Reduction of ICT Investment Due to the 2008 Economic Crisis and ICT-Enabled Innovation Performance of Firms

Abstract

In this paper, we examine empirically the possibility that an economic crisis could affect firms’ innovation performance through the ICT investment channel. In connection with this, it is also interesting to analyze the ICT characteristics of a firm (both ICT inputs and ICT infrastructures) that are associated with its ICT-enabled innovation performance. Our study is based on firm data from the glass/ceramics/cement industry of six European countries. We find a statistically significant negative relationship between ICT-enabled product/service innovation and firm’s crisis vulnerability with respect to ICT investment (pro-cyclical behavior) only for new products/services that contain ICT components. Employment of specialized ICT personnel, ICT infrastructure that supports firm’s internal functions (use of a series of standard administration and production support ICT applications), e-procurement, ICT outsourcing (only for process innovation), the awareness of the relevance of new ICTs, and quality competition (only for product/service innovation) are ICT characteristics that positively correlate with ICT-enabled innovation. Our findings have interesting implications for research and practice.