Improvements in labour productivity are the primary route to increasing the long-run economic wealth of a population, so any evidence about how to achieve improvements is always welcome.

This very well written paper from the OECD looks at a very well-worn topic on productivity – how it is related to IT and digital technologies. Since the mid 2000s there has been a long running debate about how much of a contribution IT investment has made. For the USA and other OECD economies, it appeared like the initial benefits of the 90s had stopped and failed to return.

When I was studying this topic about 10 years ago initial studies (including my own) made clear that investment in organisational capital was needed to fully benefit from investment in new software and systems: essentially, adopting new software doesn’t necessarily make a company more productive at something without staff learning new skills, and, crucially the company adopting new processes.

For example, investment in email and digital communication systems gives a company much more productivity benefit if combined with moving to a flatter structure where staff have more autonomy.

This study shows that in the Netherlands there has been a significant productivity benefit to service sector firms from increasing the digital skills of their workforce. Furthermore, less productive firms have seen a significant productivity improvement from investing in software.

As ever there are some limitations to the econometric methods used here, in particular the authors have to assume that all firms are ‘small’ in their sector and there are no firms that are technologically dominant. Their methodology also doesn’t account for firms in the Netherlands acquiring productivity-improving technologies from outside the country. Given the number of multinationals operating here, and the openness of the country this is quite a big issue.

However, these are things that can be improved with further work. The main contribution of this article is validating with quantitative evidence the intuition that you need to improve your workforce’s digital skills in order to leverage the productivity benefits of IT investment.