Review of Industrial Organization
12: 593–607, 1997.
1997 Kluwer Academic Publishers. Printed in the Netherlands.
New Information Technology and the
Knowledge-Based Economy. The Italian Evidence
a di Sassari & Torino, Laboratorio di Economia dell’Innovazione, Dipartimento di
Economia, via S.Ottavio 20, 10124 Torino, Italy
Abstract.This work analyses the outcome of the interaction between: 1) the diffusion of new informa-
tion technologies; 2) their effects on the tradability, divisibility and transportability of information;
3) the growing role of business service industries in the introduction of new technologies; 4) the
interaction between receptivity and connectivity of learning agents in the generation of localized
technological change based upon both tacit and generic knowledge, and 5) the parallel increase in
total factor productivity. The empirical results provide some support, with respect to the Italian econ-
omy, to two hypotheses: 1) The co-evolution of usage of business and communication services. Our
empirical analysis has shown the strong correlation between the levels and rates of growth in the use
of communication and business services. 2) The productivity enhancing effects of the co-evolution
in the use of business and communication.
Key words: New information technology, communication and business services, innovation, produc-
JEL Classiﬁcation: O33.
New information technology changes in depth the conditions of access, retrieval,
communicationand processingofallkinds on information. The use of new informa-
tion and communication technology makes it possible to increase the separability,
tradability, divisibility and transportability of information and hence favours the
growth of the markets for business service ﬁrms. The diffusion of new information
technology makes it possible to increase the connectivity and receptivity of infor-
mation networks hence to increase the interactions, mediated by business service
ﬁrms, between localized and generic knowledge so as to enhance the innovative
capability of economic systems and lead to the introduction of an array of process
and product innovations. The diffusion of new information technologies is likely to
Preliminary versions of this paper have been circulated within the E.U. funded T.S.E.R. project
“Services in Innovation and Innovation in Services” and discussed in several meetings of the working
groups as well as seminars of ENST (Ecole Nationale Superieure de Telecommunications) of Paris
and PREST of the Victoria University of Manchester. The comments of the members of the working
group and of many attendants at the seminars, the criticisms of two anonymous referees as well as
the help of Andrea Panetta and Aldo Geuna in data collection are all gratefully acknowledged as well
as the funding of the T.S.E.R.