85th International Atlantic Economic Conference

March 14 - 17, 2018 | London, United Kingdom

How does investment in information and communications technology pay off?: Evidence based on a survey in Japan

Friday, 16 March 2018: 9:30 AM
Akihiko Shinozaki, Ph.D. , Economics, Kyushu University, Fukuoka, Japan
Satoshi Washio, Ph.D. , InfoCom Research, Inc., Tokyo, Japan
Shigehiro Kubota, Ph.D. , InfoCom Research, Inc., Tokyo, Japan
The purpose of this study is to analyze how investment in information and communications technology (ICT) and related corporate reforms affect business performances. For this we conduct a graphical modeling analysis by corporate size using nationwide survey data from Japanese workplaces. Our sources include the Ministry of Internal Affairs and Communications and the Study Report on Accelerating Economic Growth with ICT: Challenges and Solutions.

We conducted the questionnaire with NTT Com Research in March 2014. The questionnaire was designed two-stage form—a pre-survey and a main survey. The pre-survey received 9,082 responses out of 44,045, asking about the firms and industries respondents belong to. The main survey was implemented with more detailed questions, by setting the number of target responses for each corporate size and industry classification.

The categories of questionnaire in the survey are; the introduction of ICT; effective use of ICT; corporate reforms accompanying the investment in ICT; and resultant business performances in terms of changes in sales revenues, operating profits, and number of full time jobs. Based on valid data for 4,016 respondents, we conduct a covariance structure analysis, i.e. graphical modeling analysis, which graphically expresses a conditional independent relationship between each factor. Then, we illustrate by corporate size how each factor involved with the others and by what routes they exert their respective effects on business performances.

Our study yields three observations. First, introduction of ICT, effective use of ICT, and related corporate reforms positively affect each other and improve business performances. Second, for larger firms, corporate reforms have the most direct effect on the increase in sales revenues and operating profits, while introduction of ICT and effective use of ICT have direct effects on job creation. Third, for small and medium sized enterprises (SMEs), effective use of ICT is the most important because it is the sole factor that affects directly not only increase in sales revenues and operating profits but also job creation.

These results demonstrate that corporate reform is the key factor for large enterprises to invest in ICT because their organizational structures are complicated and sometimes redundant. On the other side, for SMEs whose organizational structures are relatively simple, the most important factor is how to use ICT effectively because SMEs often have difficulty retaining highly skilled employees and/or experts in new technology when they invest in ICT.