always significant, impact on firm’s production and productivity in Indonesia.

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