Fact of the Week: Latin American Firms That Used Broadband Internet Service in 2010 Were 11 Percent More Productive Than Those That Didn’t.

Internet adoption has a tremendous impact on economic growth for developing countries. A joint research paper between the Inter-American Development Bank and the University of Barcelona demonstrates the magnitude of this economic impact in Latin America. Three economists analyzed 2010 data on more than 4,000 firms mostly in the manufacturing sector. Among these firms, 88 percent had adopted broadband Internet service for purposes ranging from low-intensity email to more sophisticated research and development. These Internet adopters were 11 percent more productive than firms without broadband service—and the higher-intensity their Internet activities, the greater their productivity gains.

The researchers find that Internet adoption has been especially beneficial for small and medium-sized firms by enabling them to engage in in e-commerce, market research, and establish a wider presence for their products and services. As a productivity-enabling platform, the Internet has allowed smaller firms to reduce the productivity gap between them and larger firms. Indeed, the economists found that Internet adoption had twice the productivity growth effect on small firms than on larger firms.