Information and Communications Technology, R&D, and Organizational Innovation: Exploring Complementarities in Investment and Production

This paper examines whether there are complementarities between investments in ICT, R&D and organizational innovation, and the contributions of different investment profiles to total factor productivity growth on Dutch firm-level data. We estimate an integrated model of investment profile adoption and total factor productivity growth. We find that the three investment decisions are complementary, in the sense that investing in one increases the probability of investing in another, because joint investments lead to higher TFP growth than individual investments. ICT earns on average an average rate of return of 9.7 percent, followed by 6 percent to 7 percent on organizational innovation and a modest 1.4 percent to 1.8 percent on R&D in services and manufacturing respectively.