Information technology and the changing workplace in Canada: firm-level evidence

Recent advances in information and communication technology (ICT) have had dramatic effects on both individual and workplace performance. Use of computers and the Internet as general-purpose technologies has spread rapidly across all sectors of the economy, transforming business organization, increasing competition, and fostering innovation. Understanding the influence of ICT on the dynamics of the workplace requires information on both demand and supply sides of the labor market, but it is only recently that the study of both sides of the market has become feasible using linked employer-employee data. In this article, we investigate the effects of new technology on firm productivity using the rich Canadian Workplace and Employee Survey for the period 1999-2003. We apply a mixed regression model which includes both firm and employee characteristics as well as their interactions with computer use. Our model allows us to control for unobserved heterogeneity at higher levels along many dimensions. Our findings indicate that computer use by employees has a positive and significant effect on the productivity of firms that the effect has not lost its momentum, and that spillover effects are not significant. Moreover, human capital enhances the effect of computer use on productivity, but organizational changes do not interact with computer use in our sample period.