Heterogeneous Returns to ICT Capital: Insights from Colombian Manufacturing Firms

The persistent productivity gap between Latin America and the Caribbean and high-income countries is partially attributed to low levels of innovation and limited adoption of technologies, such as information and communication technologies (ICT). ICT capital has been shown to enhance firm performance, yet its role in emerging markets remains underexplored. In this study, we analyze the impact of ICT capital on output in Colombian manufacturing firms from 2013 to 2018. Using an augmented production function, we estimate the output elasticity of ICT capital while addressing potential endogeneity and measurement concerns. Here, we show that ICT capital contributes significantly to output, with elasticities comparable to non-ICT capital and labor. The results reveal substantial heterogeneity: innovative, high-tech, exporting, and big firms have higher ICT capital elasticities than their noninnovative, low-tech, nonexporting, and smaller counterparts. These patterns suggest that complementarities exist between ICT and firms assets related to innovation, export orientation, and growth. The findings presented here contribute to the literature on ICT capitals role in firm productivity and inform policy making by emphasizing the need for different strategies to foster digital transformation in SMEs and in low-tech sectors.