Rapid ICT adoption raises important questions about what the ensuing effects might be on firm operations. For instance, Bloom et al. (2009) investigate how ICT affects worker autonomy, distinguishing between reduction of costs in communication and information. According to their findings, worker autonomy shrinks for the former while in the later, decisions are decentralized and worker autonomy increases. Their findings, however, are silent regarding how workers’ autonomy affects productivity.

Several papers have analyzed empirically the link between ICT and productivity. At the sector level, Basu et al. (2003)<sup>5</sup> examine how the adoption of ICT could explain differences in US and UK productivity performance. Their focus is on the impact via the reduction of ICT prices. According to the authors, cheap ICT capital is likely to create major changes only if firms can deploy their other inputs in radically different and productivity-enhancing ways. By comparing UK and US performance, the authors reached the conclusion that unmeasured investments in intangible organization capital associated with the role of ICT can explain the divergent productivity patterns of these two countries after 1995.

Similar arguments are used in papers using plant level data, such as in Bartel et al (2005) and Bartel et al. (2009). These papers suggest that the reduction of ICT costs induces ICT investments, which eventually diminish the cost of setup time and raise production of customized products. As a result, firms require more skilled labor leading to productivity growth. Bartel et al (2005) corroborate these channels using valves manufacturing plant level data from the US; and Bartel et al (2009) show that the effect of increased labor skills requirements complementary to ICT are stronger in the UK than the US, also using plant level data for the same valves manufacturing sector.

Using firm-level data, Bresnahan et al (2002) also suggest that the reduction of ICT prices increases investments in work organization and product and service innovations, which raise the demand for skilled workers enhancing productivity growth. Their research, using US firm level data from 1987 to 1994, found evidence of complementarities among all three types of innovations (IT, complementary workplace reorganization and new products and services). In other words, firms adopting innovations tend to use more skilled labor, and the effects of ICT on labor demand are greater when ICT is combined with organizational investments. In sum, they highlight the importance of ICT as an enabler of organizational change, which leads to productivity growth. Using the same firm level data, Brynjolfsson and Hitt (2003) specifically investigate the effect of computerization on productivity and output growth. According to the authors, ICT affects productivity because firms change their production processes and engender complementary innovations within and across firms. Their main conclusion is that the estimated contributions of computerization to output growth steadily increase in the long run. In the short run, measured output contributions of computerization are approximately similar to computer capital costs, but in the long run their contribution is significantly greater than their costs.

Therefore, one strand of this literature argues that productivity gains are reinforced by ICT investments if complementary investments in organization capital are conducted jointly, as found in Crespi et al. (2006) and Commander et al (2011). Crespi et al. (2006) investigate this issue using UK firm-level data from 1998 and 2000. The authors reached similar conclusions as in the previous literature, such as the fact that ICT and organizational change interact in their effect on productivity growth. In addition, the authors find that organizational change is affected by competition, which leads to more innovation as found in Kretschmer et al. (2012). Commander et al. (2011) evaluate this linkage by utilizing firm-level data from two large

> 5 Another example of sector level analysis is Fernald (2014).

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