ICTs and time-span in technical efficiency gains. A stochastic frontier approach over a panel of Italian manufacturing firms

- Cobb-Douglas and the more flexible Translog production frontier are tested.
- ICT and non-ICT capital and high and low-skilled labour have positive effects on productivity.
- ICT investments significantly reduce inefficiency in Italian manufacturing firms.
- ICTs reduce firm inefficiency for a long time-span since their adoption.
- ICT returns are influenced by firm characteristics, most of which idiosyncratic.

In this paper, in contrast to much of the existing literature dealing with the impact of information and communication technologies (ICTs) on labour productivity, we assess the relationship between ICT investments and technical efficiency (TE) using a stochastic frontier approach. We utilize a large panel dataset of Italian manufacturing firms over the period 1995-2006 and confirm the findings of the previous work on ICT and productivity. In addition, we test to what extent ICT investments influence the gap between firms and the production frontier; that is, how adoption of ICT influences the narrowing of the said gap. We also test the duration of the effects of adopting ICT on technical efficiency. Finally, our results indicate that ICT returns on TE are influenced by certain firm characteristics, most of which idiosyncratic, such as management practices, labour organization, research and development.