IT And Firm-Level Performance in the Philippines, 1999–2006

  • Niño Alejandro Q. ManaloEmail author
  • Jose D. V. CamachoJR.


Information technology, or it, has become an integral part of a country’s development. Governments have provided policies to facilitate the growth of the it sectors of their respective economies, while firms have utilized it in improving their production process. This study aims to assess the economic impacts of it on the productivity of Philippine firms in terms of revenue.

Using the production function approach, secondary panel data on 50 firms for the period 2001–2004 was analyzed to measure the contributions of it capital on firm output. Results showed that it capital contributes significantly to the output of the firm and outweighs the contribution of the non-it inputs; confirming previous researches. Different panel estimation techniques were utilized in this study, where it was found that the fixed effects model (fem) is better suited to analyze the data compared to the random effects model (rem). Still, the presence of heteroskedasticity and autocorrelation justifies the use of the feasible generalized least squares (fgls) estimation, which produces the best results among all the employed panel estimations. It was further found that a firm belonging to either the finance or manufacturing sectors benefits less from using it capital, suggesting that extensive use of it capital in these sectors has led to diminishing returns over time.

it’s contributions extend beyond its tangible benefits. Quality improvements, improved technology and organization, and improvement in workers’ human capital are just some of it’s intangible elements. Given the significant effects of it’s contribution to firms’ production, the government needs to ensure a vibrant macroeconomic environment in conjunction with continuing improvements in the digital infrastructure and certain institutional reforms to ensure the continued promotion of it use in the country.


IT Firm Behavior Firm Productivity 

JEL Classification

D21 Firm Behavior O3 Technological Change 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Alonzo, D.B. (1997). The IT Plus Factor, IT2000 (April–June 1997), 27-30pp.Google Scholar
  2. Asian Productivity Organisation (apo). (1997). Information Technology and Rural Development in Asia-Pacific Region. Report of an APO Study Mission. Tokyo.Google Scholar
  3. Bangko Sentral ng Pilipinas (bsp) Selected Philippine Economic Indicators. May 2002.Google Scholar
  4. Black, S. and L. Lynch. (1997). How to Compete: The Impact of Workplace Practices and Information Technology on Productivity. Working Paper 6120. National Bureau of Economic Research (nber).Google Scholar
  5. Bresnahan, T., E. Brynjolfsson, and L. Hitt. (1999). Information Technology, Workplace Organization, and the Demand for Skilled Labor: Firm-Level Evidence. Working Paper 7136. nber.CrossRefGoogle Scholar
  6. Brynjolfsson, E. and L. Hitt. (2003). Computing Productivity: Firm-Level Evidence. Working Paper 139. eBusiness@MIT.Google Scholar
  7. -. (2000). Beyond Computation: Information Technology, Organisational Transformation and Business Performance. Journal of Economic Perspectives 14(4): 23–48.CrossRefGoogle Scholar
  8. -. (1998). Beyond the Productivity Paradox: Computers Are the Catalyst for Bigger Changes. Communications of the ACM 41(8): 49–55.Google Scholar
  9. -. (1996). Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending. Management Science 42(4): 541–58.Google Scholar
  10. -. (1995). Information Technology as a Factor of Production: The Role of Differences Among Firms. Economics of Innovation and New Technology 3(4): 183–200.Google Scholar
  11. Businessworld Philippines Top 1,000 Corporations. (various years).Google Scholar
  12. Computerworld Philippines Premier 100. (various years).Google Scholar
  13. Dairo, J. (1999). Improving R&D Support for I.T. and Microelectronics. Milepost 1(6): 20–21.Google Scholar
  14. Dryden, J. (2003). ICT, the Economy and Society — Challenges of Measurement and Analysis. Organization for Economic Cooperation and Development (oecd), France: Paris.Google Scholar
  15. Gerstein, M.S. (1987). The Technology Connection. Reading, MA: Addison-Wesley.Google Scholar
  16. Gordon, R. (2000). Does the “New Economy” Measure Up to the Great Inventions of the Past? Journal of Economic Perspectives 14(4): 49–74.CrossRefGoogle Scholar
  17. Greenan, N., J. Mairesse, and A. Topiol-Bensaid. (2001). Information Technology and Research and Development Impacts on Productivity and Skills: Looking for Correlations on French Firm Level Data. Working Paper 8075. nber.Google Scholar
  18. Greenwood, J. and B. Jovanovic. (1999). The Information-Technology Revolution and the Stock Market. American Economic Review 89(2): 116–122.CrossRefGoogle Scholar
  19. Gujarati, D. (2003). Basic Econometrics, 4th ed (International Edition). New York: McGraw-Hill.Google Scholar
  20. Haacker, M. and J. Morsink. (2002). You Say You Want a Revolution: Information Technology and Growth. Working Paper 02/70. imf.Google Scholar
  21. Inoue, T. (1998). Impact of Information Technology and Implications for Monetary Policy. Discussion Paper Series 98-E-7. Institute of Monetary and Economic Studies (imes).Google Scholar
  22. Intriligator, M., R. Bodkin, and C. Hsiao. (1996). Econometric Models, Techniques, and Applications, 2nd ed. New Jersey: Prentice Hall.Google Scholar
  23. it Resource Philippines. The Annual Sourcebook of the Philippine Information Technology Community. (various years).Google Scholar
  24. Jorgenson, D. and K. Stiroh. (2000). Raising the Speed Limit: US Economic Growth in the Foreign Age. Working Papers No. 261. Paris: oecd.Google Scholar
  25. -. (1999). Information Technology and Growth. American Economic Review 89(2): 109–115.CrossRefGoogle Scholar
  26. Kimbell, L. and J. Lorant. (1974). Physician Productivity and Returns to Scale. Chapter 20 in University of California, Human Resources Research Center, An Original Comparative Economic Analysis of Group Practice and Solo Fee-for-Service Practice: Final Report. Springfield, Va: National Technical Information Service, U.S. Department of Commerce.Google Scholar
  27. Kuroda, M. and K. Nomura. (1999). An Explanation of the Productivity Paradox: tfp Spillover Through Capital Accumulation. Discussion Paper Series 99-E-10. imes.Google Scholar
  28. Lee, I.H. and Y. Khatri. (2003). Information Technology and Productivity Growth in Asia. Working Paper 03/15. imf.Google Scholar
  29. Lichtenberg, F. (1995). The Output Contributions of Computer Equipment and Personal: A Firm-Level Analysis. Economics of Innovation and New Technology 3: 201–217.CrossRefGoogle Scholar
  30. Medium-Term Philippine Development Plan (mtpdp). 2004–2010. National Economic Development Authority.Google Scholar
  31. Monk, P. (1992). Innovation in the Information Economy in C. Antonelli, ed., The Economics of Information Networks. Netherlands: Elsevier Science Publishers B.V.Google Scholar
  32. Nagy, H., S. Boyson, and S. Gunamine. (1996). The East Asian Miracle and Information Technology: Strategic Management of Technological Learning. Discussion Papers 326. World Bank.Google Scholar
  33. Nagy, H. (1995). The Diffusion of Information Technology: Experience of Industrial Countries and Lessons for Developing Countries. Discussion Papers 281. World Bank.Google Scholar
  34. -. (1991). The Information Technology Revolution and Economic Development. Discussion Papers 120. World Bank.Google Scholar
  35. National Information Technology Council (nitc). it21 Philippines Asia’s knowledge center: it Action Agenda for the 21st century. October 1997. Manila, Philippines.Google Scholar
  36. oecd. (2004a). The Economic Impact of ict — Measurement, Evidence and Implications. oecd, France: Paris.Google Scholar
  37. -. (2004b). icts and Economic Growth in Developing Countries. OECD, France: Paris.Google Scholar
  38. -. (2003). ict and Economic Growth: Evidence from OECD Countries, Industries and Firms. OECD, France: Paris.Google Scholar
  39. Oliner, S. and D. Sichel. (2000). The Resurgence of Growth in the Late 1990s: Is Information Technology the Story? Journal of Economic Perspectives 14(4): 3–22.CrossRefGoogle Scholar
  40. -. (1994). Computers and Output Growth Revisited: How Big is the Puzzle?” Brookings Papers on Economic Activity 2: 273–317.CrossRefGoogle Scholar
  41. Philippine Business Profiles and Perspectives, Inc. (2001). Top 7,000 Corporations 2000-2001: The Philippines in the New Economy.Google Scholar
  42. Pilat, Dirk. (2004). The ict Productivity Paradox: Insights from Micro Data. OECD Economic Studies No. 38, 2004. OECD, France: Paris.Google Scholar
  43. Pohjola, M. (1998). Information Technology and Economic Development: An Introduction to the Research Issues. Working Papers 153. unu/wider.Google Scholar
  44. Royol, R. (1999). An Economic Assessment of the Information Technology (it) Sector in the Philippine Economy: A Survey of Alternative Approaches. Undergraduate thesis, uplb.Google Scholar
  45. Tolentino, M.C. (1998). The Economic and Social Impact of Information Technology in Southeast Asia: Focus on the Philippines”, Policy Digest 2(10): 30–36.Google Scholar
  46. Wallace, T.D. and JL Silver. (1988). Econometrics: An Introduction. USA: Addison-Wesley.Google Scholar
  47. Wong C.W. (2000). “Sales of pcs, lans, printers up in ’99”, Computerworld Philippines (June 30, 2000), 1, 15pp.Google Scholar

Copyright information

© Japan Economic Policy Association (JEPA) 2007

Authors and Affiliations

  • Niño Alejandro Q. Manalo
    • 1
    Email author
  • Jose D. V. CamachoJR.
    • 2
  1. 1.Department of Economics College of Economics and ManagementUniversity of the Philippines Los BañosPhilippines
  2. 2.Department of Economics College of Economics and ManagementUniversity of the Philippines Los BañosPhilippines

Personalised recommendations