Firm Productivity and Learning with Digital Technologies: Evidence from Cloud Computing

James M. Brand; Mert Demirer; Connor Finucane; Avner A. Kreps

doi:10.3386/w32938

Firm Productivity and Learning with Digital Technologies: Evidence from Cloud Computing

James M. Brand, Mert Demirer, Connor Finucane & Avner A. Kreps

Working Paper 32938

DOI 10.3386/w32938

Issue Date September 2024

Revision Date December 2025

Digital technologies have transformed firm production across all sectors. In this paper, we document new facts about firms’ productivity with emerging technologies by studying how efficiently they use cloud computing. Leveraging high-frequency CPU utilization data from nearly 100,000 firms, we find large and persistent dispersion in firms’ cloud productivity. Productivity, however, is highly dynamic in this setting: firms improve their cloud productivity by 33% in the first year after adoption, and reach a stable level only after four years, indicating a long adjustment period to learn the technology. While faster learning among initially less efficient firms reduces productivity dispersion by 60% over time, substantial heterogeneity remains even after 10 years. Finally, productivity improvements occur primarily within individual divisions of a firm, with minimal knowledge transfer across divisions.

This paper was previously circulated under the title “Firm Productivity and Learning in the Digital Economy: Evidence from Cloud Computing.” We thank Dan Ackerberg, Vivek Bhattacharya, Noman Bashir, Nick Bloom, Jeffrey Campbell, Eli Cortez, Ulrich Doraszelski, Luca Fontanelli, Ambar La Forgia, Sonia Jaffe, Bob Gibbons, Matthew Grennan, Igal Hendel, Patrick Hummel, Gaston Illanes, Kristina McElheran, Kyle Myers, Donald Ngwe, Scott Orr, Rob Porter, Devesh Raval, Michael Schwarz, Carolyn Stein, and Neil Thomson, as well as seminar and conference participants at CEPR Industrial Organization Conference; NBER Organizational Economics Meeting; NBER Productivity, Innovation, and Entrepreneurship Meeting; Northwestern University; Rice University; Stanford University; Tilburg University; UBC Sauder School of Business; Utah Business Economics Conference; University of California, Berkeley; University of California, Los Angeles; University of Maryland; University of Toronto; and ZEW Conference on the Economics of Information and Communication Technologies for their helpful conversations and comments. Aaron Banks provided excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.

James M. Brand
James Brand is a paid employee and minority equity holder at Microsoft (a firm active in the cloud market, which this paper studies).

Mert Demirer
Mert Demirer is a former paid postdoctoral researcher at Microsoft.

Connor Finucane
Connor Finucane is a paid employee and minority equity holder at Microsoft.

Avner A. Kreps
Avner A. Kreps is a former paid intern at Microsoft (a firm active in the cloud market, which this paper studies).
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James M. Brand, Mert Demirer, Connor Finucane, and Avner A. Kreps, "Firm Productivity and Learning with Digital Technologies: Evidence from Cloud Computing," NBER Working Paper 32938 (2024), https://doi.org/10.3386/w32938.

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