# **ICT Use, Innovation, and Productivity: Evidence from Sub-Saharan Africa**

## **1. Introduction**

Low productivity growth is one of the main factors hindering economic growth in many developing economies, especially in Sub-Saharan African. One potential enabler of productivity growth is the adoption and use of information, communication and technology (ICT). ICT can facilitate productivity growth by making use of production factors more efficiently and facilitating the adoption of other technologies. The potential for ICT as a productivity enabler is even larger in those regions farthest away from the technological frontier, such as Sub-Saharan Africa, which until now tended to have lower ICT adoption rates and underdeveloped ICT infrastructure.

The extent of the contribution of ICT towards economic growth is still under debate; even when this issue is investigated using data from the developed world. The early empirical literature in the 1970s and 1980s measuring whether the significant implementation of ICT as a new technological revolution had an impact on productivity growth found inconclusive evidence; coined as the “productivity paradox” or “Solow Paradox”.<sup>2</sup> Pilat (2004) suggested several factors that contributed to the “productivity paradox” including the limited capability of aggregate data (at country and/or sector level) to measure properly the impact of ICT on productivity growth.<sup>3</sup> This debate still continues today and it remains an open question about the extent to which ICT can boost productivity growth.<sup>4</sup> Despite the existing caveats, some literature reviews such as Pilat (2004), Draca et al (2006) and Litan and Rivlin (2001) suggest a positive effect of ICT on productivity growth; although there is some evidence of publication bias in the literature that could overemphasize this positive impact of ICT on productivity. According to Polak (2014), the average estimated ICT elasticity is positive but very small, 0.3%. One possible explanation for this small impact could be the fact that ICT is embedded in many capital and production technologies, which makes it difficult to separate the sole impact of ICT related investments from the impact of production factors.

The objective of this paper is twofold. First, it aims to contribute to the existing empirical literature on the impact of ICT on productivity. Our approach focuses on one specific channel through which ICT can impact productivity: _ICT as an innovation enabler_ . Second, and more importantly, our objective is to shed light on the role of ICT in firm level productivity for a sample of African countries. The current low productivity levels in African firms suggest that the enhancing effect of ICT could be potentially large. However,

> 2 Solow (1987) has remarked that “computers were everywhere but in the productivity statistics”.

> 3 Other factors are: some of the benefits of ICT were not picked up in the productivity statistics; benefits of ICT use took a considerable time to emerge, as some other key technologies, such as electricity; small samples of firms drawn from private sources.

> 4 This has been pointed out by a recent article from The Economist (2014).

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