MODULARITY AND PRODUCTIVITY - ASSESSING THE IMPACT OF DIGITAL TECHNOLOGY IN THE US TELECOMMUNICATIONS INDUSTRY

This article investigates the impact of digital technology diffusion o n the productivity of firms making up the local operating sector of th e U.S. telecommunications industry for the years 1991 to 1993. Diffusi on of digital technology is measured as the extent of line digitalizat ion that has taken place, with digitalization expected to enable firms to reap significant operating efficiencies. While the diffusion of th is particular technology in the local operating company sector has bee n relatively low, it is found that, after controlling for the effects of a number of other covariates also likely to affect firm-level perfo rmance, the spread of digital technology within the U.S. local telepho ne network plays a significant and positive role in impacting producti ve efficiency of the firms making up the network. The investments that have been made in energizing the U.S. information superhighway, via t he digitalization of telephone lines, are justified in productive effi ciency terms. The article contributes to empirical literature in the t echnical change area which assesses the firm-level productive efficien cy consequences of technology diffusion. (C) 1997 Elsevier Science Inc .