Public Digital Goods and Firm Productivity

Abstract

As public digital goods become more freely available and more frequently used as key inputs by firms, understanding the impact they have on productivity becomes more important. In this paper, I measure the impact of one such good, open source software (OSS), on firm productivity. I find a positive and significant return to the usage of OSS. I address the endogeneity issues inherent in productivity studies by using panel data with fixed and random effects, dynamic panel estimation via the Arellano-Bond method, and matching. I find that the main effect is moderated by firm size such that smaller firms receive a larger benefit to OSS usage. My findings fill an important gap in the existing literature on the returns to IT investment, which does not properly account for non-pecuniary IT inputs.