Technological progress and productivity growth in the U.S. mobile telecommunications industry

Abstract

The fast growing U.S. mobile wireless industry has been experiencing dramatic technological change and substantial competition. As a result of these catalysts, we argue that wireless firms have experienced significant productivity improvement and provide new evidence that technological progress almost exclusively contributed to productivity improvements in the wireless industry by significantly expanding the production possibilities set. We employ nonparametric estimation procedures based on Data Envelopment Analysis (DEA) that utilize input-output data from a representative sample of 16 firms in the mobile wireless industry to estimate productivity change, technological change, and relative efficiency change for the period spanning the years from 2000 to 2002. Our findings show that the industry experienced a significant growth of 13% in productivity, which was primarily due to an average technological progress of 9.9% in the industry. Additionally, we find that national wireless operators experienced significantly higher productivity growth and contributed more to technological progress than regional providers. Firms that were industry pioneers as evidenced by high market share at the beginning of our sample period experienced higher productivity growth and greater technological progress compared to firms with lower initial market share. Moreover, the industry experienced significantly higher productivity growth and technical progress in the later sample period between 2001 and 2002 than in the early period between 2000 and 2001.