Productivity Paradox Research Articles

Beyond the modern productivity paradox: The effect of robotics technology on firm-level total factor productivity in China

This study aims to provide firm-level evidence on the burgeoning debate about the productivity effect of robotics technology. Taking China as an example, we find that city-level robot exposure plays a significant role in augmenting total factor productivity for firms in industries with high degrees of task replaceability. The results of the mechanism analysis further reveal that firms with substantial exposure to robotics technology are incentivized to improve their innovation performance and cultivate human capital. Conversely, there is evidence that firms characterized by low task replaceability experience a reduction in productivity as a consequence of robot exposure, potentially attributable to the effect of inter-industry resource reallocation. These findings offer empirical support for theoretical arguments regarding the productivity enhancements stemming from the development of robotics technology, while also shedding light on strategies to elevate productivity through the adoption of new technologies.

The Impact of Digital Economy on Firm Performance: Evidence from China

ABSTRACT This paper employs a multidimensional fixed effects model and examines the impact of the digital economy on the performance of firms in traditional industries. We have identified a pattern similar to the “IT productivity paradox” observed in the United States during the 1980s. Using data from A-share listed Chinese firms from 2011–2019, we find that the digital economy significantly reduces the short-term performance of firms by intensifying market competition and increasing adjustment costs. On the contrary, the digital economy improves firms’ long-term performance through accumulation of human capital and greater innovation capability. Competitive strategies strengthen the effect of the digital economy on the long-term performance of firms. Additionally, our research demonstrates that technology-intensive firms and small firms experience more pronounced negative effects in the short term but firms with high-tech titles suffer smaller shocks than other technology-intensive firms. These findings presents novel perspectives on the influence of the digital economy on firm performance, offering valuable insights for managers, investors, and policymakers involved in economic decision-making.

Effectiveness of the economic growth factors: productivity and innovation

The article reveals the modern problem of the rates of economic growth of the Ukrainian economy, as well as other countries, associated with their significant decrease. It is shown that its problem occurrence can also be explained by the lack of attention to the activation of innovative processes in the country during the formation of real economic policy. The assumption is substantiated that this happened due to insufficient prioritization of the separate production factor – innovation, in neoclassical methods of macroeconomic analysis. Therefore, they did not provide the right guidelines for governments in the formation of economic strategies and programs. Such countries demonstrate a stable value of the “GDP gap” against successful countries. Ukraine has been in this trend for many years, not only in relation to the countries – economic leaders, but also to its closest neighbors.A macroeconomic analysis is presented that demonstrates the presence of a “productivity paradox” in many European countries after the 2008 crisis: GDP, measured in current US dollars, exists with minor fluctuations rather than a steady upward trend. It was confirmed that the “GDP gap” did not fundamentally change between groups of countries with different types of economies. It is shown that the emergence of the “productivity paradox” phenomenon is because, against the background of the large-scale development of modern innovation processes, the main indicators of measuring the productivity of labor and other resources have significantly decreased compared to the previous times. Performance statistics of economic growth factors, built on the dominant neoclassical models, show less and less explanatory power for revealing the role of labor productivity in economic growth. This was confirmed by the regression analysis carried out, which proved insufficient attention of Ukrainian economic policy to endogenous factors of innovative development.The analysis of endogenous models of economic growth and Schumpeterian conceptual approaches showed that the key factor of economic growth in modern conditions should be the factor of scientific and technological innovations, because the existing globalization processes and the formation of the Industry 4.0 industries are contributed not only to integration of national economies and the global technological changes, but also condition by the strengthening of the divergence between developed and developing countries. It is shown that these processes occur due to the lack of sufficient own innovation potential of developing countries.
 JEL classіfіcatіon: O11, O20, O32, O38, O40

Creation or disruption? Doubts from the internet applications in China's rural sector

To address the current large gap in research on the Internet applications in the Chinese rural sector, this paper explores the effect of these applications on the labor productivity of Chinese farmers from a creative destruction perspective. First, we construct a model to analyze the direct and indirect paths of the Internet applications impact on the productivity of farm households at the theoretical level; second, we conduct an empirical study corresponding to the theory based on micro-survey data obtained from China's first nationwide large-scale social survey project. Specifically, we verified the Internet applications direct effect on farm household labor productivity through the mean treatment effect approach and explored the efficiency and mechanism of action of the Internet productivity effect in the rural sector using the mediating effect model, Probit model, and the counterfactual analysis framework. The study finds that the productivity effect of the rural Internet applications still has a certain gap compared with the urban sector, although it is not at the "Solow's paradox" stage. Further discussion reveals that the Internet adoption in rural areas is a process of "creative destruction", and its destructive effects are dominant at this stage, while the creative effects still need to be further explored. This paper emphasizes that, for developing countries, accurately identifying the development stage of the Internet applications and further exploring its creative role is an important way to improve labor productivity in rural areas, and it is also an important step to promote the construction of digital villages.

How does fintech affect bank efficiency in Taiwan?

This study investigates the impact of financial technology (fintech) on bank efficiency in Taiwan from 2007 to 2020, using parametric and non-parametric analyses. In the future, fintech is expected to play an important role in bank sustainability operations. The findings show that fintech-related initiatives affect bank efficiency. These results illustrate how fintech can help banks directly or indirectly improve their efficiency, leading to higher profits or lower costs. For instance, mobile payment systems, a fintech-related initiative, improve bank efficiency. However, this degree of improvement is not substantial. In general, the findings imply that fintech-related initiatives do not significantly improve bank efficiency, implying an IT "productivity paradox."

Artificial intelligence and firm growth — catch-up processes of SMEs through integrating AI into their knowledge bases

AbstractArtificial intelligence (AI) is seen as a key technology for future economic growth. It is labelled as a general-purpose technology, as well as an invention of a method for inventing. Thus, AI is perceived to generate technological opportunities and through these, innovations, and productivity growth. The leapfrogging hypothesis suggests that latecomer firms can use these opportunities to catch up. The aim of this paper is to provide insight into this catch-up process of latecomer firms through integrating AI into their knowledge portfolio and thereby creating new technological trajectories. The moderating effect of firm size is also analysed. Combining firm-level data with patent data, a regression at the firm level is conducted. Evidence is found that smaller firms experience productivity growth from AI when operating at the productivity frontier, indicating the opposite of the leapfrogging hypothesis. However, there is evidence for the positive impact of AI on firm innovation, which is higher for latecomer firms that are larger in size. In general, we find a diverging pattern of the influence of AI on productivity and innovation growth, indicating the need for a finer grained analysis that takes indirect effects - that also could explain the observed productivity paradox - into account.

Robot Adoption, Organizational Capital, and the Productivity Paradox

Robot Adoption, Organizational Capital, and the Productivity Paradox

Impact of digital economy on urban sustainable development: Evidence from Chinese cities

AbstractDigital economy takes data as its core input element and has high green value, but does the development of digital economy necessarily promote sustainable development? We use 286 Chinese cities from 2011 to 2019 as a case study to examine the impact of digital economy on urban sustainable development, and discuss the mechanisms of digital economy on urban sustainable development, heterogeneous impacts, threshold effects of environmental regulations, and the role of National Big Data Comprehensive Pilot Zone. It was found that: (1) The digital economy has green value and can effectively contribute to urban sustainable development. (2) The digital economy can achieve urban sustainable development by enhancing green technological innovation and human capital. (3) Environmental regulation has a threshold effect in the digital economy driving urban sustainable development. (4) The establishment of National Big Data Comprehensive Pilot Zone can promote urban sustainable development. (5) The polarization effect of the level of urban sustainable development in first‐tier and second‐tier cities is still increasing under the background of digital economy, which intensifies the “Matthew effect” among different levels of cities, and the inclusiveness of digital economy has not really been reflected in China. This study explores the influence and mechanism of digital economy on urban sustainable development in the context of China, which is of great theoretical and practical significance for developing countries to solve Solow productivity paradox and realize urban sustainable development in the new development stage.

Overcoming the Productivity Paradox in the Public Sector by Managing Deliberate Learning

ABSTRACT Digital technology offers an opportunity for increased productivity in public organizations, but organizations struggle to gain revenue from their investments, known as the productivity paradox. This study examines the role and relations of digital adoption (DA), deliberate learning (DL), and managerial dynamic capability (MDC) on improving productivity in a digital transformation (DT) process in the Norwegian courts. The results show that DL had a strong impact on productivity and that MDC plays an important role in enabling DL processes.

AI-Driven Productivity Gains: Artificial Intelligence and Firm Productivity

Artificial intelligence is profoundly influencing various facets of our lives, indicating its potential to significantly impact sustainability. Nevertheless, capturing the productivity gains stemming from artificial intelligence in macro-level data poses challenges, leading to the question of whether artificial intelligence is reminiscent of the “Solow paradox”. This study employs micro-level manufacturing data to investigate the impact of artificial intelligence on firms’ productivity. The study finds that every 1% increase in artificial intelligence penetration can lead to a 14.2% increase in total factor productivity. This conclusion remains robust even after conducting endogeneity analysis and a series of robustness tests. The study identifies that the positive impact of artificial intelligence on productivity is primarily achieved through the value-added enhancement effect, skill-biased enhancement effect, and technology upgrading effect. Furthermore, the study reveals that the effects of artificial intelligence on productivity vary across different property rights and industry concentration contexts. Additionally, the structure of factor endowments within firms can also influence the productivity gains from artificial intelligence. Our study presents compelling evidence demonstrating the role of artificial intelligence in fostering economic sustainability within the framework of Industry 4.0.

Artificial intelligence and productivity: global evidence from AI patent and bibliometric data

In this paper we analyse the relationship between technological innovation in the artificial intelligence (AI) domain and macroeconomic productivity. We embed recently released data on patents and publications related to AI in an augmented model of productivity growth, which we estimate for the OECD countries and compare to an extended sample including non-OECD countries. Our estimates provide evidence in favour of the modern productivity paradox. We show that the development of AI technologies remains a niche innovation phenomenon with a negligible role in the officially recorded productivity growth process. This general result, i.e. a lack of a strong relationship between AI and registered macroeconomic productivity growth, is robust to changes in the country sample, in the way we quantify labour productivity and technology (including AI stock), in the specification of the empirical model (control variables) and in estimation methods.

DIGITAL TRANSFORMATION IN THE EU: OPPORTUNITIES OF THE VISEGRAD COUNTRIES

The article gives an idea of the development of digital economy in the European Union. Main indexes that give an integral vision of digital transformation in the EU member states are analyzed. Strengths and weaknesses of digital development of the Visegrad countries than predetermine their «lagging» position are identified. Many negative factors are of long-term nature and determine the degradation of positions that the «four» members are having during the last years. The presence of disproportional development within the scope of the Visegrad Group with the definite digital leadership of the Czech Republic was revealed. The main directions of the future digital development of the EU as a whole and the priorities of its member states, including «2030 Digital Compass», are considered. Special attention is paid to the issue of the impact of digitalization on the economy. The problem of inequality during the expansion of the digital economy is analyzed. The «Solow paradox» is confirmed as illuctrated by the Visegrad countries which indicates the existence of structural factors affecting economic dynamics, that digitalization isn’t yet able to «compensate».

Digitalization Improves Enterprise Performance: New Evidence by Text Analysis

The reform of digitalization has deeply influenced the development mode and production methods of traditional production in China. However, the impact of digitalization on the management performance of Chinese listed companies are not well investigated and there is a gap in the establishment of digitalization effective measurement variable. In order to fill this gap, this article constructs a variable to measure the application degree of “digitalization” at the company level. By analyzing the text of the annual reports of Chinese listed companies from 2009 to 2020, the effective variables to measure “digitalization” are determined. Based on this, the development status and determinants of enterprise digital applications and the impact of digitalization on enterprise performance are discussed. Thus, by analyzing the panel data of these companies, the relationship among the age of the enterprise, the knowledge level of the board of directors, the proportion of fixed assets, the company’s assets, and the degree of enterprise digitalization are evaluated. At last, according to the evaluated results, the relationship between the degree of digitalization and the performance of enterprises is analyzed. In this article, our analysis helps to solve the “IT production paradox” problem, and also to provides data and theoretical support for digitalization to improve corporate performance to a certain extent. Furthermore, the digitalization measurement variable laid out in this article provides a foundation for future research on the relationship between digitalization and corporate performance.

Does digital transformation promote green innovation? A micro-level perspective on the Solow Paradox

Digitalization and sustainability, as emerging trends, have long attracted both academic and industrial focuses, yet the topic has not been sufficiently investigated at the micro-firm level. Selecting Chinese listed companies from 2010 to 2021 as the research sample and adopting the two-way fixed effects model, the impact of firms’ digital transformation on their green innovation as well as the channels and mechanisms involved are investigated. The empirical results show that, firstly, the digital transformation of firms can significantly promote the quality and quantity of their green innovation. Secondly, internal control is a mediating path for digital transformation to promote green innovation, while financing constraints suppress the above effects, and top management team’s environmental attention positively moderates the promotion of green innovation by corporate digital transformation. Thirdly, the promotion effects are more pronounced in firms that are state-owned, large-scale, ecologically cost-free, and relatively highly financing constrained. The findings suggest that digital transformation has advantages in revealing the “Solow paradox” that persists in the digital era, and the synergistic development of digitalization and greening at the firm level is realistic and feasible.

Limited Effectiveness of IT/IS Investments in an Emerging Economy

The business value of investments in information technology/information system (IT/IS) has been the subject of active research over several decades. Even though a plethora of similar studies analyzing the impact of promised IT/IS investments on firm performance exists, the results, largely inconclusive, mostly concentrate on the developed countries. In this backdrop, and with an expected manifold rise in IT/IS investments in India in the coming years, an assessment of the relationship between investments and firm performance can be noteworthy. The study explores this important issue by analyzing the impact of IT/IS investments on the firm's performance in India based on data of around 6500 IT/IS investments during 2000-2016. We deploy a series of univariate and multivariate analyses and complement those with several robustness tests. Our principal findings indicate that IT/IS investments on the average in India have been mostly unsuccessful in impacting firm performance positively, in line with "productivity paradox" phenomenon previously documented in the U.S. and other markets. We substantiate our principal results using several robustness tests. We offer several possible explanations of our results spanning across both IS as well as finance literature and discuss the implications of future investment prospects for firms. The results highlight the need for adoption of caution by firms operating in emerging economies like India while considering future IT/IS investment decisions. These suggestions are likely to serve as a good reference point in other emerging economies as well.

Theorizing the relationship between the digital economy and firm productivity: The idiosyncrasies of firm-specific contexts

With the rise of emerging economies such as China, the research environment for the digital economy (DE) has changed significantly. However, our understanding of the productivity impact of DE development in Chinese firms remains in its infancy. The idiosyncrasies of the firm-specific contexts are closely related to further research on the this topic. As a baseline, we hypothesize a U-shaped DE-firm productivity (FP) relationship. We analyze the idiosyncratic influences of firm size and locality on the DE–FP relationship. The findings, which are based on a sample of Chinese firms from 2016 to 2019, show that (a) the U-shaped DE–FP relationship applies to Chinese firms; (b) this relationship is moderate for large firms, substantially steeper for medium firms, and inverted for small firms; (c) the U-shaped DE–FP relationship for eastern region firms is moderate, while the U-shaped relationship for central region firms is steep, but the transition is incomplete, and western region firms have experienced increasing productivity since the early stage of DE development. This study offers an alternative approach to understanding Chinese firms' strategic choices in DE development and provides a more nuanced explanation for the productivity paradox by emphasizing the significance of the firm-specific context. In this way, the study captures the sophisticated and constantly evolving relationships between DE and FP for heterogeneous Chinese firms.

The effects of unemployment and inflation rates on the business value of information technology and economic performance: The partial adjustment valuation approaches

Equipped with the one-equation theory of partial adjustment (PA) under the constant speeds of PA assumption (Nerlove, 1958) and the two-equation theory of PA under the dynamic and variable speeds of PA assumption (Lin & Kao, 2014), this paper applies the constant PA speeds (Lin et al., 2010) and dynamic PA speeds (Lin & Kao, 2014) PA valuation (PAV) approaches to analyze the grand research issue (for three research questions), namely, how IT and two important macroeconomic variables, unemployment rate and inflation rate, affect the country's performance jointly and separately from a global perspective. The ten research models are fitted into a panel data sample composed of 11 countries (Canada, France, the United Kingdom, the United States, Australia, Belgium, Denmark, Greece, Norway, Portugal, and Spain) over the period from 1993 to 2011. The results reveal that the IT productivity paradox remains in some developed countries; IT payoffs hinge on the exploitation of available complementary resources; and the complementarity and substitutability relationships between IT and unemployment and inflation rates exist.

Features of digitalization of Russian regions

Based on the materials of the Rosstat Monitoring of the Development of the Information Society in the Russian Federation for the period 2011-2020, the article analyzes the indicators characterizing the development of information and communication technologies. The purpose of the study is to assess the dynamics of business digitalization in Russian regions and digital divides. The main method of analysis is descriptive statistics. Based on the study of the indicators dynamics, the authors identified leading and outsider regions for various indicators of digitalization and built consolidated ratings of regions digitalization for 2011 and 2020. The study assessed the stability/mobility of the list of leading and outsider regions for the period under review, and considered the concentration of inequality and the relationship between business digitalization and the level of labor productivity in the region. Based on the results of the study, there was concluded that the mobility of the group of regions-leaders of digitalization is higher than those of the regions-outsiders. There is a fairly high concentration of low digitalization indicators in outsider regions, which, however, is stable over time. There is no significant relationship between the indicators of business digitalization and the level of labor productivity in the region, which to a certain extent confirms the productivity paradox known in the economic literature. On the other hand, the accelerated development of digitalization in regions with low levels of productivity and labor can be seen as an investment in the development of the region and in increasing labor productivity.

ICT Capital Formation, Unemployment, and the Solow Paradox

This study explores the impact of ICT on unemployment and labour productivity. Using a time-varying modelling approach, quarterly US data from 1972 to 2020 estimate the relationships between unemployment and ICT capital investments. The results highlight that ICT capital investments reduce unemployment and increase labour productivity, showing no evidence supporting the Solow Paradox. The mechanisms behind the relationship between ICT and enhanced labour productivity are identified by Data Envelopment Analysis (DEA) and include improved access to information and an improvement in the labour structure.

Artificial intelligence (AI)-enabled CRM capability in healthcare: The impact on service innovation

Although AI-enabled customer relationship management (CRM) systems have gained momentum in healthcare to enhance performance, there is a striking dearth of knowledge on how such capabilities are formed and affect service innovation. The study adopted a mixed-method approach to investigate the underlying phenomena. This research infused resource-based theory, dynamic capability theory, and theory of productivity paradox to investigate how healthcare in India acquires AI-enabled CRM capabilities and enhances service innovation. We identified the facets of AI-enabled CRM capabilities using a case study and developed a framework for AI-enabled CRM capability and service innovation. This study noticed that customer service flexibility (CSF) is a missing link in this relationship. The findings of the quantitative study employing PLS-SEM reveal the linear relationships between AI-enabled CRM capability, CSF, and service innovation. This study explains the formation of AI-enabled CRM capabilities to fill the research gap and direct innovative performance in healthcare, which is an immediate need to sustain in a volatile environment. This study provides theoretical implications to enhance the research stream and practical implications for decision-makers.