Technology diffusion and firm performance: It pays to join the digital bandwagon!

This article examines the relationship between the deployment of technology and subsequent productivity in major firms in local telecommunication exchanges in the United States over the period 1995–2000. Technological progress is measured by the extent to which digital technology spread within the firms’ networks. Using a set of performance measures that decomposes company profitability into productivity and price-recovery measures, we found that deployed digital network technology has a positive and significant impact on firms’ productivity but a negative impact on firms’ price-recovery patterns. We conclude that it is beneficial for firms to join the digital era sooner rather than later.