The revival in US productivity growth since the mid-1990s is linked to a surge in investment in information and communication technologies (ICT).
Against the backdrop of a weakening link between productivity and traditional innovation inputs (e.g. R&D expenditure), digitization has spurred productivity through innovations in management techniques, business models, work processes and human resource practices. More fundamentally, digitization is changing the way innovation itself is done, opening the prospect of a long-term increase in the overall rate of innovation. Over time, this will dwarf the benefits from any particular innovation.
Digitization is transforming innovation in four ways:
- improved real-time measurement of business activities
- faster and cheaper business experimentation
- more widespread and easier sharing of ideas
- the ability to replicate innovations more quickly and more accurately. This mutually reinforcing sequence amounts to a new kind of R&D, with far-reaching implications for public policy.
Erik Brynjolfsson is Professor of Management at the MIT Sloan School of Management, the Director of the MIT Center for Digital Business, and a Research Associate at the National Bureau of Economic Research. His work has been recognized with nine "Best Paper" awards from fellow academics. He is frequently cited in the business press, and was named one of five “E-Business Visionaries” by BusinessWeek and one of the two most influential academics by Optimize magazine. Erik is the co-editor of two books, Understanding the Digital Economy and Strategies for eBusiness Success.
Discussant: Isabel Grilo, European Commission, DG ECFIN
Chair: Reinhilde Veugelers, Senior Fellow Bruegel