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ICT-ENAblED INNOVATION AND ENTREPRENEURSHIP SERIES

ICT, INNOVATION, AND ECONOMIC GROWTH IN TRANSITION ECONOMIES

An infoDev publicAtion prepAreD by

ECORYS Nederland b.V.in collaboration with

TNO and IDEA

2007

A Multi-country Study of Poland, Russia, and the Baltic Countries

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www.�nfoDev.org

Informat�on for Development Program


ECORYS Nederland B.V.�n collaborat�on w�th

TNO and IDEA

2007

ICT-enabled INNOVATION AND ENTREPRENEURSHIP SERIES


©2007 The International Bank for Reconstruction and Development / The World Bank1818 H Street NWWashington DC 20433Telephone: 202-473-1000Internet: www.worldbank.orgE-mail: [email protected]

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Table of Contents ��

Table of Contents

Preface vChapter 1. Executive Summary 1Chapter 2. Background and Methodology 21Chapter 3. The Selection of Regions and Sectors 25Chapter 4. Survey Results and Analysis 27

ANNEXESAnnex 1: EBS Methodology 63Annex 2: Country Characteristics 67Annex 3: Regions 73Annex 4: Selection Criteria for Sectors 77Annex 5: Selected Sectors 79Annex 6: Properties of the Dataset 89Annex 7: Results of the Survey – Tables 93Annex 8: Company Case Studies 125Annex 9: Electronic Business Survey (EBS) Baseline Questionnaire 131

�v ICT, Innovation, and Economic Growth in Transition Economies

The Information for Development Program (infoDev) has commissioned a multi-country study of information and communication technologies (ICT), innovation, and economic growth in selected transition economies. The study’s particular focus is on firm-level survey data collection and analysis framed by a clear articulation of the constraints and enabling conditions at the industry and country levels.

The overall objective of the study is to advance understanding of the relationship between ICT, innovation, and economic growth in transition economies.

The study focuses on five countries: Estonia, Latvia, Lithuania, Poland, and Russia. It is not designed to be a comprehensive analysis of the above-mentioned issues in all sectors and all regions of these countries. Instead, it provides an in-depth survey and analysis of a reasonably representative sample of firms in several regions and/or sectors so that broader conclusions can be drawn with some degree of

confidence. The study draws conclusions about conditions and challenges common to several or all of the countries in the study.

The study aims to assess the diffusion and impact of ICT at the firm level and the related policy implica-tions. It also makes specific recommendations for promoting and supporting ICT usage to improve competitiveness and new business creation. These recommendations concern the enabling environ-ment and point at some specific lessons learned/best practices at the firm level.

The study examines both traditional and new sectors. It explores whether and under what conditions traditional sectors have been successful in harnessing ICT, and identifies new opportunities and sectors that have emerged, thanks to ICT.

A consortium of three companies has carried out the study. ECORYS Nederland B.V. led the consortium with TNO and IDEA as partners.

Preface

Preface v

v� ICT, Innovation, and Economic Growth in Transition Economies

1.1 Introduct�on to the StudyThere have been significant debates about the impact of new ICTs on economic performance and competitiveness in general, and on productivity, efficiency, and innovation in particular. Notably, in seeking an explanation for the acceleration in productivity and economic growth experienced in many industrialized countries in the latter half of the 1990s and early 2000s, many economists have looked at the development, application, and utiliza-tion of ICT as a critical factor. It has been argued that ICT represents a new General Purpose Technology, with the potential of transforming economic processes into a “New Economy,” generating a sustained increase in economic growth through processes of technological development and innovation. Hence, at firm level, the expecta-tions are of greater efficiency, lower costs, and access to larger and new markets, while govern-ments see the application and use of ICT as generating higher national productivity, job creation, and competitiveness. In response to these developments, a number of studies have tried to assess the economic impact of ICT on firms and countries. The emphasis in these studies has been on the impact of ICT in OECD countries, in particular the United States and Western Europe1. The findings of these studies suggest that ICT has contributed greatly to produc-tivity growth and competitiveness in the OECD countries in the last decade. More recent studies have focused in greater detail on the processes of application and use of ICT within firms. One such study, the E-commerce Business Impacts Project (EBIP) of the OECD2, came to the conclusion that there is a need to reassess the notion of e-commerce or e-business. Hence, the evolution of ICT usage comes closer to electronic business networking—“the use of ICT to forge closer and more interactive links between business processes within the firm and commercial processes in the market place.”

1.2 Why th�s Study? The ICT dynamics in transition economies are at a stage when one can apply lessons learned from the United States and old European Union (EU) member states both at corporate and government levels. Meanwhile, the nature of the transition economies of Central and Eastern Europe might require tailoring of the lessons learned from Western Europe and the United States, and perhaps even new approaches to policies for ICT adoption and utilization.

Hitherto, there have been no studies that have gone beyond the narrow look at ICT utilization. Past surveys of ICT dynamics in transition countries are of what might be called the “e-readiness” variety. These surveys gather data on firm-level ICT investments and construct profiles of the technologi-cal evolution in various sectors and industries. This evolution is then tied to assumptions and estimates about use patterns and probable effects on perfor-mance and productivity. Industry-wide impacts are then produced by means of aggregations and projections based upon these assumptions and estimations.

However, this approach does not sufficiently serve the purpose of analyzing the effects of ICT on the economic performance of firms, and their position in the marketplace. Nor does it provide a solid foundation for linking the ICT take-up by firms with key enablers, barriers and constraints.

The present study derives its purpose from the context outlined above and aims to achieve the following:

Chapter 1

Executive Summary

For example, ‘information technology and the uS economy’ (2001) by D. W. Jorgenson and ‘ict investments and Growth Accounts for the european union 1980–2000’ (2003) by Van Ark et al.

http://www.oecd.org/document/21/0,3343,en_2649_33757_2539157_1_1_1_1,00.html

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Executive Summary 1

2 ICT, Innovation, and Economic Growth in Transition Economies

It looks beyond the ICT dynamics in terms of ICT investment and technological evolution. It selects firms in transition economies as the subject of analysis since little is known on the economic effects of ICT for this unit of analysis within a transition context. The choice of the subject of analysis is further supported by the fact that there are still ample opportunities in transition countries for positive intervention at corporate and government levels. It builds on the research carried out on the role and impact of ICT in OECD countries in order to provide a comparative basis. For this purpose, the questionnaire used in the OECD EBIP study has been adapted and applied.

1.3 Ma�n Character�st�cs of the Present StudyThis study addresses the need for collecting more revealing data on ICT utilization and its impact at the firm level, the need for more rigorous analysis of how ICT investment and use affects innovation, and the need for better understanding of how this complex translates into productivity increases and enhanced competitiveness.

Accordingly, the main research questions of the study are as follows:

What is the contribution of ICT utilization to the economic performance of firms?What is the contribution of ICT utilization to innovation in firms?What are the enablers, barriers, and constraints for ICT utilization at firm level in transition countries?

Throughout the study we draw comparisons with findings from similar studies conducted for Western Europe and the United States, to ascertain whether there are any particular characteristics of ICT utilization and its impacts in transition countries. In addition to providing reliable data and analysis of ICT utilization and its effects, the study identifies a set of recommendations that can guide decision-making at firm and government levels.

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1.4 MethodologyIn answering the central research questions of the study, the project has adopted a new and innovative methodology that identifies the impact of ICT at firm level. More specifically, the methodology adopted for this project is an Electronic Business Survey (EBS) that allows us to collect data at firm level, and place the application and utilization of ICT within its proper context. Such a methodology has allowed us to take account of the context specificity of the utilization of ICT within different sectors and firms. In contrast, many existing studies of the impact of ICT have looked at national, regional, or sectoral impacts as their unit of analysis. Such studies have often limited themselves to the role of ICT per se, and failed to capture the critical role and complexity of the utilization of ICT as a determining factor in shaping the impact on innovation and economic outcomes. Hence, the survey methodology for this project has, in part, been designed to address some of the weaknesses of existing studies to gain a more comprehensive understanding of the processes that shape the application and utilization of ICT, and the subse-quent impact on innovation and economic growth.

In addition, the survey findings have been comple-mented with eight case studies of firms that have allowed us to ascertain in greater detail the factors shaping ICT take-up and use.

1.5 Geograph�c Coverage, Select�on of Reg�ons and SectorsThe countries included in this study, as specified by infoDev, are Estonia, Latvia, Lithuania, Poland, and Russia. These countries have many things in common because they have all been subject to significant transformations associated with the transition process and their accession to the EU (with the exception of Russia). As such, they are of interest to a study that aims to analyze the role of ICT and innovation for economic growth within the context of transition. However, the countries are also different in many ways. For example, Estonia is at the forefront of ICT and innovation among the transition countries, while Russia has yet to establish

Executive Summary 3

a solid ICT infrastructure that can serve as a founda-tion for economic growth. Accordingly, the selection of countries offers the opportunity to study the role of ICT and innovation in different settings and contexts, albeit under the same processes of change associated with transition economies.

In order to provide a more focused and in-depth study, the area of analysis in Poland and Russia was narrowed further to a selection of regions. These regions represent areas of significant economic importance to the two countries, and were primarily selected for that reason. A set of key sectors was selected on the basis of the following criteria:

Growth potential and/or strategic importance for economic development of the country concerned. Potential for cross-country comparisons and extrapolation of findings to other sectors. ICT and innovation content.

The companies at the forefront of ICT usage in selected transition economies of Central and Eastern Europe were the target groups for the study. In total, 620 firms participated in the survey.

1.6 Key F�nd�ngsThe findings emerging from this study reveal a number of issues surrounding the development, application, and utilization of ICT and its implica-tions for innovation and economic growth. Below, we outline the key findings and messages emanating from our study. This is followed by more in-depth answers to the key research questions of the study.

ICT plays an important role in facilitating the modernization and improved economic perfor-mance of firms in transition countries. ICT in itself is often insufficient for improving economic performance. Rather, a range of complementary factors are required, e.g., organizational change and new marketing strategies. ICT use among firms in transition countries is primarily geared towards improved production and transaction processes, e.g., organizational change and improved marketing, rather than the development of new or improved products.

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There are significant sectoral differences in the role and scope of ICT use. The greater the information intensity of production and transaction processes, the greater the scope for applying and using ICT. Promoting the application and use of ICT for improved economic performance requires policies tailored to the individual sectors of the economy.

1.7 What �s the Contr�but�on of ICT to the Econom�c Performance of F�rms?

1.7.1 ICT UsageThe study reveals that ICT is a technology of growing importance in all countries surveyed. Access to the Internet is almost universal among the firms surveyed (99 percent of all firms). About 98 percent of all enterprises used e-mail and 44 percent used an Intranet provision. Local area networks are also rather popular (74 percent). However, the nature of the access and its use are very different among the firms, as summarized in the box below. It is mainly the less advanced ICT that is quickly spread in the region, rather than the latest generations of it. The latter is very much dependent on the technical infrastructure available within the individual countries, which was found to vary greatly in the sample. While Estonia is moving fast towards broadband connections, Latvia, Poland, and Russia are lagging behind. Nevertheless, perhaps contrary to expectations, companies do not find the technical infrastructure (defined as network reliability, network flexibility, and range of available services or geographic coverage) disturbing and hampering their activities. About 70 percent of the companies state that telecommunications prices do not inhibit the use of ICT.

Moreover, in transition economies, companies use ICT to serve customers and markets. About half of the companies in the survey place a high priority on two interrelated business areas: purchasing and procurement, and marketing and sales. Firms actively use computer networks for these activities and almost all of them are using the Internet to buy and sell goods and services. The Internet is a common means for servicing customers, providing them with information on products and services,

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contact facilities and often after-sales support. Market/customer related activities are automated within half of the firms. This seems to be the primary driving force for automation and ICT use in other business areas such as procurement and purchasing, finance (especially invoicing), delivery, and stock control.

1.7.2 ICT Utilization and Economic PerformanceIt is clear from this study that ICT utilization is already having an impact on economic performance among firms in transition countries. This is reflected in the findings on the impact of ICT on economic performance (see Table 1.1 and box below), where it is evident that ICT is a substantial contributor to productivity, profitability, and growth. Moreover, the fact that 30 percent of the firms say that ICT usage itself generates increases in ICT investment indicates that engagement in ICT usage is to a certain extent a self-sustaining process that requires cumulative investment.

However, while the use of ICT is resulting in improved economic performance of firms, it is important to note that ICT utilization does not automatically translate into economic impacts, but require a range of complementary factors. Hence, one of the most notable findings relates to the factors shaping ICT utilization and impact on economic performance. Figure 1.1 below depicts the factors that contribute to the positive impact of ICT,

and ICT’s relative importance. Figure 1.1 shows the aggregate number of times each of the factors was mentioned as a positive contributing factor.

It is evident that a new marketing strategy, capital investment in equipment, and organizational change are the three factors that are most critical for success-fully translating the adoption and utilization of ICT into positive economic outcomes.

Moreover, different factors affect different dimen-sions of the economic performance of firms.

BOx 1.1. Findings on Use of Internet

Access to the Internet is becoming increasingly dif-ferentiated, with wide variations in type and intensity. While almost all companies surveyed had made use of the Internet dur-ing the last three years, the means of connecting to the Internet differed greatly. For example, almost 22 percent of the surveyed firms are making use of fast connections with download speeds of more than 2 Mbps, while almost 18 percent of the firms are still using an analogue connection.

Selling via the Internet is less popular among firms than buying. Hence, more than 47 percent of firms placed orders, while less than 40 percent received and processed orders using the Internet.

Purchasing and Procurement and Marketing and Sales are the most popular uses of computer networks by firms, with approximately half of the companies in the study placing a high priority on the use of ICT in these business areas.

TABlE 1.1. ICT and Economic Performance of Firms

percent of firms with ict in combination with performance indicators reported increase ict contribution (percent) other factors (percent)

labor productivity 50.4 13.1 47.0

Operational costs 41.1 5.1 28.1

Revenue from sales 55.2 7.0 43.4

Profitability 44.0 10.5 48.2

Capital investment in innovation 51.5 16.1 57.5

ICT investment 45.4 30.2 46.0

Competition in price 57.1 5.3 29.1

Competition in quality 63.8 10.0 39.5

percent of firms with reported decrease

Operational costs 18.6 15.7 51.7

Executive Summary 5

Accordingly, a new marketing strategy is particu-larly relevant for translating the introduction and use of ICT into the improvement of profitability. This is mainly because the use of ICT together with new marketing initiatives enables firms to strengthen their position in existing markets, or enter new markets, and thereby improve profit-ability.

ICT and investment in equipment is particularly important for lowering operational costs and increas-ing revenues. This is perhaps not surprising, as ICT is said to allow for new and more efficient production processes, which in turn require investment in new equipment. The impact of ICT on production processes thus does not primarily arise from ICT in itself. Rather, ICT is a means by which new and more efficient production processes can be achieved when combined with new equipment.

Organizational change is particularly important for achieving greater labor productivity, lower opera-tional costs, and higher revenues. The close correla-tion between these dimensions of improved economic performance from ICT and organiza-tional change identified in this study corresponds well with findings from other studies on the impact of ICT on firm performance.3 It has thus often been argued that the effective utilization of ICT requires more horizontal organizational structures with greater levels of responsibility for the overall

coordination of work placed on the individual employee. It also requires the implementation of clearer functional descriptions of tasks. All this often requires a complete re-shaping of the organizational structure of the firm where all aspects of the organizational development are consequently given attention. This view is further supported by the case studies conducted as part of this project, which highlighted the importance of changes in organizational structures and ensuring that every employee has a sense of responsibility for his or her work.

These findings also have to be seen in the light of the wider transition process that shapes the context in which the firms operate. Hence, it is important to note that the firms are going through a period of rapid modernization, emphasizing improved production processes and flexible organizations that can address the needs of the market, as part of transformations of the socio-economic fabric to a market-driven economy. This may in part explain why ICT is combined with other factors, such as new marketing strategies and organizational change, for improved economic performance. In addition, it is worth noting that the size of the firm appears to matter when ICT and performance

Figure 1.1. Factors Reinforcing the Positive Effect of ICT in Companies

new marketing strategy

capital investment in equipment

organisational change

own specification

not applicable

don't know

training of staff

changes in salary structure

refusal

0 100 200 300 400 500 600

room, G, Dencik, J. et al (2004), conceptualisation and Analysis of the new information economy3�


inidcators are looked at. For productivity and profitability the attribution of positive effect to ICT (mainly or along with other factors) ranges between 67 percent and 61 percent for large firms and between 55 percent and 53 percentfor micro and small enterprises. Micro and small enterprises score relatively better for revenue increases than for cost reductions. For revenue increases, the differ-ence between micro and small and large enterprises is 18 percent while for cost reduction it is13 percent.

1.7.3 Sectoral Differences in ICT Use and Economic ImpactsThe introduction, use, and impact of ICT is not only determined by the characteristics of the individual firm, but also by the nature of the goods or services being produced and sold. More specifi-cally, there appears to be a strong correlation between the “information intensity” of the product and the capacity of firms to use ICT to increase performance. This involves both product character-istics as well as transaction characteristics. In other words, it is not the nature of the tangible or intangible product that determines the extent to which ICT can be used to improve performance, but the extent to which procurement, production, and sales processes are information rich or informa-tion poor.

The findings specific to particular sectors on ICT and economic performance are summarized and presented in Table 1.2 below.

1.7.4 Country Differences in ICT and Economic PerformanceWhile it is not the aim of this project to conduct a comprehensive comparative analysis of the five countries included in the study, the data set allows us to identify some tentative findings pertaining to ICT use and its impacts in individual countries. However, these findings should be interpreted with great caution. Our regional samples have been constituted to be representative of the geographical area under scrutiny. Sectors were chosen that are important for the economies of those regions. As a consequence, the industrial composition of our sample varies considerably per country, leaving little scope for rigorous comparative analysis. It may seem paradoxical that samples that are more or less representative of regional economies cannot be compared but, as is demonstrated in this study, the rate of adoption and potential effects of ICT usage on firm performance vary significantly per sector, and differences in the sectoral composition of the economy in the different regions may therefore determine regional outcomes.

Proof of this was obtained by comparing the different regional samples. Many differences were found, but most of them could not be explained without taking into account the incidental influence on a given regional sample of non-comparable sectors. The proper way to infer regional or country differences is thus to operate by triangulation, i.e. to find out about residual differences by comparing identical sectors or industries in different countries. Unfortunately, when applied with rigour this approach yields only a relatively small sample of three sectors (food, ICT and retail) for three countries (Estonia, Poland and Russia).

At a general level, when comparing productivity effects, a ranking is obtained in which Estonia holds the first place, followed by Russia and Poland, but with only marginal differences between the latter two. Note that the ranking is not static, but is an indication of the dynamism displayed by the industry in the last three years (2002–2005). It may well be, for example, that the rate of adoption of ICT in a given country is higher in absolute terms, but the pace of adoption has recently been higher in another country.

Among the firms that reported an increase in productivity, Russia and Estonia both show a

TABlE 1.2. Sector Related Key Findings on ICT and Economic Performance

contribution of ict to Sector economic performance

Finance High

Food Processing low

Furniture low

Heavy Machinery High

ICT services High

Retail & wholesale Medium

Executive Summary 7

significant contribution from ICT, while the role of ICT in generating productivity gains is much more limited in Poland4. Similarly, the role of ICT in delivering cost reductions, revenue increases, and improved profitability is far more limited in Poland compared to Estonia and Russia. It is thus evident that the overall role and impact of ICT in the transition countries differs significantly between countries. This should perhaps not surprise us, as the diverse overall socio-economic and political contexts of the different countries will create varied environments for ICT adoption and utilisation. We explore these issues further in a subsequent section of the study (see section on Barriers and enablers)

In the Box below, we summarize our findings and answers to the first research question of the study.

1.8 What �s the Contr�but�on of ICT to Innovat�on among F�rms?In addition to identifying the immediate impact of ICT on the economic performance of firms, the study also ascertains how firms use ICT to improve their future performance, namely through innovation.

The findings of the study suggest that ICT in itself is only a minor facilitator of innovation; it only becomes powerful in combination with a number of other complementary factors. In Figure1.2 below, the factors that contribute to innovation and their

it should be noted that the starting point of the countries are also differ-ent, which may explain some of the differences in the results.4�

TABlE 1.3. Country Related Key Findings on ICT and Economic Performance

percent of firms percent of firms percent of firms percent of firms with with reported increase with reported reduction with reported increase reported increase in in labor productivity* in operational costs* in revenues* profitability*

Estonia 58 (64) 18 (67) 58 (45) 40 (56)

Poland 38 (42) 15 (42) 34 (21) 28 (18)

Russia 41 (76) 24 (72) 63 (56) 43 (80)

* The figure in brackets is the percentage of firms who reported increase/decrease and who attributed this change mainly to ICT or ICT and other factors.

BOx 1.2. Findings on Impact of ICT on Firm’s Performance

As a contributing factor to productivity growth, the utilization of ICT must be looked at in the context of a more generic set of measures and efforts to increase productivity. Hence, the productivity increase is caused by a combination of factors, with the introduction and use of ICT being only one of them (see above). The contribution of ICT to productivity is both through reductions in operational costs and increases in revenue. However, neither of these is generally achieved by ICT in isolation, but only by integrating ICT into wider efforts to reduce costs or increase revenue, such as investment in equipment, organizational change and training of staff. As with cost reductions and revenue increases, ICT is also seen as contributing to the overall profitability of firms. However, once again, this is rarely achieved by ICT in isolation. Rather, ICT needs to be complemented with other factors, notably a new marketing strategy. ICT is an important contributor to investment in innovation and efforts of firms to modernize, with ICT taking up a significant proportion of innovation investment. ICT is mainly contributing to firms’ efforts to compete on quality rather than price. This finding should be placed in the wider context of ICT being a decisive factor in generating efficiency gains, but is not generally considered a distinguishing factor in effectively attaining a competitive advantage over competitors that are equally investing in ICT. Size matters, with larger firms being more able to utilize ICT to generate performance improvements. Accordingly, larger firms consis-tently performed better on the selected indicators than medium, small, and micro enterprises. The potential effect of ICT on the firm’s performance will be determined by the information intensity of the product, which involves both product characteristics and transaction characteristics. The role and impact of ICT differ significantly between transition countries.

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relative importance are depicted. The chart shows the aggregate number of times each of the factors was mentioned as a positive contributing factor.

Furthermore, the study found that the role of ICT is different for different types of innovation. In most of the sectors surveyed in the countries, ICT contributes more to process innovation than to product and relational innovation. The use of ICT is thus mainly for changes in production processes within the organization, rather than the develop-ment of new products or the furthering of relation-ships especially with suppliers.

In a comparable study of Western European firms5, it was found that relatively fewer firms report decreasing costs as a result of ICT. Rather, the contribution of ICT to product innovation was higher in the Western European sample. Even more significant was the contribution of ICT to relational innovation, in particular the contribution of ICT to increasing customer loyalty and consolidating preferential relations with suppliers. These effects are less outspoken in our study of Eastern European firms. The comparison confirms the picture of the Eastern European sample as composed of firms that are rapidly modernizing their organizational structures. The effect of ICT use on internal organization is likely to be more marginal in firms that already have a highly streamlined internal organization and are already well adapted to the market economy. It is also easier for firms that are

modernizing their structure to integrate ICT in the workings of their organizations. In that sense, Eastern European firms may benefit from being “followers.” This would include benefits from learning experiences and investments in Western European economies. However, it also leads to the conclusion that ICT usage is comparatively less mature. First, reaping the full benefits of ICT usage also requires streamlining external and internal transaction processes. Our findings indicate that Eastern European firms find it comparatively more difficult to enter that stage. Second, several forms of ICT-driven product innovations, particularly for intangible products, are conditional upon, or will only significantly pay off when external and internal processes are mutually integrated. Our findings indicate that many, if not most, Eastern European companies have not yet reached that stage. However, in time they may benefit from being “second” here as well.

The more detailed findings of the study on ICT and innovation are summarized in Table 1.2 below.

1.8.1 Sectoral Differences in ICT Use and InnovationAs with ICT and economic performance of firms, there appear to be sectoral differences in the role of

Figure 1.2. Factors Contributing to Innovation

changes in salary structure

training of staff

not applicable

refusal

don't know

own specification

capital investment in equipment

organisational change

new marketing strategy

0 200 400 600 800 1,000 1,200 1,400

Verhoest, p., Huverneers, c. & Hawkins, r. (#00#). ‘economic impacts of e-business’, in p. cunningham & M. cunningham (eds.) eAdoption and the Knowledge economy: issues, Applications, case Studies. Amsterdam: ioS press, ###-##0.

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Executive Summary �

influence ICT use and the impact of the technology on innovation and economic growth. More specifically, the study analyzed to what extent the existing policy and regulatory environments facilitate or inhibit the take-up and use of ICT among firms. A central finding from these efforts is that there are significant policy areas in need of improvement, if firms in the countries included in the study are to benefit fully from the opportunities offered by ICT.

Hence, inadequate education and training, and inappropriate taxation and fiscal policy were most negatively looked upon. The provision of online government services was also considered an area that needed improvement. In contrast, commercial law, intellectual property, and security policy are

ICT for innovation. Again, the degree of informa-tion intensity correlates positively with the impact of ICT on innovation. In table 1.4 below, we summarize the impact of ICT on the different types of innovation for the respective sectors.

1.� What are the Enablers, Barr�ers, and Constra�nts for ICT Ut�l�zat�on at F�rm Level �n Trans�t�on Countr�es?While the emphasis of the study has been on the role of ICT within firms, we have also explored the role of factors external to the firm itself that

TABlE 1.4. Key Findings of the Study Related to ICT and Innovation

type of innovation

Process innovation

Product innovation

Relational innovation

Findings

A majority of firms surveyed have recently managed to improve the speed and reliability of business processes (68 percent).

There is a positive relationship between ICT utilization, improved speed, and reliability of business processes and a reduction of business process costs. (38 percent).

Key factors of importance for process innovation, beyond ICT, are organizational change, a new marketing strategy and capital investment in equipment.

The main processes improved through process innovation are automation, information management, and wider processes of organizational change.

The companies surveyed said the development of new products and services played an important role.

Product innovation has contributed significantly to revenue increases in the last three years.

The contribution of ICT to product innovation is very limited.

New marketing strategies, investment in equipment, training of staff, and organizational change are key to product innovation.

The main outcomes of product innovation are the customization of products and new bundled offerings

Relational innovation is closely linked to product and process innovation, and explains the role of new marketing strategies in facilitating innovation.

ICT plays only a minor role in facilitating relational innovation with customers, but is more important for the relationships with suppliers.

Key factors for relational innovation are, perhaps unsurprisingly, new marketing strategies, organizational change, and capital investment in equipment.

The main outcomes of relational innovation towards customers are changes in sales value per customer, a greater share of retained customers, and changes in the sales value per retained customer.

The main outcomes of relational innovation towards suppliers are changes in the number of suppliers; changes in value of purchases per supplier; changes in the number of repeat suppliers; and the value of purchases by repeat suppliers.


Hence, Russia has been slower in taking steps to establish a policy and regulatory environment conducive to greater ICT adoption and utilization by firms. For example, weak enforcement of intellectual property rights and regulation has been a major inhibitor for the development of the ICT market. In the 1990s, it was common for most of Russian businesses to use pirated copies of the Windows Operating System. While the piracy rate is falling, the Business Software Alliance reported that the rate was still 87 percent in 2002.6

More recently, however, more significant efforts have been made to improve ICT dissemination and use in Russia. Notably, the ‘Electronic Russia 2002–2010’ program was initiated in January 2002 “to increase the efficiency of the economy both in the public and private sectors; make wider use of information technology in government departments; and transfer much of the state’s work online.” In part motivated by the objective of gaining WTO membership, the program targets four key areas of ICT: regulatory environment and institutional framework; Internet infrastructure; e-government, and e-education.

The policy and regulatory environment for ICT adoption and use is thus expected to improve signifi-cantly in Russia in the near future. However, the current weaknesses manifest themselves in the relatively low productivity impact of ICT identified in this study.

generally evaluated relatively positively, while telecommunication prices and quality of service are most positively looked upon. In interpreting these findings, it should also be taken into account that even though they have been positively evaluated on average, many of these factors have also been obstacles for firms to engage in or to intensify ICT usage. Surmountable obstacles for proactive players may be insurmountable for the lesser players. Our findings therefore indicate an order of priority (established by experienced users) but do not allow conclusions about levels of satisfaction in general.

In addition to these general findings on enabling and inhibiting policy and regulatory environ-ments, the study also identifies results pertaining to the specific circumstances of the countries. Hence, it is important to emphasize that the five countries included in the study face a range of very different policy challenges that requires different approaches and prioritization. For example, in Estonia the introduction of appropri-ate legislative, regulatory, and policy initiatives has played a significant positive role in the develop-ment of its information society. Indeed, all the Baltic States and Poland have introduced a range of reforms as part of their accession to the EU, which has acted as a catalyst for improved take-up and use of ICT. However, Estonia has by far been the quickest in adapting existing legislative and regulatory frameworks, resulting in a more advanced position with respect to ICT adoption and use compared to the other four countries included in the study. http://www.american.edu/initeb/sw5840a/analysis.htm6�

TABlE 1.5. Sector-related Key Findings on ICT and Innovation

contribution of ict contribution of ict contribution of ict to Sector to process innovation to product innovation relational innovation

Finance High High Medium

Food Processing low low low

Furniture Medium Medium Medium

Heavy Machinery High High High

ICT services High High High

Retail & wholesale Medium Medium Medium

Executive Summary 11

The different issues emerging for the five countries are summarized in Table 1.6.

In sum, it is evident from the findings outlined above that ICT is playing an increasingly impor-tant role in shaping economic progress in the transition countries. For these processes of transformation to continue and to ensure that the changes translate into economic growth, it is important that there is an appropriate regulatory and policy environment. Indeed, the transforma-tions associated with the introduction of ICT and innovative activity is by no means an automatic process, but requires an appropriate facilitative environment shaped by appropriate policies and regulations.

1.10 Conclus�onsThe point of departure for this project was the increasing awareness of the role of ICT in facilitat-ing economic growth. Accordingly, the central objective of this study has been to place the debate about ICT and economic growth within a transition context. In other words, this study has explored whether and how ICT is being used by firms in transition countries and the impact of introducing ICT on innovation and economic growth.

Our study has adopted a forward-looking perspec-tive. Methodologically, this was achieved by two means. Firstly, instead of investigating the status

TABlE 1.6. Country-related Key Findings of the Study

country

Estonia

latvia

lithuania

Poland

Russia

Key findings

Estonia is at the forefront with respect to ICT among the five countries.

The participants in the survey generally showed a high level of satisfaction with the policy and regulatory environment.

Key areas of concern are the lack of sufficient government training programs and somewhat inadequate protection of intel-lectual property rights and public financial support for research and development (R&D), diffusion, or uptake.

latvia has a fast growing ICT sector, but is generally worse placed in terms of ICT infrastructure compared to its Northern Baltic neighbor.

The participants in the survey showed only moderate satisfaction with the policy and regulatory environment.

Key areas of concern are the insufficient public financial support for R&D and the inadequate government training programs. In addition, latvia needs more public and private awareness raising activities and an improved education system for ICT usage.

lithuania has had greater difficulties than Estonia or latvia with respect to the establishment of an ICT infrastructure.

Participants in the survey showed a reasonable level of satisfaction with the policy and regulatory environment.

The key areas of concern are the inadequate government training programs and the insufficient public financial support for R&D, diffusion, or uptake.

The overall infrastructure for ICT and innovation in Poland is relatively poor.

The satisfaction with the policy and regulatory environment was considered moderate to poor.

The key areas of concern are inappropriate taxation measures, and public financial support for R&D, diffusion, or uptake that act as critical barriers for further ICT development and innovation. In addition, the government training programs are viewed as inadequate.

Russia has a comparatively weak ICT and innovation infrastructure, and according to some assessments, the development of ICT in Russia is lagging behind that of the leading Western countries by some 5–10 years.

The satisfaction with the policy and regulatory environment is generally poor.

The key areas of concern are the inappropriate taxation measures, and lack of public financial support for R&D, diffusion, or uptake. In addition, the inadequate commercial law is a cause for concern, while public and private awareness-raising measures and government training programs will also need to be improved.


quo, we adopted a dynamic approach by asking firms to report ongoing trends. Secondly, we concentrated our investigation on proactive firms on the assumption that the conduct and results obtained by these firms are indicative of more generic future evolutions.

The findings of this study suggest that ICT is already playing a significant role in the transition economies, with ensuing economic benefits. However, it is also evident that the introduction of new technologies must be accompanied by a range of complementing factors for ICT to be effectively utilized and to contribute to productivity gains and economic growth. In particular, firms must develop appropriate and new marketing strategies, invest in equipment, and undertake processes of organizational change. This raises a critical question of whether the reason for some firms having yet to experience economic benefits from ICT lie with their failure to undertake the complementary efforts, or if it is due to some limitations inherent in ICT itself.

Sector differences play an important role in under-standing the different degrees of ICT utilization and the capacities of firms to use it to improve perfor-mance and innovative activity. Some characteristics may be specific to a given sector, but most can be captured under more generic categories. They relate to the information intensity of a product (service or good) and associated transactions (inter- and intra-firm). As is argued and demonstrated, the informa-tional nature of the product is an important variable because it determines the extent to which produc-tion can be ICT supported or even entirely ICT based, as well as the extent to which inter- and intra-firm transactions can be entirely performed elec-tronically. However, on the basis of our observations, four additional important characteris-tics can be specified: product complexity, product standardization, frequency of transactions, and amount of transactions. Here is a brief explanation of each:

Complex products require more information processing than simple products. This very complexity may form an obstacle to implement-ing ICT solutions, but the potential for perfor-mance improvements through informatization is greater for complex than for simple products. Standardized products require less information handling than products that are produced on a

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one-off basis, which require additional informa-tion handling before the actual production process can be started. The obvious example of this is product customisation. Frequent transactions will evidently increase the potential for cost reductions through ICT usage compared to occasional transactions, and increase economies of scale. Finally, the amount of transactions equally determines whether transaction costs can be reduced through scale effects. Mass transactions will yield more cost reductions than dedicated ones.

The above characteristics may or may not occur simultaneously but will tend to be mutually reinforcing when they do. This is illustrated by the charts below that can mentally be superimposed and rotated to make characteristics coincide. The potential for using ICT to increase economic performance is obtained by adding up pluses (+, ++, +++).

It has been shown that wider socio-economic factors in general, and the regulatory and policy context in particular, have a significant impact on the extent to which firms can and will make use of ICT as a means for improving their competitiveness. This is, for example, evident from the significant differences in economic impact of ICT tentatively identified as part of this study. Countries that have established an appropriate policy and regulatory environment thus appear to be better placed to exploit the opportuni-ties offered by ICT for innovation and economic growth. This is a particular challenge for transition countries undergoing significant changes in their legal and regulatory systems.

An extensive analysis of the role of the policy and regulatory environment in shaping ICT use and its impact on innovation and economic growth has been beyond the scope of this study, but it is evident that this is an area in need of further research. Accordingly, the findings of this study are as interesting for the questions it raises, as for the answers it provides.

With regard to ICT and innovation, this study has found that ICT utilization has substantial effects on process innovation, a moderate effect on product innovation, and only a limited effect on relational innovation. These findings are in stark

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contrast to recent findings from Belgium, where the contribution of ICT was comparatively greater for product innovation and less important for process innovation. Moreover, the Belgian study found a significant contribution of ICT to rela-tional innovation, whereas this was negligible in our study, indicating that there may be differences in the use of ICT between Western and Eastern Europe. In particular, it also indicates that ICT usage is comparatively less mature in Eastern Europe. First, reaping the full benefits of ICT usage requires streamlining external and internal transac-tion processes. Our findings suggest that Eastern European firms find it comparatively more difficult to enter that stage. Second, several forms of ICT-driven product innovation, particularly for intangible products, are conditional upon, or will only significantly pay-off when external and internal processes are mutually integrated. Again, our findings suggest that most Eastern European firms have yet to reach that stage.

Moreover, the study has found that, for the transi-tion countries to successfully exploit the full potential of ICT, there are still, possibly insur-mountable, barriers to be overcome. Indeed, the type of industrial transformation these regions are going trough does not mean that these economies are entering the age of the so-called knowledge economy, and this even assuming that firms are effectively catching up in terms of ICT adoption and intensity of usage. Firstly, our sample, which is representative of the economic fabric of the regions observed, contains a majority of low-value added and labor intensive sectors. Secondly, in terms of

ICT usage, observed effects mainly concern process innovation and much less product innovation.

By contrast, the Western European economies are concentrating their efforts on high-value added activities and our survey results suggest that they are better able to use ICT for product innovation. In this way these economies are likely to be able to maintain their competitive edge for the foreseeable future. We are thus witnessing two types of indus-trial transformation, which in geo-economic terms may lead to the emergence of different tiers of the knowledge economy. One could view such an outcome as undesirable in so far as it reflects different levels of progress towards a single techno-logically determined knowledge economy. If so, the failure of transition countries to use ICT for product innovation may be a serious impediment for future growth and the ability to catch up with Western Europe and other OECD countries.

Alternatively, one could view the findings of this study as suggesting that the application and use of ICT does not lead to a single technologically determined knowledge economy. Rather, existing differences in socio-economic and institutional context also become manifest in the manner in which the new technologies are utilized, with the introduction and use of ICT resulting in a diverse range of knowledge economies.

Such an outcome can be seen as a result of the mechanisms of comparative advantage, with ICT being used as a means to advance the respective comparative strengths of each country. As such, the

Complex Product

StandardisedProduct

One-offProduct

Simple Product

Frequent Transaction

DedicatedTransaction

MassTransaction

Simple Product

Tangible+

++ +

++ + ++

++++

++ +++

Tangible

Tangible

Intangible Intangible


Tangible

Tangible Tangible

Tangible



Tangible


emergence of different uses and impacts of ICT is not only to be expected but also desirable.

The ensuing policy implications from such conclu-sions pertain mainly to the need for tailoring policies to the circumstances of each individual country—there is no one-size- fits-all policy. From a policymaking perspective, it is thus necessary to identify how ICT fits within the overall socio-economic fabric and the sectors relevant for the country’s comparative advantage, rather than how the socio-economic fabric needs dramatic restructur-ing in order to realize some pre-conceived notion of an optimal and uniform knowledge economy. The emphasis should therefore be on how ICT can be used to increase value added and improve perfor-mance within the prevailing socio-economic context, and thus explore opportunities for using ICT as a vehicle for moving up the value chain within existing sectors. This, no doubt, makes it much harder to design and formulate appropriate policies and benchmark progress in the era of the knowledge economy, and represents a critical methodological and policymaking challenge that will need to be addressed.

Notwithstanding such differences between coun-tries, it is important to emphasize that the findings of this study have also highlighted a range of common problems facing transition countries. More specifically, an appropriate policy and regulatory environment is critical for companies to begin using ICT for competitive advantages. Irrespective of the nature of the use of ICT, it is thus evident that there has to be a suitable policy and regulatory environ-ment in order to provide firms with an incentive to use ICT to improve their competitiveness.

Moreover, it is important to stress that differences in wider institutional and socio-economic context do not mean that there are no opportunities for countries to learn from each other’s experiences and engage in active policy learning. Rather, such policy learning has to take account of the different contexts in which the policies are implemented.

Finally, it is important to note that the activities and processes of the emerging knowledge economy (or economies) are increasingly taking place across a global terrain. From this observation it does not necessarily follow that national policymakers are therefore powerless. On the contrary, the more the

world becomes a single market place, the more significant it may become that the actions of national authorities provide a supportive regulatory and policy regime.

1.11 Pol�cy Recommendat�onsIn light of the above findings and conclusions, a set of recommendations can be outlined. We first explore some general policy implications and then provide a summary of the recommendations that arise from this study in tabular form. This is followed by a more elaborate discussion of each of the recommendations, coupled with good practice examples.

Our data shows that generic measures with and indi-rect effect on businesses’ performance such as telecommunication regulation, education, etc. make a difference (see our findings on the Baltic States). The data also show a direct relation between investment levels in ICT and performance increases (see our findings on the differences in average performance increases in Russia and Poland). Such investments may be enhanced by generic measures such as competition law and taxation measures.

With regard to investment, however, our data also suggests that policies should take into account sectoral variations. Indeed, the effect of ICT investment may vary per sector and per industry (some sectors will benefit more than others). Moreover, within a give sector or industry, invest-ment will yield more or less results depending on the application area (business processes that benefit the most from ICT in terms of performance vary).

Policies can be tailored for this by taking sector specificities into account in policies that can be designed to have more direct effects on specific industries, such as science and technology and support to innovation. Our findings suggest that, given public financial resources (tax revenue) such policies can be inspired by two types of choices. First, should industries that are of strategic impor-tance to a country receive preferential treatment? Second, given the nature of the sectors, what kind of application areas are likely to yield the most effect and should therefore be targeted by innovation and ICT programs?


In many cases it will not be possible to answer these kinds of questions on a nationwide scale due to the existence of regional clusters of economic activity. But this observation actually reverts to saying that sectoral differences matter to industrial policies.

The more concrete recommendations that follow should be read with this in mind. Accordingly, while the recommendations are of a fairly general nature, their implementation requires consideration of how they are best tailored to sectoral differences.

1.11.1 Encouraging Greater Take Up and Utilization of ICT in the Private SectorWhile ICT is already making its mark on the economic fabric in the transition economies, there

are still significant unexploited opportunities. A high priority for governments in the transition countries should therefore be the further adoption and utilization of ICT among companies. This will involve highlighting the benefits to companies of using the new technologies and promote good practice for introducing and utilizing ICT within organizations. In addition, policymakers must ensure that the tax and fiscal system does not discourage investment in ICT products. This includes addressing issues such as the types of goods included as investment (e.g. Software) and their deductibility and depreciation rates. It can also involve tax credits for investments by firms in ICT skills for employees.

What

Encouraging greater adoption and use of ICT in the private sector

Encouraging greater adoption of ICT in the public sector

Promoting Internet secu-rity and trust

Supporting research and innovation

Strengthening competi-tion

Underpinning develop-ments in skills and the labor market

Why

Enhances productivity and profitability

Creates network effects

Creates markets

Demonstration effects

Encourages take up and use of technologies and applications

Builds familiarity and trust

Direct benefits in public sector

Builds familiarity and trust

Increases propensity to adopt applications or use technologies

Creates markets

Promotes technological leadership

Supports the development of assisting technologies

Overcomes technological constraints

Removes constraints on rolling out new applications

Increases competition and innovation

Provides the skills to adopt and use new technologies

Encourages implementation of organizational changes to complement technological opportunities

examples of activities

Promote good practice examples, improve tax and fiscal incentives, improve education and training systems (see below), improve public support systems.

RTD on organizational change, introducing key e-public services, e-identity authentication, promotion of Open Source Software, establish understanding of future demand patterns, regulation to create a market for supporting technologies, skills for the e-public sector.

Civil and criminal framework, development of mechanisms for criminal enforcement and civil liability (including foren-sics), trust e-marks and Web seals, more actions on spam, stimulate e-identity standardization, RTD on e-identities.

Strengthening intellectual property rights and commercial law. Support R&D investment. Support networks between science and enterprise. Improve tax and fiscal incentives for R&D. Ensure the engagement of SMEs in RTD. Demand-side regulation for deployment of new technologies.

Improve competition in telecom markets - address issues such as roaming fees and number portability, tackling issues in relation to VoIP, RFID, spectrum allocation and intellectual property rights.

Fund best practice projects in use of the Internet as a peda-gogical tool, promote multi-stakeholder partnerships for high-level ICT skills to identify a common set of core skills as a reference for national programs; prioritize the promotion of ICT-related management skills through specific training actions to develop e-business; ensure skills development and ICT-awareness are integrated into employment policies.


1.11.2 Encouraging Greater Adoption of ICT in the Public Sector The public sector has a critical role to play in the development of a wider ICT infrastructure within the transition countries. The more public services are available on-line, the greater the incentives are for private enterprises and individuals to adopt the new technologies. Accordingly, the use of ICT for the provision of public services (e.g. taxation and registration) can lead to significant efficiency gains from ICT to private enterprises. Indeed, the more ‘networked’ the society and economy becomes, the more gains can accrue from the new technologies (as noted by Metcalfe’s law). Furthermore, the public sector can act as an example to the private sector on how to introduce and use ICT.

1.11.3 Promoting Internet Security and Trust In order to promote greater use of ICT, enterprises and individuals must trust the technologies and security of the information they provide and receive via the Internet. Consequently, improving the overall security of Internet use (E-security) should be considered a key priority for the development of

the ICT infrastructure. It is, for example, of interest to note that this study found only limited use of ICT for selling goods and services among the surveyed companies. This may in part be due to inadequate security, or at least a perception of risk, associated with the use of ICT for consumption. Improving Internet security can therefore be a catalyst for improving the opportunities for firms to make more extensive use of ICT for improving sales.

1.11.4 Supporting Research and InnovationBoth economic theory and empirical analysis underline the key role of research and innovation in economic growth and progress. Yet, market failures (in the form of spillovers and externalities) generally cause enterprises to under-invest in research and innovation. This is generally referred to as the ‘appropriability’ issue, where key-knowledge and the return of being the first to develop are only partly appropriable. Accordingly, there is a need to design and implement tailor-made policy instruments and investment mechanisms to stimulate R&D spending and innovation. This involves an approach that begins with identifying the needs of the levels where innovation, growth and job creation takes place: industry, sectors and companies. By identifying specific needs or drivers instrumental to an increase in research and innovation, specific policy measures can be designed.

In addition, the transition countries that have, or are about to, obtain membership of the EU, have a range of new opportunities and funds available for supporting research and innovation. Successfully exploiting the opportunities offered by EU member-ship is critical for successfully advancing the knowledge economy.

Good practice example: electronic integrated customs Duty and tax System (poland)

The electronic Integrated Customs Duty and Tax System in Poland is well-established. It operates on a nation-wide scale and offers extensive functionality in supporting all customs procedures and documents as well as the financial processes relating to the collection, settlement, and justification of customs duties and tax due. In addition, it supports the budgeting and account functions of all the customs department’s activities and provides a well-used means for electronic data interchange with traders, thus bringing significant benefits to all its users and Poland as a whole.

Good practice example: estonia’s iD-program

The purpose of the Estonian ID-program is to use nationwide electronic identity and develop a new personal identification card that would be a generally acceptable identification docu-ment and contain both visually and electronically accessible information. On January 28, 2002, the first ID-cards were issued to Estonian citizens.

The output of the ID-program is the ID-card, which functions on an electronic crypto-processor, based on smart-card technology. It includes personal certificates and private keys of the card owner.

Good practice example: tallinn technical university innovation centre (estonia)

A number of specific initiatives have been taken in Estonia to encourage the development of new knowledge-based busi-nesses, including the Tallinn Technical University Innovation Centre (TUIC). The TUIC seeks to promote linkages between the R&D base of Tallinn Technical University and businesses. Its activities include active marketing of R&D projects that have market potential; providing assistance to university staff seeking to cooperate with industry; managing the spin-off program, and developing incubation services for knowledge based start-up companies.


gence of ICT, with the new technologies enabling learning in a range of new ways and environments. ICT is thus said to offer a host of new e-learning opportunities. In order to exploit the new education and training possibilities offered and necessitated by ICT, governments need to increase levels of invest-ment in human capital in general, and in ICT- related skills in particular. Moreover, the policy and regulatory environment should encourage firms and private individuals to invest in their human capital.

1.12 Recommendat�ons for F�rmsIn addition to the policy recommendations, the findings and conclusions of this study also have implications for firms and their efforts to introduce and utilize ICT for competitive advantage. The key recommendations for firms are as follows:

1.12.1 The Introduction of ICT Needs to be Well Prepared and Fit with the Overall Business StrategyWhen introducing ICT into the production process of a firm, it is important that the new technologies are introduced with a view to supporting the overall business strategy. This involves identifying the appropriate technologies and suppliers that are suitable for the particular needs of the company. While this may seem an obvious point, many new technologies are often introduced as a result of prevailing ‘hype’ about their importance rather than on the basis of a strategic assessment of the compa-ny’s needs.

1.11.5 Strengthening CompetitionEnsuring that the ICT markets are competitive is critical for lowering connectivity prices and increas-ing take-up. The liberalization of the telecommuni-cation market is therefore a critical priority for the successful furthering of the information society. A more open and competitive telecommunication market will also ensure that new technologies are rolled out quickly, as competitive pressures provide the incentive to develop better and more efficient telecommunication products and services. In addition, it is important to ensure a regulatory framework that protects intellectual property rights, so that markets remain open to new products and services.

1.11.6 Underpinning Developments in Skills and the Labor MarketIt is widely recognized that success in the era of the knowledge economy is dependent upon the avail-ability of appropriate skills, so that the workforce can deal effectively with technological innovation in ICT and organizational change. Meanwhile, the opportu-nities for learning are also enhanced by the emer-

Good practice example: use of eu Structural Funds (lithuania)

Membership of the EU has given several transition countries access to significant EU Funds for supporting research and innovation. lithuania provides an illustrative example of how EU membership gives rise to new opportunities to support research and innovation. EU accession in May 2004 was followed by a first round of implementation of the EU’s Structural Funds, which allowed lithuania to double the amount of funding available for innovation. Several measures directly addressing innovation are currently implemented to strengthen the innovation support infra-structure and develop its institutional capacities; to improve R&D and business co-operation in innovation development; to improve the quality of human resources for R&D and innovation; and to strengthen the public and private R&D base. Direct support for innovation in firms was also offered.

Good practice example: estonia’s liberalization of the telecommunications market

Estonia has been one of the first countries among the CEE countries to open the telecommunications market for liberaliza-tion, providing a basis for the development of the Estonian information society. The telecommunications market in Estonia was fully liberalized from Jan. 1, 2001. Increased competition in the telecommunications market since 1991 resulted in a 50–80 percent reduction in the price of international long-distance calls, lower prices on national long-distance calls, and price reductions of 50 percent for Internet connections.

Good practice example: estonia’s tiger leap

The Estonian ‘Tiger leap’ is a national target program launched by the Ministry of Education of Estonia, with the objective of modernizing the educational system in the country by introducing information and communication technology. Initiated by Estonia’s President lennart Merti and sponsored in part by the UNDP, Ti-ger leap is based on cooperation between schools, universities, private enterprises and public institutions. The program builds up structures for distance learning and continuous learning for teachers and students. Estonian teachers are provided training in computer skills and the use of educational software. The program has ensured that 98 percent of Estonia’s schools have access to the Internet, with more than one computer per 20 students. It has created a national learning network for teachers and trained 40 percent of Estonian teachers in ”advanced computer skills.”


1.12.2 ICT Needs to be Complemented with a Range of other FactorsICT rarely results in enhanced competitiveness and improved performance in isolation. Rather, the successful utilization of ICT often requires organiza-tional change and training of staff that allows the business to change production processes in a manner that leads to a more efficient operation. Depending on the type of activities for which ICT is intended to be used, there may also be other changes required, such as a new marketing strategy etc. Hence, if firms are to realize the true potential of ICT, the required investment is larger and more comprehensive than the expenditure on ICT itself.

1.12.3 Use ICT for Product InnovationIt appears as if ICT is currently not optimally used to facilitate process of product innovation in the transition countries. Companies should explore possibilities for integrating ICT more effectively into efforts to develop new and better quality products to increase the value added of their activities.

1.13 Impl�cat�ons and Quest�ons for Further ResearchThis study has found a number of interesting issues pertaining to the take-up, use and impact of ICT among firms in transition countries. However, in many ways the value of the study lies as much in the questions raised by its findings as the questions answered. In particular, the methodological ques-tions that come to light from this study are mani-fold. In light of the attempt to develop a more nuanced perspective on the role of ICT at firm level, a number of issues came to the fore, meriting further analysis. In this section we outline some of the key questions emerging from the study, and make suggestions for further research.

First and foremost, this study has shown that ICT works in combination with other factors in generating improved economic performance among firms. Hence, it was evident that the economic impact from ICT use emerged when the new technologies were combined with other factors such as organizational change, investment in new equipment and new marketing strategies. However, it remains unclear how

ICT interacts with other factors in shaping improved economic performance. In other words, is ICT a critical ingredient for facilitating the contribution of other factors or merely one of several substitutable factors that contribute to economic performance? For example, is it possible to initiate successful organisa-tional change for improved economic performance without ICT, or is ICT a critical enabler or perhaps even the trigger of such organizational change?

In view of such questions, it would thus be of interest to disentangle the relationship between ICT and the other factors to identify the exact role of ICT. This could be explored by complementing the questionnaire with in-depth interviews or work-shops to explore, for example, the counter factual question of what would have happened in the organization if ICT had not been adopted and used? In general, a more detailed and nuanced picture of the impact of ICT could be achieved by including more in-depth questions about the nature of use, its purpose and the type of equipment available.

Moreover, it is of interest to explore in greater detail how the actual use of ICT is implemented together with other operational factors related to organiza-tional change, investment in other equipment etc. In other words, what are the processes through which ICT is introduced and how do these processes interact with other factors of change, such as an internal reorganization? Are there any general lessons learned about these-processes that can be applied more generally among firms operating in transition economies? Answering these questions will allow us to draw conclusions about and develop more detailed recommendations for firms operating in transition economies. Such conclusions and recommendations can be translated into practical guidance for firms about the take-up and use of ICT for improved economic performance.

Furthermore, this study found significant sectoral differences in the impact of ICT in transition econo-mies. However, the differences between sectors did not necessarily follow any traditional distinctions between sectors of economic activity, such as manufacturing vs. services or tangible vs. intangible. Rather, service sectors such as financial services and ICT services coupled with manufacturing sectors such as heavy machinery were all found to make effective use of ICT for improved economic performance. This is a notable contrast with the

Executive Summary 1�

results emerging from other studies of ICT in transition economies, where the role of ICT in the manufacturing sectors has been found to be limited. Such differences in findings suggest that further research on the role of ICT within individual sectors is called for. In particular, it is of interest to explore whether it is the more nuanced approach to exploring the impact of ICT used for this study that uncovers a different role for ICT in certain sectors, or whether it is merely a result of the particular sample used for this study.

More specifically, it is important to note that the sample for the current study is limited to “front-runners” in the take-up and use of ICT. Such an approach was taken because we wanted to explore the dynamics and impact of ICT use in firms where the new technologies had existed for some time. However, only focusing on front-runners may well have given rise to a positive bias in the results with respect to impact, explaining why firms in heavy machinery report a higher impact of ICT than other studies. Accordingly, it would be of interest to expand the scope of this study to encompass firms that operated further behind the technological frontier.

Also, the current study does not control for some of the other factors that have been found to

determine the impact of ICT on economic performance, such as education and training. For example, when comparing countries or sectors, there may be significant differences in the skill-levels of employees in the firms surveyed, creating a bias in the results. This suggests that it would be worthwhile developing the survey methodology such that it is possible to take account of key factors, such as skills, that have been found to have an influence on the ability of individuals and firms to make effective use of ICT.

Finally, this study identified a number of issues pertaining to the enablers, barriers, and obstacles that firms in transition countries are faced with. The results suggest significant differences in overall performance of and the type of barriers facing different countries. However, the study did not provide an in-depth comparative analysis of policy approaches adopted in the different countries explaining these differences. In light of the findings of this study, it would be of interest to further develop the analysis to get a better picture of the types of policies that are conducive for the take-up and utilization of ICT among firms. This would involve examining the links between performance by firms and particular types of regulation and policy instruments in greater detail.

Chapter 2

Background and Methodology

for which each decline in price appears to bring forth new uses, one that can spark off a long-lasting major economic transformation. Such general purpose technologies are, as Bresnahan and Trajtenberg (1995)7 say, ‘engines of growth’: precisely because they have a wide range of potential uses, and are complementary to a large proportion of other inputs, their price elasticity of demand is likely to be high” (DeLong and Summers, 2001).8

2.1.2 ICT, Innovation and Economic Growth in Transition CountriesThe transition economies of Central and Eastern Europe face considerable challenges in adapting their economies to compete effectively in regional and global markets. Among the challenges facing these countries is the need to increase their produc-tivity, adapt the structure of their economies to global competition in an increasingly knowledge-intensive global economy, foster innovation and new business creation, and develop new goods and services that respond to changing domestic and international demand. ICT can help address all of these challenges by:

increasing productivity; increasing the knowledge component of goods, services and production processes; increasing the capacity of firms to identify quickly, and respond to, changing domestic and international markets; facilitating innovation in products and services, and new business creation; increasing the skills and adaptability of the work force; and by opening new markets for ICT-enabled production and services at a distance.

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2.1 ICT, Innovat�on and Econom�c Growth �n Trans�t�on Econom�es

2.1.1 ICT, Innovation and Economic GrowthThe New Economy paradigm has emerged as an attempt to understand the changes to modern economies caused by the introduction and wide-spread diffusion of ICT. Crucial to the New Economy paradigm is the understanding of ICT as not only new products, but also as acting as catalysts for the transformation of fundamental economic and social processes and activities. Rather than merely being a new additional product to businesses and households, the utilization of information and communication technology constitutes a change in the way producers and consumers conduct their business. It is thus argued that these new technologi-cal developments are of a significantly different nature than other improvements in products and processes that industrialized economies have experienced since the end of World War II.

First, ICT increases the speed and number of ways in which electronic information can be transferred from one person or machine to another. Second, developments in ICT have made it possible to store and transfer many different types of information electronically that previously took a non-electronic form. These two aspects of ICT combine into a forceful alteration of the ways in which informa-tion can be used in production and consumption processes. By increasing the speed at which electronic information can be transferred and processed, and giving a number of different types of information and knowledge an electronic form, ICT enhances the role of electronic information in economic processes. This has led some observers to regard ICT as a ‘general purpose technology’—“one useful not just for one narrow class but for an extremely wide variety of production processes, one

bresnahan, t. F. and trajtenberg, M. (1995), General purpose technolo-gies: ‘engines of growth’? Journal of econometrics (65), 1, pp. 83-108

Delong, J. b. and Summers, l. H. (2001), How important Will the infor-mation economy be? Some Simple Analytics.

7�

8�

Background and Methodology 21


ICT, in short, can help workers be more effective and competitive. It can help existing firms be more innovative and responsive, and help new firms emerge exploit new market opportunities and promote innovation.

While some research has been done on the uptake of ICT as tools of productivity, competitiveness, and innovation at the industry level in these countries, there is so far little rigorous data on the adoption of ICT at the firm level in key sectors of the economy that have the greatest opportunity to be sources of country’s innovation and competi-tiveness. Nor is there adequate knowledge of the key enablers of ICT take-up, and ICT-driven innovation, in existing or new firms. There is also a great need for better understanding of the con-straints facing entrepreneurs and innovators in these countries, and the opportunities and challenges facing firms and industries as they increasingly integrate with the regional and global economies (including the particular challenges facing the countries now joining the European Union.) It is important to better understand how ICT can help firms and innovators address these challenges.

More substantial and rigorous data, as well as analyses of these issues are valuable in efforts to better understand, and provide policy guidance on, how to create the conditions for ICT-enabled growth and competitiveness in the transition economies. It also contributes to a better under-standing, more generally, of the impact of ICT on innovation and competitiveness.

2.2 Scope of the StudyThe overall objective of the study is to advance under-standing of the relationship between ICT, innovation, and economic growth in transition economies. Commissioned by the Information for Development Program (infoDev), the study focuses on firm-level survey data collection and analysis framed by a clear articulation of the constraints and enabling condi-tions at the industry and country level.

With a focus on five countries—Estonia, Latvia, Lithuania, Poland, and Russia—the study is not designed to be a comprehensive analysis of the

above-mentioned issues in all sectors and regions of these countries. It provides an in-depth survey and analysis of a reasonably representative sample of firms in several regions and sectors so that broader conclusions can be drawn with a certain degree of confidence. The study draws conclusions not only about individual sectors but also about individual countries, and, most importantly, about conditions and challenges common to several or all of the countries in the study.

The study aims at assessing the diffusion and impact of ICT at the firm level and the related policy implications. It also gives some specific recommen-dations on what each country, sub-region and region could do to better promote/support ICT usage to improve competitiveness and new business creation. These recommendations concern the enabling environment and point to some specific lessons learned and best practices at the firm level.

The study examines traditional and new sectors. It explores whether and under what conditions traditional sectors, such as the food industry, have been successful in harnessing ICT. It also identifies new opportunities and sectors that have emerged, thanks to ICT. The study intends to serve as an important element of infoDev’s broader attention to the challenges facing developing and transition countries in promoting ICT-enabled innovation, growth and competitiveness.

2.3 Survey MethodologyA key objective of the study was to analyze and assess the diffusion and impact of ICT at the firm level in relation to productivity, competitiveness, and innovation in selected key sectors. To show where and how actual productivity and performance gains occur within firms as a result of ICT adoption, it is important to identify adoption rationales, key enablers and inhibitors of ICT take-up, as well as of the relation between ICT take-up and:

cost structures; revenue generating capacity; innovation (product, process innovation); relationships with suppliers and customers;

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Background and Methodology 23

business organization and strategy; and external factors (economic and regulatory conditions).

Furthermore, as these variables are subject to various other forces, it is important to determine the extent to which the effects are substantially or uniquely attributable to ICT. This is an important condition for determining the additionality of ICT. Therefore, parameters and benchmarks can vary not only for each country, but also for each industry and firm.

2.3.1 A New, Tested Approach to Data Collection and AnalysisThe project team based its approach on the EBS methodology. A major advantage is that the EBS approach has already been well tested in previous international studies. EBS was developed by TNO-STB, in collaboration with the OECD, the Telematica Instituut (a Dutch government-industry research initiative), the Institute for Prospective Technological Studies (IPTS, a Joint Research

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Centre of the EU) and the Belgian Central Plan Bureau.

The EBS methodology adopts a “business” rather than a “technology” perspective, by focusing the data gathering and analytical processes on the evolution of business as such. EBS can be adminis-tered in a qualitative, quantitative, or mixed form that captures great amounts of detail. In qualitative form, the method is applied via case studies based on in-depth “audits” of firm level ICT application activities, using a standardized data gathering and analytical format. The audit includes sub-routines to gather detailed information on investment patterns (similar to “readiness” studies), adoption-application processes and impacts on innovation. The quantita-tive form, which is used in this study, embeds these routines into a conventional survey instrument.9 (See Annex 1)

For further information on the ebS methodology and the way it has been tailored for this study please see Annex 19�

Chapter 3

The Selection of Regions and Sectors

Growth potential and/or strategic importance for economic development of the country. Potential for cross-country comparisons and extrapolation of findings to other sectors. ICT and innovation content.

3.2.2 The List of Sectors Based on the above criteria, at least five sectors were identified for each of the selected countries and regions. (See Table 3) The initial idea of a priori selecting well-defined and delineated sectors and/or product categories ready for surveying has been put aside, as no adequate and precise data for this purpose could be retrieved.

The current choice was made on the basis of existing statistical data, results of earlier country studies, and expert judgements of the local survey managers.

For each of the chosen sectors per region or country, key company data were collected, such as products or services segment (NACE code), a short descrip-tion of the products and/or services produced/marketed, and company size (small, medium, or large, based roughly on number of employees). This also applies to other useful company details, such as a contact person for each company, addresses (actual and postal), telephone and fax numbers, and e-mail addresses.

The resulting long lists of firms for each country and region, covering the full scope from micro-enter-prises to large firms, were processed and have been replaced by practical country shortlists for the purpose of interviews.

In Annex 5 we provide more information on the distribution of companies per country/region and sectors for the sample of 620 firms. In addition, there is more detailed information on the sectors in each of the countries.

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The geographic scope of the study is confined to five transition economies in the north-eastern part of Europe: Estonia, Latvia, Lithuania, Poland, and Russia. These countries share not only a common past legacy, but also a similar need for adapting and transforming their economies. For the purpose of our analysis, Annex 2 provides an overview of economic and ICT key characteristics of each of the countries.

3.1 Selected Reg�onsIn order to provide a more focused and in-depth study, the analysis was narrowed further to a selection of regions. The following survey regions have been selected:

Estonia – country as a whole, prime focus on the Tallinn and Tartu regions. Latvia – country as a whole, prime focus on the Riga region. Lithuania – country as a whole, prime focus on the Klaipeda-Kaunas-Vilnius west-east corridor. Poland – Pomorskie (Gdansk and surroundings), Mazovieckie (Warsaw and surroundings) and Slaski (Katowice and surroundings). Russia – the city of Moscow and the city of St. Petersburg.

Annex 3 provides a descriptive profile of the selected regions from Poland and Russia.

3.2 Selected Sectors

3.2.1 Selection CriteriaKey sectors have been targeted in each of the countries. The selection has been based on three sets of criteria (for more details on the selection criteria please see Annex 4):

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The Selection of Regions and Sectors 25


TABlE 3.1. Final Lists of Sectors & Aggregate Product Categories to be Surveyed

country

Estonia

latvia

lithuania

Poland

Poland

Poland

Russia

Russia

region

Tallinn and Tartu regions

Riga region

Klaipeda-Vilnius corridor

Mazowieckie (Warsaw)

Slaskie (Katowice)

Pomorski (Gdansk)

Moscow city

St Petersburg city

primary sector

Petroleum refining

Petroleum refining

Secondary sector

FoodFurniture (wood value chain)ICT equipment

Food Furniture (wood value chain)Chemicalslight machineryICT equipment

FoodFurniture (wood value chain)Automotive industryTextilesICT equipment

FoodAutomotive industryConstruction materialsICT equipment

FoodAutomotive industryICT equipment

Food ShipbuildingICT equipment

FoodFurniture (wood value chain)Paper (wood value chain)MachineryConstruction materialsICT equipment

FoodFurniture (wood value chain)Paper (wood value chain)MachineryConstruction materialsICT equipment

tertiary sector

RetailBankingICT services

RetailBankingICT services

BankingRetailICT services

BankingRetailICT services

BankingICT services

BankingTransportICT services

TransportICT services

TransportICT services

Chapter 4

Survey Results and Analysis

number of customers and suppliers; change in sales value per customer; value of purchases per supplier; share of retained customers; number of repeat suppliers; changes in sales value per retained customer; and value of purchases per repeat supplier.

The issue of innovation is analyzed across the whole sample of firms as well as across different sizes of companies and sectors.

Finally, the chapter discusses obstacles and enablers for ICT usage. Internal and external factors for the company are taken into account. Special attention is paid to the regulatory and policy context, where other relevant information from the countries is included to support (or not) the results of the study. The role of the government is looked at on a country-by-country basis.

4.1 ICT Usage Profile This section presents an overview of the type of Internet connections, computer networks used, and the presence of information technologies within firms, including their integration and electronic linkages with other (automated) systems. It identi-fies the types of business activities that are supported by the ICT usage: how firms use information technologies in buying and selling products and services, and how customers and suppliers are approached and serviced. The section provides information on how inter-firm and customer relationships have changed, or continued, over time. Finally, it gives an insight in the way firms com-municate and deal with government organizations.

It should be noted that our sample only comprises a selection of proactive ICT users. It is therefore not representative of the sectors as a whole, let alone of

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This chapter provides a detailed analysis of the results of the survey. The chapter gives an overall picture of the scale of ICT usage and its business applications. Further, it discusses firms’ performance in relation to ICT usage. The performance of firms is based on a combination of four sets of indicators: productivity, growth, innovativeness, and competi-tiveness. The following indicators are looked at:

Labour productivity Operational costs Revenues from sales Profitability Investment in innovation Investment in ICT Competition on price Competition on quality.

The above indicators are analysed across the whole sample as well as across large, medium, micro, and small companies, and sectors.

Following the discussion on firms’ performance, the analysis moves on to the innovativeness of compa-nies. The effects of ICT on different types of innovations are considered, such as process and product innovation and relational innovation. Process innovation covers:

speed and reliability of business processes; automation; information management; and organizational change.

Product innovation considers:

new products and services; customization; and new bundling offerings.

Relational innovation looks at a number of indica-tors describing innovations in relationships with customers and suppliers. These include:

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Survey Results and Analysis 27


the regions surveyed. However, it does allow a forward-looking analysis of the evolution of the leading sectors and regions concerned, and with that of the economy at large.

Throughout the text, tables will be repeatedly referred to. These tables are included in Annex 7 of the present report.

4.1.1 Scale of Internet Connections and ICT Use Unsurprisingly, the use of Internet and computers is widespread among the surveyed companies. This is only to be expected, as the companies had in part been selected on the basis of them being at the forefront of ICT use in the countries included in the study. Hence, all of the surveyed enterprises used one or more computers, while 99 percent used the Internet during the last three years.

However, as is evident from Figure 4.1 below, connections to the Internet vary widely, both in type and intensity. While connections to the Internet among firms may thus be increasing, significant qualitative differences in the nature of the connections are of increasing importance to an analysis of access.

In addition, 98 percent of all enterprises used e-mail and 44 percent availed of an Intranet provision. Local area networks were rather popular with 74 percent of all enterprises. Twelve percent of the surveyed firms indicated that they use other computer networks than the Internet. (See Table 2)

4.1.2 Business Use and Applications of Computer NetworksComputer networks are used for internal and external communications with business or govern-mental parties. The need for intensifying external communications stimulates the use of intra-firm computer networks. The results referring to technol-ogy usage show that electronic systems are intro-duced very much alongside the value chain starting from supply, production, and logistics; moving to purchasing and procurement; marketing and sales; and some financial administration services mainly related to invoicing. (See Figure 4.2 and Figure 4.3) The results also provide a picture of the electronic links between computer networks introduced to support and serve particular business areas with other automated systems within the firm. The latter shows the intention of the companies to automate, as much as possible, interrelated business activities. Some business areas though stay outside the attention of the companies for the time being. These include human resource management, including training and asset, and inventory management.

From Figure 4.2 it is evident that firms relate the use of ICT technologies with their aim to become more competitive and productive. The initial signals from the companies sampled indicate that market related business activities are high on their agenda. This can be observed in this part of the study and confirmed later on.

About half of the companies in the study place a

Figure 4.1. Specifics of Internet connection

DSL (<2Mbps)

No internet

Cable Modem(<2Mbps)

Cable Modem(>2Mbps)

DSL (>2 Mbps)

Other

Other broadband (< 2Mbps)

Other broadband (> 2Mbps)

Analogue

ISDN

Figure 4.2. Electronic Links between Computer Networks Used to Place Orders for Goods and Services and other Automated Systems within the Firm

Systems for orderingor stock control

Systems for invoicingcustomers

Systems for productionor service operations

Computer system(s) forreceiving orders not linked to

any of the above

Systems for deliveryof products (including

electronic delivery)

Marketing andcustomer

relations systems

Other internalor external systems

Survey Results and Analysis 2�

high priority on two inter-related business areas: Purchasing and Procurement and Marketing and Sales.

Fifty-two percent of all firms actively use computer networks to buy goods and services. Almost 95 percent of these firms use the Internet to do so. (See Table 4) Most firms that use computer networks for placing orders for goods or services have in some way established an electronic link with existing automated systems within their firms. Most frequently observed is a link with an invoicing system. Thirty-three percent of all firms that said they place orders via a computer network had an operational link to an invoicing system. Almost a third of these firms used a system for ordering or stock control. (See Figure 4.2 and Table 4)

Selling via the Internet is slightly less popular than buying. Forty-seven percent of all firms placed orders using the Internet. Almost 40 percent received and processed orders over the Internet. Five percent of all firms used (also) other computer networks for selling their products, whereas 5 percent placed orders via other computer networks than the Internet. (See Table 5) The majority of firms that received and processed orders via the Internet did so by means of an e-mail link on their Website. Thirty-six percent of the firms received

their orders via a more advanced online ordering facility. Fifteen percent of the firms sold their products through a third-party Website, and 8 percent via Electronic Data Interchange (EDI) over proprietary networks. (See Table 6)

Sales transactions via the Internet and other com-puter networks are in a number of ways electroni-cally linked to other systems within the company. Of the 247 firms selling via computer networks, 35 percent had established an electronic link with a system for invoicing customers. Almost 28 percent had an automatic link to an internal customer system, and another 29 percent to a marketing or customer relations system. Forty percent of the firms that received orders via computer networks, however, did not have electronic links to internal systems whatsoever. (See Figure 4.3 and Table 7)

It is rather common to use the Internet for servicing customers, not only by attracting them by present-ing catalogues, price lists, or product specifications, but also by providing contact facilities and even after sales support. The more passive, “simple” forms of customer services like the first few mentioned appear to be more popular. (See Figure 4.4)

More demanding forms of customer contact, such as providing a contact facility, are popular with half of

Figure 4.3. Electronic Links between Computer Networks Used for Receiving Orders/Sales and other Systems within the Firm(number of observations)

Computer system/s for receiving orders not linked to any of the above

Suppliers’ computer systems

Systems for delivery of products (including electronic delivery)

Systems for invoicing customers

Systems for production or service operations

Systems for ordering or stock control

Customer systems (including related enterprises)

Other internal or external systems

Don’t know / NA / Refusal

Marketing or customer relations systems

0 25 50 75 100


the firms surveyed. Thirty percent of the firms collect customer information online. More sophisti-cated forms of customer services are less frequently observed, yet not uncommon: almost 13 percent provide order tracking online and 19 percent provide after-sales support. (Table 8)

To summarize, Internet connections and ICT use within the companies in the sample are concentrated in market or customer-related activities, where buying goods and services, placing orders, and providing customers with information on products and services are automated in approximately half of the firms. Further, in order to support the above activities, firms have introduced automated systems in areas such as invoicing, production and service operations, and delivery of products and stock control. (See Table 9) Areas where computer networks did not play any role are training, human resources, and asset and inventory management. The explanation one can attach to these results is closely linked to the phase of the business development in the countries within the study.

The fast growth of the domestic markets, coupled with the dynamic processes of their integration into the European and international markets, make Purchasing and Procurement and Marketing and Sales primary business functions at firm level. In many of the transition countries, human resource manage-ment (HRM) systems were introduced at a govern-

mental (public) level rather than at firm level, especially in the case of SMEs. Introduction of modern HRM approaches, such as recruitment, assessment, human resource development, planning, etc., within firms, and SMEs in particular, will require automation and therefore use of ICT.

Another area with a high potential for ICT use within firms is in asset, inventory and logistics management. Although not related directly to the customer, improvement in the above areas would result in higher efficiency and quality of services. It is our judgment that inventory and logistics manage-ment as concepts are less known and understood in the countries studied, than for example, marketing. ICT usage comes when the need is there but also the understanding of the importance of the business activities it supports. The gaps described above indicate ample room for progress in, first of all, spreading ICT use and secondly, integrating various systems within the firm and achieving future efficiency benefits. (See Table 10)

Companies were also asked to comment on using ICT to access government resources. Fifty-five percent of all enterprises used the Internet or any other computer network for obtaining information from the government. Downloading of and request-ing government forms were equally popular. Almost one-third of all firms did not use the Internet at all for dealing with government organizations. (See

Figure 4.4. Use of the Internet or other Computer Networks for Providing the Customer Services

Computer system/s for receiving orders not linked to any of the above

Suppliers’ computer systems

Systems for delivery of products (including electronic delivery)

Systems for invoicing customers

Systems for production or service operations

Systems for ordering or stock control

Customer systems (including related enterprises)

Other internal or external systems

Don’t know / NA / Refusal

Marketing or customer relations systems

0 25 50 75 100


Table 11) Naturally, the extent to which this is possible depends on the state of development of e-government and the services offered by government organizations. We provide more information on this issue in section 4.4 on Obstacles and Enablers.

4.2 F�rm Performance �n Relat�on to ICT Usage A particular emphasis of the study has been placed on the issue of how ICT influences the performance of firms. Being aware that ICT as a performance-stimulating factor should be taken into account with other factors, we have tried to allocate these sets of factors that act as the most powerful combination to boost performance.

The concept of performance is operationalized, using four sets of indicators on productivity, growth, innovativeness and competitiveness:

Productivity changes are estimated by relating gross outputs to changing labor costs and other (operational) costs. Growth is estimated on the basis of changes in revenues from sales as well as changing profit margins. Innovativeness is assessed by estimates on the relation between capital investments in innova-tion in general and in ICT specifically. Competitiveness is assessed by relating the importance of competition on quality and on price in relation to changing market shares.

For each of these indicators, firms were asked to assess the importance of ICT usage in affecting observed changes. The estimates produced by our respondents allow us to make an assessment of the importance of ICT in relation to other factors that affect the performance of firms.

4.2.1 Productivity, Growth, Innovation and Competitiveness

labor productivityThe results of the study show that there has been a substantial increase in productivity in the last three years among the firms surveyed. There are also significant opportunities for further increases in the coming years. The results show that productivity

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increase is caused by a combination of factors where ICT usage is one of them. Of all firms reporting productivity increases, 13 percent attribute these increases to ICT and 47 percent to ICT in combina-tion with other factors. This is a rather high attribution score compared to the other performance indicators in our survey. These findings seem to counter the thesis of Solow’s productivity paradox, which holds that ICT investment has not produced significant improvements in productivity in industrialized economies. However, it should be added that our sample is atypical for industrial economies. The firms investigated are all part of an economy in rapid transition, involving a number of factors, including firm specific issues and broader market conditions (e.g., business and investment climate, political and macro-economic environment, etc.). This is illustrated by the fact that 50 percent of the firms report significant productivity increases and only 5 percent report decreases. It should also be noted that firms have been selected because they belong to the more proactive ICT users. In light of this, it is equally relevant to note that 40 percent of firms with productivity increases report that ICT usage did not at all contribute to this performance.

However, it is of interest to note that the companies reporting a decrease in productivity attribute this to factors others than ICT.

The findings reported above place the contribution of ICT to productivity in perspective and call for an examination of other factors that contributed to productivity gains. The other key other factors that

BOx 4.1. Some Statistics on ICT and Labor Productivity

50 percent of all responding firms report a labor productivity increase compared to three years ago. Forty-five percent of all firms believe productivity levels remained the same and only 5 percent state that output per employee decreased over the last three years. (See Table 12) Of the firms that observed productivity increases over the last three years, 35 percent report a 0–10 percent increase; 37 percent estimate the increase to lie between 10 percent and 25 percent and 19 percent have faced an increase of 25–50 percent. (See Table 13) The vast majority of firms (74 percent) that report a decrease in productivity attribute this mainly to other factors than ICT. (See Table 14)

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account for the observed productivity increases are organizational change, investment in equipment, and training of staff.

The importance of these other factors indicates that ICT usage is important, but has to be looked at in the context of a more generic set of measures and efforts to increase productivity. It also indicates that companies’ expectations to improve productivity through ICT alone would be wrong. When planning to increase usage of ICT, one should place it in the context of whether the company is organi-zationally prepared for this, and whether it has the possibility to invest in equipment and develop the capacities of its human resources accordingly.

operational costsAlthough few firms report a decrease in costs, this decrease can be attributed to the ICT usage alone or in combination with other factors. At the same time, ICT contributed to the opposite—increase in costs—although to a much lesser extent than other

factors. In general, ICT has a stronger effect on decrease rather than increase of operational costs. ICT influence on costs should be looked at in the context of a wider set of measures and efforts.

Capital investment in equipment, organizational change, and changes in the salary structure are the other factors that most strongly influence cost reduction. Change in salary structure differs from the other set of factors influencing productivity. We attribute this to the overall trend in Central and Eastern Europe of faster growth in salaries in comparison to productivity growth. It may partly indicate an increased need for more skilled (and more expensive) staff due to ICT usage.

revenues from SalesAgain, almost half of the companies experienced an increase in revenues due to ICT and other factors. The three other factors are the same as those influencing productivity. Interestingly, companies reporting a decrease in revenues do not relate this

BOx 4.2. Case Study

Case study: AB Klaipedos duona (KD) – ICT works in interaction with other factors

KD is one of the largest and most modern baking enterprises in lithuania. The company has made extensive use of ICT for the ordering system, with customers being able to give their orders online. This has resulted in an increase in the number of customers without having to increase the number of employees, thus improving the overall productivity and competitiveness of the business. KD has also used ICT for the processing of obligatory documents to the relevant authorities within government, thereby improving the process by which documents are filed and submitted. Finally, ICT has been a useful tool for improving quality management systems within the organization, with ensu-ing progress in quality and customer satisfaction. In order to make effective use of ICT, the company has experienced that a number of complementary aspects also have to be in place and improved. In particular, the introduction of new technologies has to be supported by systematic training of staff, ensuring that all employees have a sense of responsibility for their work according to their position and compe-tence. Hence, ICT has not brought about benefits to the operation of the company in isolation, but within a wider context of organizational change and improvement of the skills of staff.

BOx 4.3. Some Statistics on ICT and Operational Costs

41 percent of all firms declare that average operational costs per unit of output have increased. Forty percent indicate that operational costs remain roughly unchanged, whereas 19 percent experienced a decrease compared to three years ago. (See Table 15) Of the firms with higher operational costs, 50 percent face a 0–10% increase. Thirty-two percent notes an increase between 10 percent and 25 percent, and 16 percent note a 25–50 percent increase. Firms with a decrease in operational costs face a change over a similar range, however decreases are smaller on average, namely 64 percent, 23 percent and 11 percent, respectively. (See Table 16) Of firms that report lower operational costs, 16 percent report that ICT usage was the main factor, 52 percent say it was one of the contributing factors along with others, and 33 percent believe mainly other factors were responsible for cost decreases. Of firms with higher operational costs, 5 percent report that ICT was the main factor, 28 percent that is was one of the factors, and 67percent of the firms believe mostly other factors explain higher costs. (See Table 17)

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to ICT. However, it should be noted first that many more firms report increased revenue (55 percent) than firms reporting cost reductions (19 percent). Slightly more than half of the firms report a positive effect on revenue attributable to ICT (7 percent mainly to ICT and 43 percent to ICT in conjunction with other factors). By comparison, this is significantly less than the 67 percent of the firms that mentioned ICT in the context of decreasing costs. It also leaves 50 percent of firms for which ICT usage did not contribute to increas-ing revenue. However, the negative effect of ICT on revenue is minimal. No firms attribute revenue decreases to ICT usage, and only 6 percent hold ICT partially responsible. In contrast, 33 percent of firms saw ICT as a contribution to increasing costs.

Along with investment in equipment, organizational change and training of staff are the main contributing factors to increasing revenue. It is interesting to note that the effect of ICT as the dominant ‘stand-alone’ factor on decreasing costs (mentioned by 16 percent of the firms) is more than double the effect of ICT on increasing revenue (7 percent). Interestingly, investment in equipment (other than ICT) is seen as the other main other contributing to increasing revenue. Hence, the effect of ICT as a stand-alone factor is limited in general, but in particular on increasing revenue.

profitabilityIn more than half of the total sample of firms in the study, ICT, mostly in combination with other factors, has contributed to the increase of profitability in the last three years. Although similarities in figures can be seen with the performance indicators discussed above, a new important contributing factor appears here as a

driver of change, namely the introduction of “new marketing strategy.” Thus, as with productivity, the contribution of ICT to profitability seems to be positive on average, but this contribution needs to be seen in a broader perspective.

Fifty-nine percent of firms mention ICT as a contributing factor to favorable developments in profitability, which includes those firms that believe ICT is the main factor (11 percent) and those that believe it is one of several factors (48 percent). For 41 percent of the firms, ICT did not significantly contribute to improving profitability.

These figures on profitability are comparable to those on productivity, albeit with effects that are slightly less positive. For example, 44 percent of firms indicate an increase in profitability, compared to 50 percent of firms with productivity increases. It is striking that 16 percent of the firms indicate a decrease in profitability against only 5 percent that indicate a loss in labor productivity. A possible explanation for these differences is the increase in operational costs (other than labor costs) reported by 41 percent of firms. Moreover, it is important to note that the profitability of firms is largely ex-plained by the extent of competition and the pricing power of firms. If the firms operate in competitive markets, the productivity gains will in part be translated into lower prices for consumers rather than increased profitability of firms.

As with productivity, the contribution of ICT to profitability seems to be positive on average, but this contribution needs to be seen in a broader perspec-tive. Firstly, the amount of firms that do not mention ICT as a contributing factor remains significant. Secondly, the vast majority of firms that

BOx 4.4. Some Statistics on ICT and Revenues from Sales

Fifty-five percent of the firms indicate revenues from sales to be higher than three years ago. Thirty-four percent report similar revenues and 11 percent of the firms report lower revenues. (See Table 18) Of the enterprises with an increase in revenues, 33 percent experi-ence increases up to 10 percent, 38 percent experience increases in the range of 10–25 percent, and 18 percent experience revenue rises of 25–50 percent. (See Table 19) Seven percent of the firms attribute increasing revenues mainly to ICT usage; 43 percent to ICT and other factors, and another 50 percent report that increases in sales have to be attributed to entirely other factors than ICT. Decreases in revenue are more modest. Fifty-eight percent of the firms with a decrease can be found in the 0–10 percent range and 31 percent in the 10–25 percent range. lower revenues are even more markedly attributed to other factors, namely in 94 percent of all cases. Only 6 percent partially attribute revenue decreases to ICT and none at all saw ICT as the main reason for revenue decreases. (See Table 20)

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regard ICT as a contributing factor still see this mainly in conjunction with other factors.

As other factors, new marketing strategy is mentioned most frequently, followed at great distance by capital investment in equipment and organizational change.

The significance of new marketing strategy as a factor for profitability may indicate that the positive effects to which ICT usage contributes are not only to be situated in efficiency gains, but also in increased outputs and/or higher profits per unit of output. What is surprising though is that new marketing strategies was not perceived as one of the top responsible factors for productivity or revenue increases, nor cost reduction. Perhaps, the increase in profit can be attributed to the reduction in opera-tional costs reported earlier, which provides an almost immediate effect on a company’s results.

If linked to ICT usage, new marketing strategies may be related to (among others):

new or improved customer systems; systems of invoicing customers; and new or improved marketing or customer relations systems.

As we discussed before, the Internet is used for servicing customers, which is a new development in the transition economies and can also be considered a new marketing approach. Customers get more information about the products/services offered, higher level of product specifications, and are offered contact information and after-sales support. In addition, as the results of the study reveal later on, quality and price (in this order of priority) are seen as important factors to increasing market presence.

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Pricing and quality improvements are the essential parts of any marketing strategy.

In the end, the effect of a new or improved marketing strategy is in the intensified link between the producer and the customer. The latter should result in better economic performance, including higher revenues and increased profits, but this often does not show immediately. Since the efforts of CEE compa-nies to introduce new marketing strategies (or marketing strategies at all) are relatively recent, broader effects may be expected at a later stage.

investment in innovation Capital investment of firms in innovation is broadly defined for the purposes of this study as expenditure on R&D, technology renewal, and re-engineering of business processes and organization. The results show that firms are mostly keeping up or increasing investment levels. Only 4 percent of the interviewed firms report decreasing investment in innovation over the last three years. Fifty-eight percent of the respondents mention ICT as one of the reasons for increased investment. For 16 percent, it is even the main factor.

The top three other factors explaining a changing pattern of investment in innovation are not surpris-ing, with capital investment in equipment being by far the most important category, followed by new marketing strategy and organizational change.

The important investment levels and the nature of the other factors, which along with ICT influence the investment, suggest again an economy in transition that is making substantial efforts to modernize and introduce new and more effective approaches in attracting customer.

BOx 4.5. Some Statistics on ICT and Profitability

Forty-four percent of the firms indicate a rise in profits; 16 percent report a decrease, and 40 percent state similar profits compared to three years ago. (See Table 21) Forty-six percent of the firms with higher profits experienced an increase between 0–10 percent; 32 percent report an increase of be-tween 10–25 percent, and 10 percent noted an increase of 25–50 percent. Of the enterprises with higher profits 11 percent attribute this mainly to ICT usage, 48 percent to ICT usage and other factors, and 41 percent mainly to other factors. Of the firms with lower profits, 37 percent put themselves in the 0–10 percent range, 34 percent in the range 10–25 percent and 19 percent in the range 25–50 percent. (See Table 22) 88 percent of all firms that face a decrease attributed this to mainly other factors, 11percent to ICT and other factors and only a fraction (1 percent) mainly to ICT. (See Table 23)

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investment in ict The results of the study confirm the finding that ICT investment takes up a substantial part of the efforts of firms to modernize. The fact that 30 percent of the firms say that ICT usage itself generates increases in ICT investment also indicates that engagement in ICT usage is to a certain extent a self-sustaining process that requires cumulative investment. When we look at the other factors that motivate ICT investment, we see that investment in ICT is related to a production technology (capital investment in equipment), in ICT usage as process technology, (organizational change) and in ICT usage as a transaction technology (new marketing strategies).

The other factors influencing increases in ICT investments are the same as those motivating investment in innovation in general. Again, capital investment in equipment is by far the most important factor, followed by new marketing strategy and organizational change.

competition on priceMore than half of the firms realize that price competition plays a crucial role in gaining market

shares. They also report results of increased market shares as a consequence of engaging in price competition. Price competition is not much related to ICT; rather it is related to a set of other factors where marketing strategy is the number one factor followed at great distance by organizational change.

Only 34 percent of firms perceive ICT as one of the factors that contributes to increasing market share through price competition. This figure contrasts with the 67 percent of firms that mention ICT as one of the factors that contributes to the reduction in operational costs. Accordingly, although ICT can significantly contribute to reducing operational costs, this is seldom a decisive factor among firms when it comes to competition on price per se. It should also be noted that the importance of price competition does not automatically mean that prices are declining.

Forty-two percent of all enterprises saw an increase in sales prices compared to three years ago. Forty-four percent of the respondents indicate that prices have stayed the same; 15 percent state that prices actually declined. (See Table 33) The attribution of

BOx 4.6. Some Statistics on ICT and Investment in Innovation

The amount of capital investment of firms in innovation is higher for 52 percent of firms, more or less equal for 44 percent of firms and lower for only 4 percent of firms. (See Table 24) Of firms with increased investment in innovation, 40 percent report spending between 0–10 percent more, 34 percent report between 10–25 percent more, and 16 percent report between 25–50 percent more. (See Table 25) Sixteen percent of the firms indicate that the increased investment in innovation is primarily due to ICT usage. Forty-one percent say that this increase is due to ICT usage and other factors, and 43 percent of the firms say investment in innovation increased mainly due to other factors. Of all firms with decreasing investments in innovation, 77 percent declare that this change is due to mainly other factors and 18 percent to ICT and other factors. (See Table 26)

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BOx 4.7. Some Statistics on Investment in ICT

Forty-five percent of the firms surveyed indicate that the amount of capital investment has increased over the last three years; 51 percent say it remained roughly equal and 4 percent of the firms state that capital investment in ICT decreased. (See Table 27) Most increases in ICT investment fall in the 0–10 percent range (40 percent) and the 10–25 percent range (37 percent of firms); 10 percent fall in the 25–50 percent range. Decreases are mostly situated in the 0–10 percent range (67 percent of firms). (See Table 28) Increase in ICT capital investment over the past three years is attributed to ICT itself by 30 percent of firms, to ICT and other factors by 46 percent, and mainly to other factors by 24 percent of firms. Decrease in ICT investment is mostly due to other factors (83 percent). (See Table 29)

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price increases and declines to factors other than ICT is very high (72 percent and 73 percent, respectively), again indicating a weak relation between ICT usage and price levels.

competition on QualityFirms grant more importance to ICT as a driving force for competition on quality (50 percent) than they do for price competition (34 percent). At the same time, the loss of market share as a result of competition on quality is in 67 percent of the cases associated with other factors, similar to what was observed for competition on price. This finding supports the proposition that ICT is one of the deci-sive factors in generating efficiency gains, but is not a distinguishing factor in effectively attaining a competitive edge over other companies.

Again, new marketing strategies are mentioned as by far the most important factor (by half of the respondents), followed at a distance by organiza-tional change and investment in equipment.

4.2.2 Differences in Company Size and Overall PerformanceSize matters, as is illustrated by the tables below.10 Large firms seem better able to utilize ICT to generate performance improvements compared to smaller ones. More specifically, large companies score substantially better than medium, small, and micro enterprises on all selected indicators. On specific indicators, the results of the study show the following:

For productivity and profitability the attribution of positive effect to ICT (mainly or along with other factors) ranges between 77 percent and 71 percent for large firms and between 55 percent and 53 percent for micro and small enterprises. Micro and small enterprises score relatively better for revenue increases attributable to ICT

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BOx 4.8. Some Statistics on ICT and Competition on Price

Fifty-seven percent of all respondents believe that price competition has become more important to gaining market share compared to three years ago. Thirty-seven percent of the firms believe that the importance of price competition has not changed. Only 6 percent of all firms state that price competition has become less important to gaining market share over the last three years. (See Table 30). Fifty percent of firms that engage in price competition have increased their market share by 0–10 percent, 30 percent believe the increase is in the range of 10–25 percent and 15 percent indicate a 25–50 percent increase. (See Table 31) Of all firms that believe price competition has been important for increasing market shares, 5 percent believe that the change in the intensity of price competi-tion is mainly due to ICT usage, 29 percent believe it is due to ICT and other factors, and 66 percent believe mainly other factors are responsible for intensifying price competition. Firms for which price competition is less important are slightly more divided between the extremes: 11 percent of the respondents believe ICT mainly contributed to decreasing price competition, while 71 percent find mainly other factors responsible for this effect. (See Table 32)

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BOx 4.9. Some Statistics on ICT and Competition on Quality

Sixty-four percent of respondents perceive competition on quality to have become more important in gaining market share; 35 percent believe that its importance has remained about the same, and only a little more than 1 percent believe competition on quality has become less important over the past three years. (See Table 34) Of the firms that state that quality has become more important, 47 percent indicate that they have increased their market share by up to 10 percent; 35 percent indicate an increase of between 10 percent and 25 percent; 14 percent indicate an increase of between 25 percent and 50 percent. (See Table 35) Ten percent of respondents who report that competition on quality contributed to increasing market share believe that this is due mainly to ICT: Forty percent attribute the increase to ICT and other factors and 51 percent to other factors than ICT. Of the firms reporting that they suffered from competition on quality, 67 percent attribute the decreasing market share to factors other than ICT and 33 percent to ICT and other factors. None of the firms holds ICT responsible for decreasing its capacity to compete on quality. (See Table 36)

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in conformity with the applicable eu definitions, i.e. 0-9 employees: micro enterprises; 10-49 employees: small enterprises; 50-249 employees: medium enterprises; 250 and more employees: large enterprises.

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(mainly or with other factors) than for cost reductions. For revenue increases, the difference between micro, and small and large enterprises is of 64 percent vs. 47 percent (17 percent-point difference) but for cost reduction this is reduced to 68 percent vs. 53 percent (15 percent-point difference).

The possible explanation for why company size matters in relation to the use of ICT and general performance is that larger organizations benefit more from economies of scale and scope in applying ICT than micro and small companies.

4.2.3 Sector Differences in ICT Use and Overall Performance For a number of years, it has been increasingly recognized that sector differences are important in understanding the potential effects and benefits of ICT usage. The ambitious European Commission’s E-Business Watch, for example, is almost entirely sector-based11 The size of the sample of the present study is too limited to allow detailed analyses for all the different sectors. Sectors were selected to be representative of the industrial fabric in the coun-tries and regions under scrutiny, with the additional criteria of being significant sectors in their respective economies and relatively proactive in their adoption

of ICT. Although some sectors have been analyzed for all five countries, this does not apply to all sectors observed. As a result, not all sector datasets are sufficiently large to be analyzed in their own right. Our analysis will therefore be limited to the largest sectoral datasets.

On a more substantial level, sectors were selected to constitute a sufficiently diverse set to reveal which industry characteristics primarily affect ICT usage. This selection is based on previous research that revealed that it is not sector specificity per se that determines ICT usage, but specific product and market structure characteristics that may be common to very different sectors.12

In particular, the way product characteristics and related market structures affect transaction costs appears to be a determinant of the effects of ICT usage. In this context, literature on ICT and business development often distinguishes between tangible and intangible products. It is then assumed

TABlE 4.1. ICT, Productivity and Profitability

productivity profitability increases: Mainly ict and Mainly increases: Mainly ict and Mainly attribution to ict ict other other attribution to ict ict other other

large 11% 66% 23% large 8% 63% 29%

Medium 18% 40% 42% Medium 6% 52% 42%

Micro and Small 12% 41% 47% Micro and Small 14% 41% 45%

TABlE 4.2. ICT, Costs and Revenues

operational cost revenue reduction: Mainly ict and Mainly increases: Mainly ict and Mainly attribution to ict ict other other attribution to ict ict other other

large 15% 63% 22% large 3% 61% 36%

Medium 12% 64% 24% Medium 3% 44% 53%

Micro and Small 21% 32% 47% Micro and Small 12% 35% 54%

http://www.ebusiness-watch.org/Verhoest, p., Hawkins, r, Desruelle, p. et al (2003). Electronic Business

Networks: An assessment of the dynamics of business-to-business electronic commerce in eleven OECD countries: A Summary Report of the e-Business Impacts Project (EBIS). brussels: european commission, on-line: http://www.jrc.es/home/publications/publication.cfm?pub=1122. Also available in print (report eur 20776)

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that because of their very nature, intangible products offer more possibilities for ICT-based production and transactions. For similar reasons, many studies start out by distinguishing service and goods-producing sectors. The six sectors selected for analysis in this chapter can be categorized along these lines (three per three), but as it is demon-strated, both distinctions are misleading in that they only reveal part of the relevant factors with regard to the effective usage of ICT.

The rankings below have been obtained by sorting data on the basis of positive effects of ICT (‘mainly ICT and ICT and other factors taken together). On the basis of the analysis, the most revealing and/or inclusive indicators were selected. For performance, these are productivity, profitability, operational costs, and revenues from sales.

performance indicators for Selected SectorsBoth for productivity and profitability heavy machinery is the lead sector in terms of attribution of positive effects to ICT usage, with almost 75 percent of firms attributing positive effects to either ICT or ICT and other factors. The direct attribu-tion of effects to ICT, however, is much higher for productivity (31 percent) than for profitability (17 percent). ICT services, finance, and retail and wholesale form a trio with around 70 percent of the firms attributing positive effects to ICT or ICT and other factors.

For profitability, however, the attribution of positive effects to ICT (mainly ICT and ICT and others jointly) of the financial sector is significantly higher

(almost 85 percent) than for ICT services and retail and wholesale.

Retail and wholesale shows a much lower rate of attribution to ICT as a main factor (7 percent for productivity and 9 percent for profitability) than the four other sectors already mentioned (which range between 17 percent and 31 percent).

Furniture manufacturing and food processing close the ranks with a significantly lower attribution of positive effect to ICT for around 50 percent of firms.

The attribution of positive effect to mainly ICT, however, is markedly higher for furniture (10 percent and 17 percent for productivity and profitability, respectively) than for food processing (0 percent).

The financial sector by far exceeds the other sectors in terms of positive attribution to ICT of both cost reductions for 100 percent of firms and revenue increases for 82 percent of firms. The difference between both categories is accentuated by a very high direct attribution to ICT of 57 percent for cost reduction.

For heavy machinery the positive attribution of effects to ICT is higher for cost reduction (67 percent of firms) than for revenue increases (58 percent). Most significantly, the direct attribution of effect to ICT for revenue increased is nil (compared to 17 percent for cost reduction).

TABlE 4.3. Sector Findings on ICT, Productivity and Profitability

productivity profitability increases: Mainly ict and Mainly increases: Mainly ict and Mainly attribution to ict ict other other attribution to ict ict other other

Heavy Machinery 31% 54% 15% Heavy Machinery 17% 67% 17%

ICT Services 19% 53% 28% Finance 28% 56% 17%

Finance 29% 42% 29% ICT Services 27% 40% 33%

Retail & Wholesale 7% 60% 33% Retail & Wholesale 9% 55% 36%

Food Processing 10% 43% 48% Furniture 17% 33% 50%

Furniture 0% 42% 58% Food Processing 0% 41% 59%


For retail and wholesale the contribution of ICT is markedly higher for cost reductions (88 percent) than for revenue increases (56 percent), with also a significant difference in direct attribution (33 percent for cost reduction and 0 percent for revenue increases).

ICT services show a relatively even distribution (56 percent for cost reduction and 46 percent for revenue increases). The same accounts for food processing (55 percent and 46 percent, respec-tively) but with a much lower rate of attribution to ICT as main factor (0 percent both for costs and revenues).

Furniture is the only sector where the positive rate of attribution to ICT is higher for revenue increases (46 percent of firms) than for cost reductions (33 percent of firms).

The figures confirm that the distinctions between tangibles and intangibles, or services and goods are rudimentary when it comes to predicting the potential of ICT to increase economic performance. The number one ranking of heavy machinery for both productivity and profitability increases, wholly or partially attributable to ICT, confirms this. We may confidently assume that the explanation for this high ranking is to be found in product characteris-tics of heavy machinery.

Heavy machinery generally is a very complex product that is also often produced on a one-off basis according to customer specifications. Transaction costs will therefore tend to be high. This involves costs related to coordination, contract and/or control costs, internal to the firm and/or between the supplier and the customer. This assumption is confirmed by the higher attribution of ICT-related effects on cost reduction than on revenue increases and a direct attribution to ICT as main factor which is significantly higher for cost reduction than for revenue increases. As will be shown in the following section, revenue increases for heavy machinery can at least partially be explained by factors relating to product innovation and customer relations.

Based on these observations, it is more accurate to posit that the potential effect of ICT on the firm’s

BOx 4.10. Case Study

BankServiss (Latvia) – The importance of preparation

BankServiss is the leading company for payment card data processing services in the Baltic States. The main operations of the company are issuing processing, acquiring processing, clearing and settlement with domestic and international banks and payment schemes. In 2005 the company introduced two new e-commerce solutions to ensure reliable and secure Internet payments for banks, merchants, and cardholders. A central lesson emerging from the experiences of BankServiss is the importance of choosing the right supplier. When selecting the supplier, the emphasis should be on their experience and knowledge rather than price and quantity, since the new technologies are likely to be extensively used for a long period of time. Moreover, it is important to ensure the compatibility of the different types of software. Proper preparatory work and background research on the products are therefore important, including the consultation of other users to assess their experiences.

TABlE 4.4. Sector Findings on ICT, Costs and Revenues

operational cost revenue reduction: Mainly ict and Mainly increases: Mainly ict and Mainly attribution to ict ict other other attribution to ict ict other other

Finance 57% 43% 0% Finance 24% 59% 18%

Retail & Wholesale 33% 44% 22% Heavy Machinery 0% 58% 42%

Heavy Machinery 17% 50% 33% Retail & Wholesale 14% 42% 44%

ICT Services 11% 44% 44% ICT Services 14% 40% 46%

Food Processing 0% 55% 46% Furniture 0% 46% 55%



performance will be determined by the information intensity of the product. This involves both product characteristics as well as transaction characteristics. For example, the number two and three sectors in ranking, finance, and ICT services are products that have a high informational component and can be traded electronically as well. Financial products have an even higher informational nature than ICT services, which is expressed in the higher average ranking of finance and in particular a higher attribution for revenue increases. The latter subject will be touched upon again in the section on relational innovation.

Furniture manufacturing and food processing are undoubtedly the sectors with the lowest information intensity, both in the product and transaction area. Logically, both close the ranks in all categories under scrutiny: productivity, profitability, and cost and revenues. However, furniture scores relatively better for revenue increases. This result, as will be demon-strated in the following sections, can be related to the usage of ICT for customization and the effect this has on customer relations.

Finally, retail and wholesale hold a middle position in general, but score significantly above average on the cost reduction category. Contrary to heavy machinery, finance, and ICT services, the informa-tion intensity of these products generally does not provide much potential for spectacular performance improvements through ICT usage. The gains of ICT usage are to be situated in the area of transactions and can be due either to the high frequency of transactions and/or the amount of customers and suppliers that are involved.

4.2.4 Country Differences in ICT and Economic PerformanceWhile it is not the aim of this project to conduct a comprehensive comparative analysis of the five countries included in the study, the data set allows us to identify some tentative findings pertaining to ICT use and its impacts in individual countries. However, these findings should be interpreted with great caution. Our regional samples have been constituted to be representative of the geographical area under scrutiny. Sectors were chosen that are important for the economies of those regions. As a consequence, the industrial composition of our sample varies considerably per country, leaving little scope for rigorous compara-tive analysis. It may seem paradoxical that samples that are more or less representative of regional economies cannot be compared but, as is demon-strated in this study, the rate of adoption and potential effects of ICT usage on firm perfor-mance vary significantly per sector, and differences in the sectoral composition of the economy in the different regions may therefore determine regional outcomes.

Proof of this was obtained by comparing the different regional samples. Many differences were found, but most of them could not be explained without taking into account the incidental influence on a given regional sample of non-comparable sectors. The proper way to infer regional or country differences is thus to operate by triangulation, i.e. to find out about residual differences by comparing identical sectors or industries in different countries. Unfortunately, when applied with rigor this approach yields only a relatively small sample of three sectors (food, ICT and retail) for three

TABlE 4.5. Country Findings on ICT and Economic Performance

percent of firms percent of firms percent of firms percent of firms with reported with reported with reported with reported increase in labor reduction in increase in increase in productivity operational costs revenues profitability

Estonia 58 18 58 40

Poland 38 15 34 28

Russia 41 24 63 43


countries (Estonia, Poland and Russia). In the table below, the trends in economic performance among the firms operating in these three sectors and countries are shown.

When the data for the individual countries is broken down further, we see that the contribution of ICT to the economic performance of firms differs significantly between countries.

For productivity increases ICT is a contributor mainly together with other factors. However, the impact of ICT is far greater in Estonia and Russia than in Poland.

TABlE 4.6. Factors Responsible for Improved Productivity

percent of firms percent of firms percent of firms that attribute it that attribute it that attribute it mainly to ict to ict and other to mainly other Don’t know or n/A

Estonia 9 55 36 0

Poland 9 33 45 13

Russia 16 60 24 0


Estonia – ‘clean sheet’ advantage

The findings from this study have revealed that a strong technological heritage does not necessarily translate into suc-cess in the application and use of ICT. While countries with a relatively strong technological heritage such as Russia and lithuania have only made moderate steps towards establishing an ICT infrastructure, Estonia is at the forefront of ICT develop-ment and use among the transition countries, despite having only a limited tradition of technological development. Indeed, the ‘clean sheet’ has been considered a critical advantage for Estonia as most of the companies have bought new and modern ICT technology in part because they did not have older technologies available.

TABlE 4.7. Factors Responsible for Reduced Operational Cost


Estonia 0 67 33 0

Poland 17 25 42 16

Russia 17 55 28 0

TABlE 4.8. Factors Responsible for Increased Revenue


Estonia 0 45 50 5

Poland 11 11 71 7

Russia 13 40 47 0


For cost reductions, ICT is again only one of several contributing factors, with a far bigger contribution of ICT for firms in Russia and Estonia compared to Poland.

Similarly, ICT is making a larger contribution towards revenue increases in Russia and Estonia than Poland. However, rather than being the main contributing factor, ICT contributes together with other factors. For profitability of firms, ICT is a significant contributing factor in Estonia and Russia. However, firms in Poland appear less able to translate the use of ICT into greater profitability.

It is evident from the above that the overall role and impact of ICT in the transition countries differ significantly between countries. This should perhaps not surprise us, as the diverse overall socio-economic and political contexts of the different countries will create varied environments for ICT adoption and utilization. We explore these issues further in a subsequent section of the study (see section on Barriers and Enablers).

4.2.5 Conclusions on ICT and Performance of FirmsAll findings indicate that ICT is a substantial contributor to productivity, profitability, and growth. Simplified, the average scores lead to a 10–50–40 division of scores. Hence, on most indi-cators, around 10 percent of firms on average state that ICT is the main factor of improved perfor-mance while in roughly 50 percent of cases, ICT is mentioned as contributing to better performance only along with other factors, leaving about 40 percent of firms reporting that other factors

altogether are the main cause of improved performance. The effects of ICT are most signifi-cant for productivity and somewhat less for profitability.

The other main factors contributing to performance besides ICT usage—being organizational change, new marketing strategies, and investment in equipment—indicate that ICT usage is part and parcel of a more profound modernization that reveals economies in transition.

One important question that remains to be addressed is whether the firms for which ICT is not a contributing factor have failed to sufficiently or adequately use ICT, or whether this ‘non-contribu-tion’ was inherently due to the limitations of ICT itself. For firms that mention ICT as one of the main contributing factors, the question may be asked how ICT usage is articulated vis-à-vis other factors and where the benefits of ICT usage are (predominantly) located. In this respect, an interesting observation is that ICT is contributing relatively more to reducing costs than to increasing revenue.

In addition, it is also evident from the findings outlined above that both the size of the company and the information intensity of the product are important for the possible contribution of ICT for performance. Hence, larger firms are better placed to exploit the benefits of ICT, while greater overall information intensity of the product also provides greater opportunities for using ICT for improved economic performance. We discuss these findings, and their implications, in greater detail in subse-quent sections of the study.

TABlE 4.9. Factors Responsible for Increased Profitability


Estonia 12 44 44 0

Poland 9 9 77 5

Russia 20 60 20 0


4.3 Effects on Innovat�onSo far, our survey has provided estimates of the contribution of ICT in improving the performance of firms in the regions and industries studied. It left unanswered the question of how the enterprises in the sample obtained these results. Our survey addresses parts of this issue by investigating the effects on different types of innovation at business process level.

The ambition of this study is not to identify all possible effects of ICT at the business process level. This would require a study in its own right. Instead, this study concentrates on a number of effects that have been observed in previous studies and are known to be significant.13 These effects are the following:

Process innovation: speed and reliability, automa-tion of tasks (production as well as administra-tion), information management and the overarching category of organizational change. Product innovation: new products and services, customization and bundling of goods and services. Relational innovation: number of customers/suppliers, value of sales/purchases per customers/suppliers, repeat customers/suppliers, value of sales per repeat customers/suppliers.

Process and product innovation are well-known concepts, but the concept of relational innovation may require some explanation. The concept of relational innovation describes the way firms innovate in the way they are conducting business with suppliers and customers. It is narrower than the concept of strategic innovation, which is sometimes used to indicate the way firms reposition themselves vis-à-vis other players in the field, including for example government. Rather, the concept of relational innovation concentrates on the relations between suppliers and customers and more specifi-cally the transactional aspects of these relations.14

4.3.1 Process Innovation

Speed and reliabilityNot only did a majority of firms manage to improve the speed and reliability of business processes (68 percent), but there is also a positive relationship between ICT usage, improved speed and reliability,

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and the decline of business process costs. (See Table 37) In firms where costs went down, 85 percent relate this change to ICT usage alone or in combina-tion with other factors. In firms where improved speed and reliability led to increased costs, the connection with ICT was far less pronounced but still significant. The study shows that:

Forty-six percent of the enterprises that increased speed and reliability also increased their business process costs. Only 31 percent actually saw a cost decline as a result of increased speed and reliability. For 23 percent within this group, business process costs remained about the same. (See Table 38) Of all firms that improved their speed and reliability of business processes, 15 percent attribute this mainly to ICT, 50 percent to ICT and other factors, and 36 percent mainly to other factors. The attribution to ICT is signifi-cantly higher for firms that have lowered process costs by increasing speed and reliability: 38 percent mainly to ICT, 47 percent to ICT and other factors, 15 percent mainly to other factors. (See Table 39)

The most important other factors are organizational change, followed by new marketing strategies and capital investment in equipment.

The presence of new marketing strategies as one of the important contributing factors indicates that speed and reliability improvement is not only just oriented towards internal business processes, but also contributes to handling operations with customers and suppliers.

AutomationAlmost 60 percent of the contacted firms managed to automate tasks over the past three years. This has had a largely positive effect on reducing overall business process cost. Only 28 percent of the firms report increasing costs over the past three years and ICT is reported relatively more often in the context of cost reduction (81 percent) than in the context of

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Verhoest, p., Desruelle, p., Hawkins, r. et al (2003). Electronic Business Networks: An assessment of the dynamics of business-to-business electronic commerce in eleven OECD countries: A Summary Report of the e-Business Impacts Project (EBIS). brussels: european commission, on-line: http://www.jrc.es/home/publications/publication.cfm?pub=1122. Also available in print (report eur 20776)

Hawkins, r. & Verhoest, p. (2002). ‘A transaction structure approach to assessing the dynamics and impacts of ‘business-to-business’ electronic commerce’, Journal of Computer-Mediated Communication, 7(3), on-line: http://www.ascusc.org/jcmc/vol7/issue3/hawkins.html

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cost increases (72 percent) related to task automa-tion. But the association of ICT as the sole main factor of change is much higher among firms that were able to reduce costs through task automation than those that saw their costs increase (38 percent versus 14 percent). As for other contributing factors, automation is mostly associated with capital investment in equipment, followed by organiza-tional change.

Along with ICT, the most important other factors are capital investment in equipment followed at a distance by organizational change.

information ManagementA large majority (75 percent) of all firms report improvements in information management. (See Table 43) As could be expected, the contribution of ICT usage to this improvement is significant. Eighty-four percent of firms consider that ICT contributed to this in one way or another. Forty-one percent of firms say improved information management has contributed to cost reductions, while 28 percent report increasing costs. Thirty-eight percent see ICT as the sole main factor for lowering costs through better information manage-ment and more than 46 percent report positive effects of ICT usage as one of the contributing factors.

Organizational change is (again) the most often mentioned other factor, followed by training of staff, capital investment in equipment and new marketing strategies.

Noteworthy, but logically, training of staff reappears here as one of the leading contributing factors. That the category of new marketing strategies also appears in the top three of other factors indicate that information management is also oriented towards managing relations with suppliers and customers.

4.3.2 Organizational ChangeA substantial number of the firms have gone through organizational changes (63 percent). (See Table 46) This is not surprising at all, bearing in mind the factor “organizational change” that appeared in all sets of “other than ICT factors” influencing the corporate performance.

BOx 4.13. Some Statistics on Information Management

For 41 percent of all firms that improved information manage-ment, this improvement led to a decrease in business process cost. For 31 percent of the firms, business process costs remained the same, and for 28 percent of the firms, costs increased. (See Table 44) Among firms that have decreased cost through better informa-tion management, 46 percent attribute this mainly to ICT usage, 38 percent to both ICT usage and other factors, and 16 percent mainly to other factors. Among firms that report an increase in cost, 25 percent held mainly ICT responsible; 60 percent point to a mix of ICT and other factors, and 15 percent to mainly other factors. (See Table 45)

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BOx 4.12. Some Statistics on Automation

Fifty-nine percent of firms report having automated tasks and 41 percent report not to have done so over the past three years. (See Table 40) For 50 percent of the firms that automated tasks, this change led to a lowering of overall business process costs; 22 percent report no cost change. For 28 percent of the firms, task automation led to higher busi-ness process costs. (See Table 41) 14 percent of the firms attribute higher costs due to task automation mainly to ICT usage, 58 percent to ICT usage and other factors, and 28 percent to entirely other factors. Firms that automated tasks and have lower costs in the context of task automation point relatively more often to ICT as a con-tributing factor: 38 percent state that mainly ICT is responsible, 43 percent say ICT and other factors are responsible, and 19 percent attribute mainly other factors. (See Table 42)

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BOx 4.14. Some Statistics on Organizational Change

Of firms that decreased costs, 10 percent regard ICT usage as the main contributing factor to organizational change; 47 percent state that ICT and other factors to-gether were responsible, and 43 percent say other factors triggered organizational change. For firms that increased costs through organizational change, ICT was the driving force in only 4 percent of cases. Forty-six percent saw ICT as one of the contributing factors and for 51 percent said other factors were the main drivers. (See Table 48)

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Business process costs have decreased (in 43 percent of all cases) rather than increased (in 30 percent of cases) as a result of the introduction of organiza-tional changes. (See Table 47) More companies that decreased costs as a result of organizational changes find ICT usage as the main factor. For firms that increased costs through organizational change, ICT was the driving force in only 4 percent of the cases.

By far, most respondents point to a failing internal organization as the main driver of organizational change, followed by new marketing strategies and less so training of staff and investment in equipment.

Overall, this analysis confirms some of the main propositions formulated in the previous main section on performance indicators. The application of organizational change and its effect as observed in our sample are indicative of economies in transition that are undergoing processes of rapid moderniza-tion. Of great significance in the context of this survey is that ICT is relatively less often seen as contributing to organizational change compared to other categories of process innovation. On average 46 percent mention other factors as the main cause of change compared to 7 percent that see ICT as the main factor. However, where ICT was the main driver of organizational change, this resulted more often in cost reductions (10 percent) than cost increases (4 percent).

4.3.3 Product Innovation

new products and ServicesThe companies in the sample give new products and/or services an important role (70 percent, Table 49). In 73 percent of the companies that have introduced new products/services, this has driven the sales substantially up in the last three years (by 2005) (See Table 50). More than half of the firms associate these trends with other factors and very few attribute them to ICT only (9 percent, Table 51) New marketing strategies influence the growth of new products/services, meaning that product innovation is very much market driven.

customizationThe study shows that new products/services go hand in hand with customization. More than half of the firms have launched customized products in the market for the reporting period. This also is the cause in many cases for the increase of sales volumes. ICT comes out as one of the factors behind the above trends, but as before, it is more powerful in a combination with other factors. Similar to the introduction of new products, new marketing strategies are playing an important role.

The contribution of ICT to the customization of products is marginally higher than its contribution to the creation of new products and services, and the


Electropribor (Russia) – Careful management of the introduction of ICT

Electropribor is a leading center of development and production of sea and space navigation, radio communications, and wind energy products. With more than 2,000 employees, the successful management and organization of the introduction of ICT is paramount. Within a short time-span the company had to introduce an extensive new ICT infrastructure and ensure its effective utilization across the organiza-tion. The new ICT infrastructure would enable the organization to undertake significant restructuring and become more internationally competitive. The implementation of the new ICT infrastructure followed several stages, with the creation of a powerful IT division as a start-ing point, followed by the development of ICT rules, and an integrated dialogue environment. These steps have since been followed by the careful selection of appropriate software. The gradual process of introducing the new ICT infrastructure has been seen as a critical success factor. Moreover, the general lessons to be drawn from Electropribor’s experience can be summarized in the following strategic principles critical for success:

1. Dedicated top management focused on fast and complete introduction of ICT.2. Concentration of the management responsible for introducing the process in one common qualified ICT division with authority and a budget.3. Careful analyses and reengineering of key business processes. 4. Continuous target preparation of the personnel (training etc.).5. Orientation to the best ICT solutions with careful selection of suppliers.6. Maximum outsourcing of the work.

In sum, the introduction of ICT has to be carefully managed with complementary organizational changes and training/preparation of staff.


attribution to ICT is similar. It is significant that almost 54 percent of all firms say they have intro-duced customized products and almost 61 percent have introduced new products and/or services in a relatively short period of three years. It points to rapidly changing markets in terms of product types and quality offerings that—with caution—might serve as a sign of still relatively immature markets and economies. What it also emphasizes is the highly proactive nature and behavior of the firms surveyed. The latter indicates an increasing outward looking (e.g. customer-related) behavior of the companies.

new bundled offeringsProduct/service bundling is a commercial strategy that is greatly enhanced by ICT usage, in particular the offering of information services over the Internet. This is reflected in attribution rates that are moderate but still higher than for new products and customized products. That comparatively few firms (35 percent, Table 55) offer bundled services and that the attribution rate to ICT is moderate may be an indication of the development and integration of Internet in business processes thus far.

Like other types of ICT-based product innovation, the offering of bundled products and services typically requires a high level of integration of ICT in internal and external business processes. The relatively low direct attribution of product innovation to ICT may therefore suggest that a significant proportion of firms still have to come to terms with ICT and process innovation, before being able to effectively engage in ICT-based product innovation. It is important to point out that in 69 percent of the firms that offered new product/service bundling, the share of bundled offerings as a percentage of total sales increased (See Table 56 and 57). The latter shows that this new commercial strategy offers economic advan-tages to the companies.

Effects on product/services innovation are attributed to ICT alone in a small proportion of the cases, but in more than half of the companies ICT in combi-nation with other factors played an important role. New marketing strategies is by far the most quoted other factor, followed at great distance by organiza-tional change and investment in equipment. Training of staff is in some cases seen as important as the orga-nizational change.

The finding that new marketing strategies are by far the main triggering factor for the new products and services indicates that product innovation is mostly market-driven. The score of investment in equip-ment, which would indicate supply-led strategies, is almost four times lower. Congruent with this finding, ICT scores moderately as a driver of new product offerings compared to, for example, different categories of process innovation. Interestingly, introducing new products and services is a rather popular form of serving markets. At the same time, it is a very effective sales strategy when it comes to increasing turnover, surpassing in this respect both customization and—to a lesser extent—also bundling.

4.3.4 Product and Process Innovation for Different SectorsMore than 90 percent of the firms in the heavy machinery, retail and wholesale sectors that have reduced costs by increasing speed and reliability of operations and/or automated tasks attribute this gain mainly to ICT or to ICT and other factors.

Still in the domain of process innovation, finance and ICT services hold middle positions but follow closely with scores between 80 percent and 90 percent of the surveyed firms. Food processing and furniture close the ranks with scores below 50 percent.

In the domain of product innovation, finance and ICT services take the two top positions. In these

BOx 4.16. Some Statistics on Product Innovation

Nine percent of the firms that have increased the value of sales of new products mention ICT as the main driver behind the creation of new products and services, and 43 percent of firms mention ICT and other factors. Forty-eight percent of the firms thought that mainly other factors were responsible. Of firms that have increased value of sales by offering custom-ized products, nine percent say ICT is the main driver of cus-tomization. For 46 percent of firms this is ICT in combination with other factors. Forty-six percent held mainly other factors responsible. (See also Table 54) Thirteen percent of all firms that increased the value of sales through bundled offerings point to ICT usage as the main responsible factor; 43 percent point to ICT and other factors and 44 percent to other factors.

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sectors, approximately 70 percent of the firms that have increased revenue by launching new products or customizing products attribute this mainly to ICT or to ICT and other factors.

Furniture and retail and wholesale hold the two middle positions with scores around 50 percent. Food processing and heavy machinery score the least on product innovation. Heavy machinery scores higher on customization even though it has the lowest score of all for new products.

Findings concerning product and process innovation confirm the conclusions formulated with regard to the role of information intensity of products and transactions as determinants of effective ICT usage. Finance and ICT services both have a high potential for ICT usage as both products and transactions have high information intensity.

The assumption that the tangible nature of products offers only a partial explanation for the potential of ICT usage to increase performance is confirmed by the top positions of heavy machinery and retail and wholesale in the process innovation categories. The product characteristics, in particular of heavy machinery as a complex product often produced to customer specification, explain its relatively good potential for customization. This contributes to understanding the relatively good score of heavy machinery on increased revenues. But the majority of performance increases lie in the area of process innovation based on transaction cost reduction.

In line with the formulated expectations, furniture and food processing show the least potential for cost reductions through process innovation because of the relatively low information intensity of transac-tions. However, in the area of product innovation, furniture has a distinct potential for customization, which helps explain why it also score higher on the category of revenue increases.

4.3.5 Innovation in Customer Relationships

number of customersThe combination of new products and customiza-tion as well as the influence of the factor “new marketing strategies” contributes to explaining why the number of the customers increased in the last three years (61 percent, Table 58). For 6 percent of

the firms with an increase in the number of custom-ers, ICT usage is regarded as the main responsible factor while 44 percent noted that ICT and other factors played a role.

change in Sales Value per customer The contribution of ICT to increasing the value of sales per customer lies in the same range as its contribution to attracting more customers. Seven percent of the firms that increased their sales value per customer say that ICT was the main contribut-ing factor while 41 percent stated that ICT and other factors are jointly responsible. Again, in comparison with process and product innovation, this may point to a relative under-utilization of the Internet as a transaction tool to increase customer loyalty.

Share of retained customersICT is an appropriate tool to increase customer loyalty and can be effectively used to lock-in customers. Figures indicate that most firms were successful in keeping the share of retained custom-ers as a percentage of total customers at least stable—with total customer numbers going up— or even increase this share. This can be interpreted as a significant improvement in firm-customer stability and trust relationships. The low score of ICT (7 percent) as a tool to increase the share of retained customers, however, at least in comparison to other scores in the survey, may indicate that the usage of ICT as a transaction tool is still very much in development in the studied sample and has not lived up to its potential. This indicates that there is ample room for growth in this area.

changes in Sales Value per retained customer Similar to the share of retained customers, the contribution of ICT to increasing the sales value per customer is low and it is again possibly indicative of an underdeveloped usage of ICT as transaction technology with customers. This is largely confirmed by the fact that throughout, new marketing strategies score more than 60 percent as the single most important factor in improving customer relations and related revenue effects. In addition, observations show that most growth in sales value per customer stems from new customers rather than existing customers.

In comparison with product innovation and certainly in comparison with process innovation the


contribution of ICT to increasing the number of customers, retaining the customers and increase sales value per customer (retained) customer is small compared to other possible drivers. The most frequently quoted other factor causing positive effects of innovation on customer relationship is new marketing strategy. This factor accounts for almost half of all quotes—followed by organizational change and capital investment in equipment.

4.3.6 Innovation in Supplier Relationship

number of SuppliersThe 40 percent of firms that mention an increase in the number of suppliers is significantly lower than the firms showing an increase in customers (61 percent). About 77 percent of the firms showing decreasing numbers of suppliers attribute this to other factors than ICT usage. The relation between ICT usage and doing business with more suppliers is markedly more positive, with almost 50 percent of firms mentioning ICT usage as one of the contribut-ing factors. This attribution rate is comparable to that reported with regard to the number of custom-ers.

Value of purchases per SupplierThe relation between the use of ICT and a decreas-ing value of purchases per supplier is negligible. The relation between ICT and increased value of purchases is significant but weak. Of the 43 percent of firms for which the value of purchases had increased, almost 62 percent stated that this was due to factors other than ICT. (See Table 68) The 3

percent of firms that faced an increase in the value of purchases per supplier stated that this was due mainly to ICT usage (35 percent). (See Table 69)

number of repeat SuppliersNot many firms (26 percent) show an increase of repeat suppliers. Sixty-seven percent of the firms report that the number of repeat suppliers remained about the same and 7 percent report a decrease. (See Table 70)

Increases were predominantly attributed to ICT by 5 percent of the firms, to ICT usage and other

BOx 4.18. Some Statistics on Innovation in Suppliers’ Relationship

Forty percent of the firms reported an increase in the number of suppliers. 54 percent of the firms indicate that the number of suppliers had remained the same and 7 percent claim to have witnessed a decrease. (See Table 66) 6 percent of firms that witnessed an increase in the number of suppliers attribute this mainly to ICT usage, 44 percent to ICT usage and other factors and 51 percent mainly to other factors. Decreases are attributed to mainly other factors by 77 percent of firms. (See Table 67) Forty-one percent of the firms indicate that the purchase value per repeat supplier increased. 53 percent declare that it remained the same and 7 percent that it decreased. (See Table 72) Five percent of firms that faced an increase of the value of purchases per repeat supplier stated that this was due mainly to ICT, 36 percent to ICT and other factors and 60 percent pointed to mainly factors. Firms that faced a decrease pre-dominantly pointed to mainly other factors (84 percent). (See Table 73)

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BOx 4.17. Some Statistics on Innovation in Customer Relationships

Only 7 percent of all firms faced a decrease in customers. Ninety-seven percent of firms with a decreasing number of customers at-tributes this mainly to other factors and not to ICT. (See Table 59) Forty-five percent of all firms indicate that their sales value per customer had gone up in the last three years. 45 percent witnessed no change and 10 percent faced a decrease of the sales value per customer. (See Table 60) 92 percent of the firms that faced a decrease of sales value due to ICT attribute this mainly to other factors. (See Table 61) Forty-seven percent of all firms indicate that the share of retained customers had increased compared to three years ago. For 47 percent of the firms that share remained about the same, and for 7percent of the firms a decrease was observed. (See Table 62) 7 percent of the firms attributed increases mainly to ICT and 42 percent to ICT usage and other factors. 51 percent of firms attribute the increase mainly to other factors. Decreases in the share of retained customers are attributed to mainly other factors (94 percent of the firms). (See Table 63) Forty-four percent of all firms indicate a rise in sales value per retained customer. 48 percent of the firms see no change and 8 percent faced a decrease. (See Table 64) Only 6 percent of the firms that faced an increase stated that mainly ICT was responsible, 40 percent points to ICT and other factors and 55 percent mainly to other factors and not ICT. 92 percent of the firms that faced a decrease in sales value per retained customer pointed to other factors. (See Table 65)

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factors by 36 percent and to mainly other factors by 60 percent. (See also Table 71)

Value of purchases per repeat SupplierRemarkably, there is little difference between the evolution of value of purchases per supplier (general) and per retained supplier. The number of firms reporting increased sales is slightly over 40 percent, with ICT playing no determining role in increasing value of sales per supplier as yet.

In about half of the surveyed firms, the most quoted factor contributing to the suppliers relationships of any kind is new marketing strategy, followed by other reasons of much less importance.

4.3.7 Relational Innovation for Different SectorsHeavy machinery has a top score of above 60 percent of firms, linking ICT usage to more revenue generated by attracting more customers. In the categories of customer loyalty and revenue per customer, this sector has among the lowest attribu-tion rates.

Finance and ICT services consistently figure in the top positions for increasing the amount of custom-ers, the sales per customer, the amount of repeat customers and the sales per repeat customers. Hence, attribution of ICT usage to increasing revenue is between 54 percent and 68 percent.

Retail & wholesale consistently holds a middle position with scores between 52 percent and 41 percent. Still in the middle range, furniture manu-facturing scores better for the categories relating to customer loyalty and sales, namely between 53 percent and 63 percent, but worse for its capacity to use ICT for attracting more customers (42 percent) by using ICT.

Food processing on average scores the lowest on all accounts.

Figures on relational innovation provide no counter evidence for the conclusions made so far. They confirm some earlier findings and provide additional information. The good score of heavy machinery for attracting new customers can be explained by the

TABlE 4.10. Sector Findings on ICT and Relational Innovation

number of Sales per customers & customers & revenue increases: Mainly ict and Mainly revenue increases: Mainly ict and Mainly attribution to ict ict other other attribution to ict ict other other

Heavy Machinery 15% 46% 39% Finance 24% 47% 29%


Finance 11% 37% 51% Furniture 0% 63% 38%



Food Processing 2% 35% 63% Heavy Machinery 0% 21% 79%

repeat Sales per repeat customers & customers & revenue increases: Mainly ict and Mainly revenue increases: Mainly ict and Mainly attribution to ict ict other other attribution to ict ict other other


Finance 4% 50% 46% Finance 13% 50% 38%

Furniture 0% 53% 47% Furniture 0% 63% 38%


Heavy Machinery 17% 17% 67% Heavy Machinery 0% 38% 63%

Food Processing 0% 27% 74% Food Processing 0% 16% 84%


fact that this sector is strongly export-oriented and has internationalized in recent years. The weak scores for customer loyalty are perhaps surprising for a sector that offers customized products and uses ICT to do so, but it is logically explained by the nature of the market: heavy machinery is not sold to the same customers on a regular basis.

The counter example of furniture shows a product where the link between the number of customers and level of ICT usage in customer relations is weak but where product innovation, and in particular customization, is a good basis for increasing customer loyalty and revenue per customer. This finding also contributes to explaining the good score of furniture for revenue increases observed in the previous section.

In line with earlier findings, finance and ICT services score high on all categories of relational innovation. Significantly, they are the only sectors with substan-tial scores for positive effects on customer loyalty and revenue that can be attributed mainly to ICT. This is consistent with the market structure and transaction patterns of these sectors. Both sectors also benefit from some lock-in effects and both sectors dispose of a relatively large and stable customer base that performs regular transactions.

The latter is particularly the case for the financial sector. This is expressed in the higher scores of finance vis-à-vis ICT services for customer loyalty and associated revenue effects. ICT services is a relatively new sector with an expanding customer base. This is expressed in its higher score for increasing revenue by attracting new customers with the support of ICT.

Food processing closes the ranks on all categories of relational innovation. This is congruent with the observation that this sector has the lowest degree of integration of ICT in internal transaction processes and the weakest uplink to production processes. This finding also illustrates the systemic linkage between process, product and relational innovation, and how one is conditional upon the other.

4.3.8 Conclusion on Effects of InnovationICT usage appears to have substantial effects on process innovation, yet a limited effect on product innovation and a moderate result with respect to

relational innovation. The same order of intensity applies to the capacity of ICT to contribute to lower costs or higher revenues. This is a marked difference with observations using a partially similar question-naire in the Belgian economy15, indicating impor-tant differences between Western and Eastern Europe. Western European companies report a higher contribution of ICT to product innovation and relational innovation than East European firms in the sample. This is consistent with earlier findings revealing important lock-in effects in OECD countries.16 In the Western European study, relatively fewer firms also reported decreasing costs17.

The comparison makes it clear that the East European companies are rapidly developing organizations with frequent changes in processes and structures. Companies that already have a highly streamlined internal organization and are well adapted to the market, like the Western European firms, would observe only a marginal effect of ICT on their internal organization. It is also easier for firms that are structurally modernizing to integrate ICT in the workings of their organizations.

However, it also leads to the conclusion that ICT usage is comparatively less mature in the Eastern European firms. Reaping the full benefits of ICT usage requires streamlining external and internal transaction processes.

Our findings indicate that Eastern European firms find it comparatively more difficult to enter that stage. Several forms of ICT-driven product innova-tions, particularly for intangible products, are conditional upon, or will only significantly pay-off when external and internal processes are mutually integrated. Our findings indicate that many if not most Eastern European companies have not yet reached that stage. However, in time they may benefit from being “second” here as well.

Verhoest, p., Huverneers, c. & Hawkins, r. (#00#). ‘economic impacts of e-business’, in p. cunningham & M. cunningham (eds.) eAdoption and the Knowledge economy: issues, Applications, case Studies. Amsterdam: ioS press, ###-##0.

Verhoest, p., Desruelle, p., Hawkins, r. et al (#00#). electronic business networks: An assessment of the dynamics of business-to-business electronic commerce in eleven oecD countries: A Summary report of the e-business impacts project (ebiS). brussels: european commission, on-line: http://www.jrc.es/home/publications/publication.cfm?pub=####. Also available in print (report eur #0###)

note that the belgian sample was composed of representative samples of four industries while the eastern european sample consists of a selection of proactive ict users in various industries and a focus on strong performing re-gions. Assuming that our eastern european firms are also pro-active on other fronts (as our findings indicate), our comparison is one of Western european average firms with eastern european forerunners.

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4.4 Obstacles and Enablers of ICT UsageTo further complete our picture of key enablers, barriers, and obstacles to introducing and using ICT within firms, firms were asked to comment on a range of contextual factors. Some of these factors are firm-specific and relate to the firm’s strategy, culture, and positioning towards the use of ICT. It addresses the question of how internal resources are deployed to stimulate and harness ICT use within the firm. A second, separate cluster of contextual factors relates to the position of the firm within the supply chain, its upstream and downstream relationships with suppliers and customers, and how it handles the issue of in- and outsourcing. Another cluster of factors relates to the physical, economic, and policy context that together co-determine the market environment in which firms have to operate. Firms were asked to evaluate existing policy rules and regulations as well as policy instruments in relation to the investment, uptake, and use of ICT within the firm.

4.4.1 Factors Internal to the EnterpriseFor the majority of firms, in-house know-how, skills, and training appeared sufficient to support the uptake and effective use of ICT. However, one out

of five firms stated that they did not have sufficient in-house know-how to support the uptake of new ICT. Similar figures applied to the question whether available staff skills and training were sufficient to support effective ICT usage.

readiness towards ictTwo-thirds of all firms had no problem in justifying ICT investment costs, whereas for almost one-fifth of the firms, ICT investment costs could not be easily justified (see Table 76). Even more firms—73 percent of the total—stated that their management could be described as proactive in promoting ICT. (See also Table 77).

lock-in effectsAn interesting question is whether firms felt that ICT usage had made it easier or more difficult for them to switch between suppliers. An overwhelm-ing majority indicated that ICT usage had in fact made it easier. Yet 37 percent of firms answered “don’t know” or “not applicable” (37percent). (See Table 78)

outsourcing and “in-sourcing” of ActivitiesThirty-nine percent of all firms indicated that ICT usage had encouraged the outsourcing of activities, and 37 percent said that ICT usage had encouraged the “insourcing” of activities. Again, 50 percent of firms indicated that they either didn’t know, and 53 percent said that insourcing or outsourcing did not apply (distributed rather evenly among the two categories). When leaving out the categories not applicable, don’t know and refusal, 84 percent indicated that ICT usage had encouraged the

BOx 4.19. Case study

Case study: Epicor – Fear of change

The work of Epicor in Poland provides an illustrative example of how the fear of change can impede the application and utiliza-tion of ICT in organizations. For 20 years, the company has been a recognized leader in the provision of integrated solutions for Enterprise Resource Planning (ERP), Customer Relationship Management (CRM) and Supply Chain Management (SCM). Focusing on companies operating in manufacturing, distribution, enterprise service automation and hospitality, Epicor leverages innovative technologies, like Web services, in the development of end-to-end industry-specific solutions. In order to improve transpar-ency and control of the company’s performance, software was introduced that would allow for easier accountancy, client rela-tionship management, and project management. However, a key barrier to the effective introduction and use of the new software has been the difficulties of some staff to adapt to and accept the changes and novelties associated with the new technologies. Consequently, the new technology was not as rapidly adopted as it could have been. Notwithstanding these barriers, however, the company has still managed to use the new technology to increase revenue, efficiency, and profitability.


WebService – Capacity for change

WebService is one of Poland’s fastest growing interactive agen-cies. Established in 1996, the company has implemented almost 300 integrated marketing, consulting, and IT projects for the biggest Polish and foreign companies. Accordingly, the services provided by WebService include e-marketing, e-consulting and e-technologies (content solutions). In their work, WebService has encountered a number of factors that inhibit the easy introduction and utilization of ICT in organizations. In particular, the fear of change and lack of time/resources to adapt are primary barriers to the successful application and utilization of ICT. The experi-ences of WebService therefore suggest that a suitable integration of current and new processes and routines is of great importance for companies aiming to exploit the advantages of ICT.


outsourcing of activities. An equal percentage applies to insourcing. (See Table 79 and Table 80)

4.4.2 Regulatory and Policy Context

telecommunications infrastructureThe uptake of investment in and use of ICT by firms could potentially be hampered by factors relating to the quality and costs of using the existing telecommunications infrastructure. For most of the respondents such infrastructural factors appeared not to play a role of importance. Seventy percent of all respondents stated that telecommunication costs did not in any way inhibit the use of ICT, and only 19 percent said that it did (see Table 81 and Annex 2 for telecommunication prices).

Likewise, more technical infrastructural properties, like network reliability, network flexibility, and the range of (available) services or geographic coverage were not seen as obstacles to the use of ICT by a majority of firms. For 17 percent of the firms, network reliability was a problem. (See Table 82) Only 8 percent of the firms indicated that geo-graphical coverage was insufficient (see Table 84), whereas network flexibility and services appeared a problem for 11 percent of the firms surveyed. (See Table 83)

Asked to state the most important information technology to their firm, 23 percent of respondents mentioned e-mail, and 28 percent mentioned general Internet access, percentages that even lie somewhat higher than mobile (20 percent) and fixed telephony (22 percent) (See Table 85)

As far as telecommunication prices are concerned, the firms surveyed are generally positive. Estonian

firms are the most satisfied, while the highest level of dissatisfaction is observed in Lithuania. This finding is perhaps surprising, as telecommunication costs are often seen as a major impediment to the take-up of ICT. However, telecommunication prices in all the countries have declined significantly in recent years. This has particularly been the case in Estonia, where efforts to liberalize the telecom-munications market have been most pronounced. Moreover, it is important to stress that the survey was of leading firms, with respect to ICT adoption and use, in the countries included in the study. Prices that are not seen as major impediments for ICT take-up among these firms may be a significant barrier for other firms.

For network reliability the position of the Lithuanian firms is reversed. They are the firms with the highest degree of satisfaction. For the other countries, satisfaction levels are in the same range as for costs.

On network flexibility and range of services, Lithuania is still the most positive country, followed by Estonia. But it has not been a major problem in any other country either. Latvians are the least satisfied.

Geographic coverage is perceived as good in all countries. On this account, Estonians are the most satisfied, closely followed by Lithuania. Latvians are the least satisfied.

Perhaps surprisingly, the regions observed in Poland and Russia reveal a relatively positive evaluation of firm’s satisfaction with telecommuni-cation prices and quality of services. The main differences in perception are observed in Lithuania.

TABlE 4.11. Costs and Reliability

country ratios: appreciation of policy and regulatory factors estonia latvia lithuania poland russia Average

Telecommunication costs 12.60 3.85 1.88 2.65 4.54 3.69

Network reliability 10.33 5.09 49.00 3.05 3.22 4.16

Network flexibility and range of services 12.60 5.60 47.00 4.50 7.58 6.90

Geographic coverage of the network 65.00 4.50 44.00 8.81 10.71 10.34


Here perceptions suggest that there is a tension between low telecommunication costs and a high quality of service, whereby a good quality of service is obtained only at the expense of high prices.

e-securityFifty-seven percent of all enterprises indicated that the available level of transaction security encouraged ICT usage, 14 percent stated the opposite and almost 30 percent responded that it either did not apply or they did not know. (See Table 86) On the impact of authentication and certification systems on ICT usage, enterprises were less outspoken and certain. Although a large number of firms thought the existing system did encourage ICT usage (44 percent), an almost similar percentage indicated “don’t know” or “not applicable (43 percent).” A remaining 13 percent stated that existing authentica-tion and certification actually discouraged ICT usage. (See Table 87).

Available levels of network security were most positively evaluated in Estonia, followed by Lithuania and Latvia. Poland and Russia display the greatest levels of dissatisfaction.

Existing authentication and certification systems are most positively evaluated in Estonia and Lithuania

and Latvia. Poland and notably Russia receive a less positive evaluation on this account.

Findings on security are consistent with the findings regarding quality of service. These findings should, however, not only be interpreted in technical terms but also in terms of the regulatory incentives given to and obligations imposed on service providers by regulation. In this respect, it is revealing that the ranking of countries in this category remains about unchanged in the next sections dealing with the regulatory environment.

commercial law and intellectual property rightsForty-one percent of the firms claimed that com-mercial law was sufficient to encourage the use of ICT, and 42 percent claimed that protection of intellectual property rights was sufficient to encour-age ICT use. Compared to other factors, 23 percent of firms indicated that commercial law was not sufficient and 20 percent said the protection of intel-lectual property rights was not sufficient. Thirty-four percent of all enterprises indicated a “don’t know” and 40 percent said “not applicable” (see Table 88 and Table 89).

Prevailing commercial law is most appreciated in Estonia and Lithuania. Polish firms are very

TABlE 4.12. Security


Available level of transaction security 32.0 3.83 19.5 2.89 3.00 4.14

Existing authentication and certification systems 9.5 4.00 14.5 3.00 2.39 3.47

TABlE 4.13. Commercial Law and Intellectual Property


Commercial law in place 20.33 3.33 5.50 1.42 –1.10 1.85

Protection of intellectual property 3.71 2.77 8.25 2.65 1.07 2.02


moderately positive. Russia is the only country in which negative scores exceed the positive ones.Protection of intellectual property is evaluated mildly positively overall. It is most positively evaluated in Lithuania, then Estonia and Latvia; Poland and Russia close the ranks.

The regulatory regimes of the Baltic States are consistently perceived by our respondents as being the most favorable to electronic trade. The regula-tory measures of the Polish government are more often evaluated as being insufficient, but it may be hoped that the continuous efforts of the European Commission to harmonize regulations will have a positive effect. Particularly with regard to commer-cial law, the Russian situation is a cause for concern.

tax policy and Financial incentives On average, neither tax measures nor (direct) financial support for R&D were perceived sufficient to encourage firms to engage in the use of ICT. Forty-two percent of all enterprises even indicated that existing tax measures discouraged them to engage in ICT usage. For only 10 percent of all firms, public financial support was perceived sufficient to encourage ICT usage. (See Table 90 and Table 91).

The Russian and Polish firms are the most dissatis-fied with taxation policy. A significant majority of firms support the statement that taxation discour-aged the adoption of ICTs. By contrast, a majority of Estonian firms evaluate taxation policy positively, followed by the Lithuanian and, at some distance, the Latvian enterprises.

A vast majority of the Russian firms, closely followed by Polish firms, state that public financial support was insufficient to support R&D, diffusion and uptake of ICTs. A smaller but still significant proportion of firms in Latvia and Lithuania also

state that they are dissatisfied with taxation and financial incentives. Only in Estonia a majority of firms judged that public financial support for R&D, diffusion and uptake was sufficient.

These findings are consistent with other levels of satisfaction with government intervention in, amongst other things, ICT regulation. In that sense, they are revealing of the governments’ attitudes towards ICT. However, another correlation can be established, namely with GDP per capita and available public funds to support industrial policies, thus revealing (inherited) material boundaries to proactive ICT policies. Accordingly, for the new EU member states in the survey, streamlining some of the EU structural funds towards innovation and stimulation of ICT will be highly appropriate in light of previous relevant experience of the EU-15.

Use of international loans can also be an option although many of those are seen as too expensive in light of the financial capabilities of the countries at this stage.

educationAbout 44 percent of the firms indicated that the current education system delivered adequately trained personnel to engage in ICT usage and 28 percent stated that the system delivered inadequately trained personnel. Compared to existing staff skills and training of firm personnel, which for 69 percent of all firms appeared sufficient to support the uptake of ICTs, newcomers to the labor market still have a learning trajectory to go through. (See Table 92)

In all countries, except Poland, the education system is positively evaluated as adequately preparing for ICT usage by a significant but moderate majority of firms. In Poland, the number of firms stating that the education system inadequately prepares for ICT

TABlE 4.14. Tax and Financial Incentives


Taxation measures 14.33 1.57 2.86 –5.81 –5.0 –2.02

Public financial support for R&D. diffusion or uptake 2.25 -–4.56 –1.71 –4.94 –7.5 –3.85


usage is almost as important as the group that agrees with the statement that it is adequate.

Figures on education deviate from the traditional pattern with regard to the government’s role in promoting ICT. For obvious reasons, ICT policies are not the only factor affecting this score, which is dependent on overall levels of pedagogical quality as well. Most of all the speed of response of the educational system in the surveyed countries is still insufficient to accommodate the dynamism and the requirements of the businesses. This stems, in part, from the weak relationship between the business and education and R&D communities. It is the obliga-tion of the government to create an environment that stimulates this relationship and hence makes the educational system more adaptive and flexible to the requirements of the businesses.

e-government ServicesFor 38 percent of all enterprises, government provision of online electronic services made it more attractive to engage in ICT usage. Yet even more firms did not know or stated that government online e-services did not apply (altogether 49 percent). Curiously, almost 13 percent of the firms stated that government online electronic services made it less attractive to engage in ICT usage. (See Table 93)

In all new EU member states and particularly in Estonia and Lithuania, a significant majority of

the firms agree that the online provision of services by government made ICT usage more attractive. The opinions of the Russian firms are more divided.

National differences in the appreciation of e-government services as a stimulating factor for the uptake of ICT in the economy correlate relatively well with other governmental efforts to stimulate ICT. However, overall levels of appreciation are significantly lower than for other factors, indicating that the provision of online services is a relatively weak stimulus for the uptake of ICT services in the business community.

Awareness, training and Demonstration programsPrivate programs to raise awareness of (the useful-ness of ) ICT in firms and private demonstration programs did on average contribute more to improve ICT usage than public programs. Almost 21 percent of all firms indicated that private awareness raising and demonstration programs were not sufficient. In other words, they could be improved upon.

This figure was almost 23 percent for public programs. 45 percent, respectively 41percent indicated a “don’t know” or “not applicable” (See Table 94 and Table 95.)

TABlE 4.15. Education System


Education system 2.19 1.33 2.2 1.03 1.89 1.55

TABlE 4.16. E-government


Government provision of online 17.5 3 9.33 3.29 1.28 3.03 electronic services


Opinions about public awareness and demonstra-tion programs vary among countries, from very posi-tive in Estonia to very negative in Russia.

Scores for private awareness and demonstration programs are not significantly better in the top three countries (the Baltic countries). In Poland, the evaluation is slightly more positive for private programs than for public programs. In Russia, scores are markedly better for private than for public programs. However, in its own right the score for private programs is not good either. Indeed, the number of firms that state that private programs are sufficient is approximately equal to those that said they are insufficient.

Government training programs score negatively in all countries, with a majority of firms agreeing with the statement that they were insufficient to support the uptake of ICT. The Estonian and Russian firms are the least negatives of all. The number of Russian firms that reply “non-applicable” is markedly lower than for Estonia, possibly indicating that participa-tion in government training activities is much higher in Russia.

Private training programs are perceived far more adequate in supporting the firm’s capacity in ICT usage. The contrast with government ICT training programs is particularly striking (respectively 15 percent and 43 percent). Similarly, government training programs are generally rated insufficient in supporting the enterprise, against 19 percent for private training programs. (See Table 96 and Table 97)

Private training programs are positively evaluated on average, from very positive in Estonia to moderately

positive in Russia with Lithuania, Latvia and Poland in decreasing order on the middle positions.

Overall, the role of government is more appreciated with respect to awareness and demonstration programs than for training programs. Differences between countries are following the general patterns: both government and private programs score better in countries that have higher average scores.

In analysing and explaining these findings, it is necessary to link them to the wider policy environ-ment for ICT and innovation. Accordingly, in the section below, we provide a more detailed analysis of the relevant policy environments in the countries included in the study.

4.4.3 Policy EnvironmentsThe enabling environment for ICT should be looked upon more broadly: the overall economic and business environment and the government policy towards innovation and development of the knowledge economy are contributing factors. A case in point is Estonia where, alongside with the efforts for economic transformation in the early 1990s, there has been a clear focus on innovation and high-tech industries. In 1998, the Estonian parliament approved the Principles of Information Policy that provided the basis for the Information Policy Action Plan for establishing an information society. Estonia has carried out among others ID, public key infrastructure, state register reform and document management programs. Estonia has been using digital citizen ID cards to communi-cate with government agencies, for online bank-ing, and for digital signatures since the beginning of 2002.

TABlE 4.17. Awareness, Training and Demonstration


Public awareness raising & demonstration 14.00 1.65 2.50 1.61 –1.59 1.36 programs

Private awareness raising & demonstration 9.00 1.60 4.67 2.24 –1.02 1.79 programs

Government training programs –1.63 –2.69 –3.57 –4.15 –2.02 –2.66

Private training programs 14.33 2.41 3.57 1.94 1.54 2.23


The Lithuanian e-government strategy was laid down in the Position Paper on E-Government adopted on Dec. 31, 2002. On Dec.14, 2004, the Lithuanian Parliament endorsed the Program of the Government of the Republic of Lithuania for 2004–2008. One of its key aims is to “encourage the devel-opment of the IT and telecommunications sectors and to put the Lisbon strategy and e-action plan into practice.” It also intends “to arrange for e-government services to be provided for both private individuals and legal entities and to link state registers and information systems into a secure public institution network”.18 An E-Gate for the government providing a one-stop shop to public information was launched in 2004.19

Latvia is lagging behind not only the EU-average, but its neighboring Baltic countries in a number of key indicators such as access to broadband, e-commerce and e-business development, low relative rates of Internet usage at home and even in work-places. “Observers point to problems related to higher relative prices, low connectivity outside urban areas, as well as need for training related to new Internet and information technologies. ICT related innovation is largely confined to software applica-tions and systems, with ICT manufacturing confined to assembly”.20

Although Russia contributes with about 12 percent to the world R&D potential, it appears still quite

difficult to commercialize this potential. The Russian part in the world knowledge-based production is about 0.3 percent compared to about 36 percent of the United States and 30 percent of Japan. The government of Russia has taken innovation and technological development seriously on its policy agenda. Since 2002 a number of policy papers, laws and regulations have passed the Parliament and President Putin has personally initiated some of them. The objectives in the field of ICT are to achieve ICT contribution to the GDP of 10 percent by 2008 and 5 percent contribution to Russian exports (against about 0.3 percent at present).

Russian companies in the present study identify the following areas where improvements can be made: public awareness and government support (espe-cially financial support) to ICT, and government regulations in the field of intellectual property and taxation. At the same time, it seems that private initiatives in the field of awareness raising and training are not filling the gap. It is important to mention that Russia, unlike the other four countries in the study, is relatively far ahead with venture capital development, especially for high-tech, innovative companies. This fact is not reflected in the results of the study for Russia. It can be due to


Catching up – Latvia

latvia’s national e-government strategy was set out in the document “latvia’s e-Government Conception” adopted by the Cabinet of Ministers on 20 August 2002. In February 2005, the draft Information Society programme “e-latvia 2005–2008” was presented. The aim of the programme is to ensure the dynamic development and competitiveness of the country in the knowledge-based economy. Priority areas include e-government, e-learning, e-business and welfare, e-health, broadband and ac-cess to services, and security. The 2004–2006 Structural Funds are currently supporting a program aimed at the development and improvement of e-government infrastructure at both state and municipal levels, which also aims at providing the basis for e-government systems in rural areas.21


Government care for enabling environment – Estonia

The favorable policy and regulatory environment in the Baltic countries, and notably Estonia, is in part the result of concerted ef-forts by the national governments to create business environments more conducive to innovation and technological development and diffusion. Notably, the Estonian Research and Development Strategy 2002–2006 represents a deliberate attempt to transform the Estonian economy from relying on cheap labor as a source of competitiveness towards an innovation-based economy with high-quality human capital and innovation systems that support R&D, and the application of new knowledge in the interest of cultural, social, and economic development. This has included the facilitation of cooperation between traditional industry and new-economy sectors. The strategy builds on extensive R&D and education reforms during the 1990s, which set in motion institu-tional reform, the creation of a financing system, and the drafting of corresponding legislation to support the system. In addition, the activities of research institutions have been reorganized and a range of support structures for innovation created.

european commission (2005) “e-Government in the Member States of the european union”. Available at: http://europa.eu.int/idabc/en/docu-ment/4370/254.

policy brief: lithuania ict performance, europa.eu.int/comm/regional_policy/ sources/docconf/gothenburg/doc/briefl_lithuania.pdf

idem.policy brief: latvia ict performance, europa.eu.int/information_society/

activities/ gothenburg_conference/doc/pdf/brief_latvia.pdf

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the set up of the questionnaire where private funding is not explicitly mentioned.

Polish companies miss almost the same stimulating factors as the Russian companies do—namely tax incentives, public financing/incentives, pubic awareness raising and training organized by public institutions. Polish companies also find the educa-tional system inadequate for the fast development of their businesses. At the same time, the Polish government has been concerned with the promotion of ICT and innovation in general. Promoting information technology is described as an essential task under the government program Improving Innovation of the Economy in Poland by 2006.23 The program was adopted by the Council of Ministers on July 11, 2001.

Among the government information technology plans it is important to note the Plan of IT Implementation in Administration drawn up by the Minister of Interior and Administration that is divided into five structural areas: telecommunica-tions, information technology, law, organization and safety. It should also be mentioned that Poland has prepared an Innovation Act submitted to the

Parliament in 2005. This Act offers a number of tax and other financial incentives that would stimulate a faster commercialisation of the R&D and innova-tion in companies.

An e-government action plan for 2005–2006 was adopted in October 2004 that is an outcome of the broader e-Poland strategy for 2004–2006. Targets include broad Internet access for all of the public administration, providing local governments with access infrastructure during 2004–2006 and supporting local initiatives for broadband access through exchange of best practice. A key current project is the “Gateway to Poland” (Wrota Polski), a central e-government portal in Poland. It will be an integrated platform supporting a number of interactive services, with user identification/ authentication, electronic case handling and e-payments when needed. Pilot implementations are


Barriers to innovative companies in Russia (the case of North-West Region)22

Results of a number of studies within the project show that there are three main barriers for innovative SMEs:

Weak and ineffective innovation infrastructure.Insufficient skilled experts for innovation activities.lack of or difficult access to financial resources for innovation.

The innovation infrastructure includes relevant training opportuni-ties, information sources, advisory services in marketing, finances, commercialization of science, tendering, etc. The links between innovative SMEs and R&D units or other companies are seen as insufficient and hamper the transfer of knowledge and information along the entire innovation process.

Although there is a choice of R&D and highly qualified local experts, there are additional qualities needed from the staff mem-bers of innovative SMEs. These are: high professional culture and moral, entrepreneurship, commercial feeling. These qualities will need to be developed through relevant training courses.

Innovative SMEs do not have enough financial resources and have only limited access to other financial resources: credits are expensive; short-term credits prevail; venture capital is in its early stage of development; and state financing is bureaucratic.

1.2.3.

Djarova. J, executive Summary in: White paper How to develop SME innovation business in Russia, Recommendations to Federal and Regional authorities, St. petersburg, 2004; withih the project “Promotion of Innovative SMEs in the Baltic Region of the Russian Federation” (financed by the ec)

polish council of Ministers 2002 “improving innovation of the economy in poland by 2006”

Djarova, J. conference presentation within the frame of the project ‘Strengthening government policy and institutional cohesion to enhance inno-vativeness of Polish economy before accessing the European Union’ (financed by the Dutch Ministry of economic Affairs), 17 February 2005, Warsaw

pArp (polish Agency for enterprise Development) plays an increasing role in stimulating innovation at the level of SMes in the country.

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Key findings from case studies of innovative com-panies in Poland24

There is high potential for spin-offs from Academy of Sciences, other R&D institutes and universities. Entrepreneurship is the main driving force to commercialize an innovative idea. Start up financed by the founders; in some cases public research institutions play the role of incubators. Public funds for R&D in industry – limited; too long-term; evalu-ated on their R&D merits only; often bureaucratic procedures; more applicable to public R&D units. Financing in development phase – a problem: expensive credits of commercial banks; no venture capital for high risk activities (such as R&D); PARP25 is the only source to support a limited scope of activities. Need of intermediaries for: searching for foreign partners and international markets; export opportunities; participation in EU programs. Cooperation with R&D public units and universities – a must: there is a lag in practical orientation and commercial attitude (e.g. experience with contract research for industry).

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underway in two regions (‘Podlasie Gateway’ and ‘Malopolska Gateway’).26

4.4.4 Conclusions on Enablers and Obstacles of ICT UsageThe observation of considerable outsourcing and insourcing of activities, as well as the absence of lock-in effects, are all indicators of an economy in motion and in which value chains are being re-engineered. ICT plays a role as facilitator of this dynamism but, as explained in the previous sections, the usage of ICT as a tool for streamlining commercial relations still holds a lot of unused potential.

Considering that our sample is constituted of proactive ICT users, it is not surprising that in-house know-how, skills and management attitude are generally favourably looked upon. However, the quality of public education and of public training is evaluated more negatively when it comes to preparing the workforce for ICT.

In interpreting these findings, it should also be taken into account that even though they have been positively evaluated on average, many of these factors have also been obstacles for firms to engage in or to intensify ICT usage. Surmountable obstacles for proactive players may be insurmountable for the lesser players. Our findings therefore indicate an order of priority (established by experienced users) but do not allow conclusions about levels of satisfaction in general.

With regard to policy, along with education and training, taxation and fiscal policy was most negatively looked upon. The provision of online government services may be considered an area to improve upon. Commercial law, intellectual property and security policy are generally evaluated relatively positively. Telecommunication prices and quality of service are well appreciated.

poland brief: poland ict performance, europa.eu.int/information_soci-ety/activities/ gothenburg_conference/doc/pdf/brief_poland.pdf26�

ANNExES

Annexes 61

Annex 1

EBS Methodology

Bureau in collaboration with TNO and the OECD, involving a sample of 220 enterprises in four different sectors of the Belgian economy (for a summary see Verhoest et al 200328).

5.1 General Descr�pt�onThe EBS methodology was first applied in a mainly qualitative form by the OECD in 2001 and formed the basis for the Electronic Commerce Business Impacts Project (EBIP). This study included 217 case studies covering 20 industry sectors spread out among 11 participating countries (Canada, France, Italy, Korea, Mexico, the Netherlands, Norway, Spain, Sweden, and the UK). A summary of the research findings has been published by the IPTS27 . A fully quantitative iteration of the EBS methodol-ogy was then applied by the Belgian Central Plan

BOx 5.1. Summary of the EBS Methodology and its Application to the Study

To determine how ICT take-up and usage relate to competitiveness and economic performance, six sub-questions are addressed in the different modules of the survey:

Module A: What are the characteristics of the enterprise? Module B: Which ICT applications are available in the enterprise?Module C: How are these applications being used in distinct business processes?Module D: To what effect are these ICT applications being used?Module E: How does the usage of these applications relate to the enterprise’s business environment?Module F: How does the usage of ICT applications relate to the enterprise’s political and regulatory environment?

Module A serves to identify a number of basic characteristics of the enterprise and its position in the market. These “calibration data” are important to assess the enterprise’s capacity to adopt and use ICT business applications and/or its capacity to influence the ICT usage of other enterprises in their market.

Module B, about which technologies are available in the enterprise, is similar to that of most ICT diffusion studies. This part of the survey questionnaire will be largely based on existing procedures used by the European Commission and/or the OECD to allow international comparison.

Module C examines the effects of ICT usage as well as other factors on productivity, competitiveness and innovation. In addition, it is investigated how ICT usage and other factors relate to each other in increasing or decreasing the firm’s performance. In this context, an indication of the additionality of ICT is provided.

Module D on effects assesses the contribution of ICTs to the enterprise’s performance. The aim of this question is to establish the causal rela-tion between the usage of certain technologies in certain business processes to their effects, including negative effects. Unlike most surveys, the EBS methodology produces these estimations in a quantified and comparative way.

Module E on the relation between the enterprise and its environment aims at identifying so-called strategic issues, which are not easily quantified. Questions relate to the relation between the enterprise and its business environment, in particular the value chain(s) in which the enterprise is active.

Finally, module F relates to the policy and regulatory environment in which firms operate. A specific approach, tested in the EBIS survey is used to weigh the relative importance of incentives and obstacles to the usage of ICT applications.

Verhoest, p., Hawkins, r., Desruelle, p. et al. (2003) Electronic Business Networks: An assessment of the dynamics of business-to-business electronic business in eleven OECD countries: A Summary Report of the e-Business Impacts Project (EBIS). Seville: iptS. (also available on-line: http://www.jrc.es/home/publications/publications.html)

Verhoest, p., Huveneers, ch & Hawkins, r. (2004) e-business and enter-prise’s performances. paper for the echallenges e-2004 conference sponsored by the european commission, Vienna 27–29 october 2004 (http://www.echallenges.org/2004/). preliminary findings presented at the oecD’s Work-ing party on the information economy, paris 5–6 May 2003. Main findings discussed at an oecD Workshop on 3 December 2003.

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Annex 1: EBS Methodology 63


The big advantage of the EBS methodology is that it explores productivity and performance impacts of technical change—ICT for this case—from the general perspective of how businesses and industries evolve relative to their specific product and/or service groups and markets. EBS therefore does not impose any a priori assumptions about how any particular technology investment and any particular productivity or performance outcome are linked. Instead, the survey question routine is set up such that firms enumerate the impacts of ICT within the business dynamics and within their own firm-supplier-customer context. We believe that this approach is especially appropriate for transition economies, as it can both fill the existing data gaps and highlight its evolutionary development path at the same time.

5.2 How to Deal w�th the “Add�t�onal�ty” Problem? A principal problem with all ICT impact measure-ment is how to separate the effects of ICT from all of the other factors and forces that affect productiv-ity—in other words, to show the additionality of ICT as a specific outcome. In qualitative analysis this can be determined to an extent through examples. But in quantitative analysis, these determinations are difficult, often requiring long data time series that typically are unavailable. In its quantitative form, therefore, a specific protocol is used during the data gathering process to check for additionality (i.e. to establish the correlation between how technology has been applied and its effects). Respondents are asked to:

identify normally expected performance parameters for specific business segments or product areas (e.g. expected growth rates, cost reductions, etc.); benchmark themselves against these parameters during the period in which ICT applications were made; and estimate the degree to which positive or negative outcomes could be attributed to ICT invest-ments.

In other words, rather than benchmarking with a control group of firms with no or low-level ICT, additionality effects are determined on the firm level

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by comparison over time; before and after the ICT take-up. This method is more efficient and more effective than using control groups, both in terms of resources used and results obtained.

5.3 Ta�lor�ng the EBS

5.3.1 Adaptations to Previous Iteration of the EBSFor this study, we have adapted the basic EBS logic and question structure of the EBS research instru-ment to the term of reference provided by the World Bank. In particular, we have specified new indicators that are specific to labour productivity and competi-tiveness. We have also adapted EBS questions on the effects of innovation in business processes such that the responses will fit into the new scheme.

Modules A and B are based on work in progress at the OECD. An arrangement has been made by TNO with the OECD Working Party on Information Economy Indicators to use OECD survey instrument questions on technology usage. These have been used for survey calibration pur-poses, and to provide a baseline to compare results of our survey with OECD data as possible and appropriate. The following changes have, inter alia, been added to the questionnaire: Limitations to the initial length of the questionnaire which was considered far too long, accomplished by reducing the OECD part of the questionnaire, in particular (i) the questions on security, and (ii) the questions on effects on performance, since we evaluate these effects in our own module D.

Module D is based on categories and indicators used in the previous TNO study in Belgium. Module C was designed by TNO especially for this study. It has not been tested but it is based on vested techniques and categories and indicators that derive directly from observations in our previous studies. Modules F and G are based on categories and techniques previously used by TNO in its OECD studies. The World Bank added section G.

5.3.2 Sampling ProceduresIt is important to note that the firms in our sample are not representative of the sector as a whole. Instead firms were selected that can be labelled as being proactive users. They have been using ICT

Annex 1: EBS Methodology 65

comparatively (to other firms in the same sector) intensely, successfully and for a period of time of minimally three years. In other words, our study is

looking at forerunners and therefore is representative of trends that are likely to affect the industry or sector in the foreseeable future.

TABlE 5.1. Conceptual Background to Survey Questions

productivity

Determined in terms of replacing labor with capi-tal and/or increasing the output per worker.

competitiveness

Determined in terms of price, quality, sales volumes, market shares, or access to domestic and global markets.

innovation

Determined in terms of ability to establish new or improved products, processes and relational/organizational structures in the market. Distinguish between ‘innovation’, which is developed within the enterprise, and ‘improvement’ which often involves just the importation of existing systems and processes.

rationales

How was IT investment linked conceptually to productivity, competitive-ness and innovation?

How did IT investment impact (re)organization? Did the firms adjust their operations to utilize the IT? Or was it reorganiza-tion that promoted the IT investment?

Which internal and exter-nal factors influenced the decision to invest in IT?

What were the expecta-tions?

enablers

Which factors facilitated the implementation of IT?(e.g. price of technology, availability of solutions, government assistance (subsidies), policy and regulatory impediments, inward investment

inhibitors

What barriers were encountered that delayed or prevented implementa-tion or exploitation of IT at the desired levels?

(e.g. high technology and software prices, lack of in-house implementa-tion knowledge, lack of government assistance, lack of inward investment etc.)

Output per workerlabor costsHigher overall productionTotal revenues and business costs

Price levelsSales volumesMarket shareCapital expenditureNumber of ‘new’ customersMarket access / expansion (do the firms serve customers in new regions /countries, etc.?)

New or improved productsNew or improved processesNew or improved business models

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implementation factors impact indicators

Annex 2

Country Characteristics

taking an increasing role and a more export-oriented focus. Estonia has been able to respond and adapt to the process of globalization, and is one of the front-runners of the 10 new EU member states in terms of e-connectivity with an overall Internet penetration rate of almost 50 percent. These trends also manifest themselves in the prices of connectivity.

6.1 Eston�aEstonia has undergone significant socio-economic changes and experienced an average annual eco-nomic growth rate of 5.7 percent during the period 1994–2004. During this period, the structure of the Estonian economy significantly shifted, with services

TABlE 6.1. Overview of all Prices in Estonia

Analog modem

ISDN

Other narrowband

ADSl < 2Mbps

SDSl < 2Mbps

ADSl >= 2Mbps

SDSl >= 2Mbps

Cable modem with contractual download speed < 2Mbps

Cable modem with contractual download speed >= 2Mbps

E-mail

Website

Mobile phones

Fixed telephony

All prices quoted in USD

estonia

exchange rate used: 1 eeK = uS Dollar 0,07911

unit

minute

minute

minute

month

month

month

month

month

month

month

month

subscription per month

minute


minute

estonia Source

Elion

Elion

EMT

Elion

Elion

Elion

Elion

Starman

Microlink

Elion

Zone

EMT

EMT

Elion

Elion

remarks

5 email addresses

0.01

0.01

0.20

42.48

93.35

92.56

186.70

7.91

79.11

3.88

7.83

4.67

0.14

9.49

0.02

Annex 2: Country Characteristics 67


Moreover, ICT has been given high priority by the Estonian government, with a score of 5.3 out of 7 on the latest World Bank benchmark. In addition, Estonia has a relatively sound R&D basis, with a comparatively high proportion of scientists and engineers working in R&D.

6.2 Latv�aLatvia faced an average annual economic growth rate of 5.9 percent in the period 1994–2004. The rapid rate of economic progress has been associated with a significant structural change, with services taking on an increasingly dominant role in the economy as in Estonia. ICT is the fastest-growing sector in the country and is among the three top national economic priorities, alongside timber and light industry. Hardware and services have traditionally been stronger, but the total number of software development companies, some ISO-certified, has grown to more than 100 and

employing over 4,000 people in the period 2001–2002.

Latvia was one of the most advanced regions in the former Soviet Union in terms of telecommunica-tions development. Today the country ranks 39 out of 75 of overall Readiness for the Networked World, which is significantly below Estonia, but above neighboring Lithuania. Internet penetration reached a little more than 35 percent in 2005. The relatively weaker ICT infrastructure is also evident in the prices of connectivity.

The relatively weak ICT infrastructure is in part the outcome of frequent changes in the government, and less priority given to ICT than in neighbouring Estonia.

Moreover, the basis for innovation is rather weak in Latvia compared to its Baltic neighbours, with a limited number of scientists and engineers working in research and development.

TABlE 6.2. Overview of all Prices in Latvia

Analog modem

ISDN

Other narrowband

DSl (ADlS,SDSl, VDSl etc) < 2Mbps

DSl (ADlS,SDSl, VDSl etc) >= 2Mbps

E-mail

Website

Mobile phones

Fixed telephony


latvia

exchange rate used: 1 lat = uS Dollar 1,7826

unit

minute

month

minute

month

month

month

month


minute


minute

price Source of information

latellekom

latellekom

lMT GSM

latellekom

latellekom

Apollo

Apollo

lMT GSM

lMT GSM

lMT GSM

lMT GSM

0.02

26.56

0.18

70.95

229.95

7.13

14.26

8.52

0.05

6.31

0.32

Annex 2: Country Characteristics 6�

6.3 L�thuan�aLithuania, like the other Baltic countries, has experienced significant economic growth in the last decade, with an average annual economic growth rate of 5.1percent in the years 1994–2004. Again, this economic progress has been accompanied by structural change in the economy, with services taking on a more dominant role. However, the structural change in Lithuania is less pronounced than in the other Baltic countries. This may partly be the result of Lithuania’s role as a leading manu-facturer of electronics in the former Soviet Union.

Although the technological heritage provides the country with a favorable infrastructure for ICT development, notably hardware, the research of Readiness for the Networked World conducted in 2001–2002, ranked Lithuania 42nd of 75 countries. Moreover, the study ranked Lithuania 58th in the e-commerce micro-index, while the country’s ranking on ICT policy was 67. Such rankings are reflected in indicators of the ICT infrastructure, with—for example—an Internet penetration of approximately 28 percent in 2005. Accordingly, Lithuania has had greater difficulties than both Estonia and Latvia in

establishing a strong ICT infrastructure. Below, the prices for connectivity are presented.

Notwithstanding these difficulties, the basis for innovation in the country is fairly good, with a comparatively large number of scientists and engineers working in research and development.

6.4 PolandAlthough Poland was one of the better performing transition economies in the 1990s, recent years have proven more difficult with lower growth and high levels of unemployment. In the years 1994–2004, Poland thus had an average annual economic growth rate of 4.1 percent. The structural change accompa-nying the transition process has been characterized by a growing services sector. In addition, the economy has become more open, with significant increases in trade as indicated by an average annual growth in exports of 10.8 percent from 1994–2004.

With regard to the ICT infrastructure of Poland, there has been a significant increase in ICT expendi-ture from $71per capita in 1995 to $271.1 per

TABlE 6.3. Overview of all Prices in Lithuania

Analog modem

ISDN

Other narrowband



Mobile phones

Fixed telephony

All prices in USD

lithuania

exchange rate used: 1 ltl = uS Dollar 0,35858

unit

minute

month

Kb

month

month


minute

minute

price remarks

For 40 hours of con-nectivity

70 USD installation costs


Source

AB lietuvos Telekomas


Omnitel



Omnitel

Omnitel


0.01

7.17

0.0032

13.63

41.95

0.72

0.10

0.14


capita in 2001. However, the overall ICT infrastruc-ture in Poland is relatively poor, as evidenced by an Internet penetration of only 28 percent in 2005. The relatively poor ICT infrastructure is in part related to the low government prioritization of ICT in Poland, with the World Bank estimating a score of only 3.6 on a scale of 7 in 2002. The prices for connectivity in Poland are presented below.

In addition, the country has a comparatively low number of scientists and engineers working in research and development, suggesting that the overall foundation for developing, applying and utilising ICT for innovation and economic growth is weaker in Poland than in some of the other countries that are analysed in this study.

6.5 Russ�aAmong the countries included in this study, the Russian economy has experienced the most difficult transition process in the last decade. These difficul-ties are reflected in the comparatively low average annual economic growth rate from 1994–2004 of

3.2 percent. As with other transition economies, the decade of change has also seen significant structural changes, with services becoming more dominant. However, it should be noted, that the manufactur-ing sector was, and remains, more significant in Russia than in the other countries included in this study.

A relatively slow pace of ICT development is reflected in the comparatively weak ICT infrastruc-ture in Russia. Hence, Internet penetration reached only a little more than 15 percent in 2005. As for the ICT sector, it contributes to approximately 1 percent of GDP, and according to some assess-ments, the development of ICT in Russia is lagging behind that of the leading Western countries with some 5–10 years. The prices for connectivity in Russia are presented in the table below.

The number of people employed in scientific jobs was significantly reduced in the period 1990–2001, with an associated significant reduction in spending on science. In addition, the foundation for innova-tion in Russia is further limited by the poor commercial application of scientific knowledge, with less than 5 percent of scientific discoveries being

TABlE 6.4. Overview of all Prices in Poland

Analog modem





Mobile phones GPRS (WAP – Wireless Ap-plication Protocol)


polandunit

minute

month

month

month

month

10 kb of data

price Source

Telekomunikacja Polska S.A

Telekomunikacja Polska

Telekomunikacja Polska

UPC Telewizja Kablowa

UPC Telewizja Kablowa

Polska Telefonia Cyfrowa operating Era GSM network

0.013

25

92.25

27

50

0.0738

Note: GPRS General Packet Radio Service. GPRS is a mobile data service available to users of GSM mobile phones. Often described as “2.5G”, i.e., between the second (2G) and third (3G) generations of mobile telephony.

remarks




Annex 2: Country Characteristics 71

TABlE 6.5. Overview of all Prices in Russia

Analog modem

ADSl < 2Mbps

ADS >= 2Mbps



Other broadband with contractual download speed >= 2Mbps

E-mail

Fixed telephony


russian Federation (Moscow, St. petersburg)

unit

minute

month

month

month

month

month

month

minute


price remarks

some users of broad-band connections are instead charged 0.02–0.07$/Mb

0.01

20

30

150

50

150

200

10

0.02

50

applied in commercial settings during the last 10 years. Accordingly, of the countries included in this study, Russia appears to have the weakest basis for

successfully developing, applying, and utilizing ICT for economic growth.

Annex 3

Regions

(almost 17,000 students); Pomerania Pedagogical Academy in Słupsk (almost 10,000 students); and the Marine University in Gdynia (more than 8,000 students).

7.1.2 Mazowieckie RegionThe Mazowieckie Region is located around the capital city of Warsaw. The regional economy is dominated by food, automotive, oil, chemical (mainly pharmaceutical), publishing, energy, telecoms, banking, finance, insurance and IT. According to the latest official data of Polish Official Statistics (GUS), there were 575,598 business entities in the region. Roughly 17,090 of these enterprises had a share of foreign capital31.

The region benefits from a number of advantages, of which the most important include the following:

It is an area with a large concentration of companies and the highest level of income per capita. It is in the trans-European transport corridors; has well-developed railway network and the largest airport in the country, ensuring connec-tions with large cities in the country and in Europe. It is an area with the highest innovation levels. Outlays on R&D activities are one of the highest in the country. The region is often visited by foreign tourists, thanks to advantageous connections with other European cities, high quality of hotel, transport, telecommunication and financial services. In economic and cultural terms, the voivodship is dominated by Warsaw—capital of the country and the region, as well as city of international importance.

■

■

■

■

■

7.1 Poland

7.1.1 Pomorskie RegionThe Pomorskie Region in Poland is located in the Northern part of the country. The regional economy is dominated by shipbuilding, oil refining, electrical, transport, fishing and tourism. According to the latest official data of Polish Official Statistics (GUS), there were 226,329 business entities in the region29. Roughly 3,221 of these enterprises had a share of foreign capital30.

The region benefits from a number of advantages, of which the most important are:

a diversified economy; a developed SME sector; the tri-city metropolitan area (Gdańsk, Gdynia and Sopot) is one of Poland's main centers of economic growth, and an important transporta-tion junction; a maritime location; the presence of high-tech industries; strong agricultural potential of the Żuławy region; a young, well-educated labor force; a large and differentiated raw material resource base; export capacities of the shipbuilding industry; and an attractive region for tourism.

Notwithstanding such advantages of the regional economy, there is a high unemployment rate of more than 20 percent. Among the employed, almost 23 percent work in industry and more than 15 percent in trade and repair.

The regional innovation system benefits from several universities, of which the most important are the University of Gdańsk (more than 27,000 students); the Technical University of Gdańsk

■

■

■

■

■

■

■

■

■

■

GuS – Statistical yearbook of the regions 2004 – poland. See page 637. pomorskie region profile. See http://www.paiz.gov.pl/index/

?id=f2fc990265c712c49d51a18a32b39f0c. GuS – Statistical yearbook of the regions 2004 – poland. See page 637.

29�30�

31�

Annex 3: Regions 73


Warsaw is characterized by high levels of inward investment, a large pool of qualified labor and high rate of privatizing the state sector. The Warsaw Stock Exchange is the largest bourse in Central Europe.

Compared to the country as a whole, the region has a fairly low unemployment rate of approximately 16 percent. Among the employed, more than 30 percent are employed in either industry or trade and repair.

The regional innovation system benefits from several universities, of which the largest are Warsaw University (more than 50,000 students), Warsaw University of Technology (more than 30,000 students), Kazimierz Pułaski Technical University in Radom (almost 20,000 students), Warsaw School of Economics—number of students (more than 12,000 students), Warsaw Agricultural University (almost 18,000 students) and University of Commerce and Law in Warsaw (more than 10,000 students).

7.1.3 Slaskie RegionThe main city of the Śląskie region is Katowice. The regional economy is dominated by mining, iron, lead and zinc, metallurgy, power engineering, automotive, chemicals and textiles industries. According to the latest official data of Polish Official Statistics (GUS), there were 424,031 business entities in the region. Roughly 4,105 of these enterprises had a share of foreign capital32.

The region benefits from several advantages, the most important of which are listed below:

It is the most industrialized and urbanized region of Poland. It has a large market—almost 5 million consum-ers and many large companies. It has a comparatively good road, railway, and telecommunications infrastructure; International airport "Katowice" in Pyrzowice ensures domestic and international flight connections. It has a broad range of sectors where investment opportunities exist: industry, services, develop-ment and modernization of infrastructure, tourism, agriculture. It has a well-developed and diversified R&D base (over 30 universities, numerous R&D units, 200 000 students).

■

■

■

■

■

■

■

■

It has active cross-border cooperation, thanks to the proximity of the Czech and Slovak borders.

Despite these advantages, the regional unemploy-ment rate is more than 20 percent. Among the people employed, almost 30 percent are working in industry, and a further 16 percent are employed in trade and repair.

The regional innovation system benefits from several universities, of which the largest are the Silesian University in Katowice (more than 40,000 stu-dents), the Technical University of Częstochowa (more than 22,000 students), the Technical University of Silesia (almost 30,000 students), the Academy of Technology and Arts (more than 5,000 students), the Karol Adamiecki Academy of Economics (more than 12,000 students) and the University of Marketing Management and Foreign Languages in Katowice (more than 11,000 stu-dents).

7.2 Russ�a

7.2.1 MoscowThe regional economy around the capital city of Moscow is dominated by mechanical engineering, the food industry, the electric power industry, the fuel industry, the chemical and petrochemical industry and forestry, wood processing and pulp-and-paper.

In 2004, the fastest growing sectors were food (7.7 percent), light (15.9 percent), non-ferrous metal-lurgy (21.7 percent), mechanical engineering & metal working (21.4 percent), building materials industry (2.9 percent), forestry and wood processing (4.2 percent).

The level of registered unemployment is 0.6 percent (February 2005), while an employment study done by Moscow Statistical Committee showed that the real unemployment rate is higher, at around 1.1 percent. Among the people employed in large and medium-sized enterprises, 12 percent were em-ployed in processing industries, 12 percent in education, 11 percent were working in transport

■

GuS – Statistical yearbook of the regions 2004 – poland. See page 637. 32�

Annex 3: Regions 75

and communications, 11 percent in organisations performing research and development, 10 percent in health and social care, 8 percent in wholesale and retail trade and 6 percent in construction.

Among the large- and medium-sized enterprises, the largest increases in the number of employees between February 2004 and February 2005 were in wholesale and retail trade, financial services and construction.

7.2.2 Saint PetersburgSaint Petersburg is the largest industrial center of Northwest Federal district that accounts for 30 percent of the total amount of the industrial output of this district. The city is one of the largest diversi-fied industrial complexes of Russia. The industry of Saint Petersburg employs more than 20 percent of the population and contributes 26.3 percent of tax revenues in the budgetary system and almost 45

percent of the total sum of profits received in the economy of the city.

The basis of the industry of Saint Petersburg is dominated by mechanical engineering enterprises, producing technically complex high technology production, and enterprises from the food industry. There are about 700 large industrial enterprises and more than 12,000 thousand medium and small enterprises.

Approximately 39 percent of all industrial produc-tion in Saint Petersburg is produced by private companies, while more than 31 percent is by joint Russian and foreign companies, more than 18 percent by foreign enterprises and 5 percent by mixed Russian (without foreign capital) firms. The share of the state-owned enterprises represents slightly more than 6 percent of the total volume of industrial production.

Annex 4

Selection Criteria for Sectors

information component products; simple and/or standardized products versus complex products and/or variable product specifications.

C. ICT and Innovat�on Content and Intens�tyPast experience indicates that it is important to select firms where the level of ICT application is known already to be reasonably extensive and where the applications are diverse enough to encompass SMEs as well as large companies. The supply chain (value system) dynamic is known to be a key component of productivity effects. Firms that have been using ICT actively, for a relatively long period and success are more indicative of future trends and possibilities. The selection of sectors was made having in mind a more or less comparable distribu-tion between sectors in terms of ICT intensity and assets between the countries. Both ICT-producing and ICT-using firms have been taken into account, with an emphasis, however, on ICT-using manufac-turing and services.

A. Growth Potent�al and/or Strateg�c Importance for Econom�c Development Sectors have been selected on the basis of an assessment of their current and future importance for the national economy, taking into consideration sectors with a particularly high growth potential and/or strategic importance for general economic development in the country concerned.

Current sector performance and growth potential were taken as a point of departure for the selection of key sectors. Not only economic performance and growth per se (i.e. income and wealth creation), but also employment growth potential (including which quality segments) are important variables, viz. the phenomenon of “jobless” growth. Indeed, improved overall labor participation is a key factor to develop-ment, particularly so in transition economies.

B. Potent�al for Cross-country Compar�sons & Extrapolat�on of F�nd�ngs to other SectorsIn order to allow cross-country comparisons and extrapolation of findings to other sectors, the selection of sectors includes equivalent sectors over all five countries. The basis for comparison lies in shared product characteristics. To this end, our sampling method uses matrices comprising different dimensions such as: goods and/or low information component products versus services and/or high

TABlE 9.1. Sector/product Category Selection Matrix ict producing ict using

Manufacturing A C

Services B D

Annex 4: Selection Criteria for Sectors 77

Annex 5

Selected Sectors

A good fit with the final pre-specified list of product groups/sectors in each of the countries and regions. Balanced and representative representation of firms according to size (micro, small, medium and large enterprises) and in accordance with the structure of the sector concerned. Adequate attention for foreign direct investment and foreign-owned enterprises, but an emphasis on domestic enterprises.

■

■

■

�.1 D�str�but�on by Country/Reg�onThe table below shows the distribution of companies per country/region and sectors over the whole sample of 620 firms.

The final selection of firms and the downsizing of the long list to practical shortlists for interviewers are based on a number of criteria:

TABlE 10.1. Distribution of Companies per Country/Region and Sectors

country

Estonia(69)

total

latvia(70)

total

lithuania(57)

total

Poland

region

Tallinn and Tartu region

69

Riga region

70

Klaipeda-Vilnius corridor

57

Mazowieckie (Warsaw) (63)

Secondary sector

Food – 17Furniture (wood value chain) – 12 (incl. 9 wood products, 3 furniture)ICT equipment – 4

33

Food – 7Furniture (wood value chain) – 15 (incl. 5 wood products, 10 furniture)Chemicals – 2Heavy machinery – 1light machinery – 1ICT equipment – 0construction materials (incl. basic metals) – 632

Food – 8Furniture (wood value chain) – 0Automotive industry – 10Textiles – 9ICT equipment – 1construction materials (incl. basic metals) – 3light machinery – 3Heavy machinery – 236

Food – 5Automotive industry (manufacturing and repair) – 0/4Construction materials – 7ICT equipment – 1Heavy Machinery – 2

tertiary sector

Retail – 11Banking – 7ICT services – 12transport – 1others – 536

Retail – 7Banking – 17ICT services – 5publishing – 2construction services – 1transport – 1others – 5

38

Banking – 12Retail – 6ICT services – 0construction services – 2others – 1

21

Banking – 7Retail – 21ICT services – 15construction services – 1

(continued on next page)

Annex 5: Selected Sectors 7�


Pro-activeness of firms as measured by degree of innovativeness and (a priori assessed) successful-ness in applying ICT over the last three years.

�.2 Selected Key Sectors: some Styl�zed Facts and F�gures by Country

9.2.1 Estonia

FoodThe Estonian food sector has undergone a compre-hensive renewal process during which equipment for production processes has been modified to meet the EU requirements. The biggest production shares in the food sector are dairy and drink products. Those two types of products also represent the best export articles. With the recent EU membership of

■ Estonia, the food sector benefits from opportunities for expanding business activities across borders and increase exports to other EU countries. Indeed, with the new opportunities arising with EU membership, coupled with increasing domestic demand, the future prospects for the Estonian food sector are generally considered good. However, in order to fully exploit the opportunities associated with EU membership, the sector must address some critical weaknesses, such as the limited number of suppliers and the problem with rapidly aging and occasionally infected products that have a negative impact on sales and the reputation of the Estonian food sector.

Furniture (Wood)Wood is the number one export article and the most valuable natural asset to Estonia. Almost 25 percent of all exports are wood and wooden products—i.e. furniture. A very large investment has been made in the center of Estonia, where the biggest sawmill is

TABlE 10.1. Distribution of Companies per Country/Region and Sectors (continued)

country region Secondary sector tertiary sector

Poland

Poland

total

Russia

Russia

total rFtotal

Slaskie (Katowice) (60)

Pomorski (Gdansk) (77)

200

St Petersburg city (124)

Moscow city (100)

224620

Food – 4Automotive industry (manufacturing and repair) – 4/9ICT equipment – 0Machinery/light machinery – 6/3

Food – 17Shipbuilding – 20ICT equipment – 0Chemicals – 5Machinery/light machinery – 1/1

89

Food – 18Furniture (wood value chain) – 17 (incl. 5 wood products, 12 furniture)Paper (wood value chain) – 1Machinery / light machinery 20/1Construction materials – 13ICT equipment – 0Motor vehicles incl. shipbuilding – 2chemicals – 4

Food – 13Furniture (wood value chain) – 8 (incl. 6 wood products, 2 furniture)Paper (wood value chain) – 3Machinery / light machinery 14/1Construction materials – 19ICT equipment – 2repair motor vehicles – 3136326

Banking – 0ICT services – 9retail – 5transport – 20

Banking – 0Transport – 17ICT services – 9retail – 2construction services – 1other – 4111

Transport – 9ICT services – 15retail – 14publishing – 5construction services – 1others – 4

Transport – 1ICT services – 16retail – 16construction services – 1others – 4

98294

Annex 5: Selected Sectors 81

situated. Furthermore, furniture producers have spent a lot of time on design and testing to fulfill the needs of clients. Over the past few years, more and more Estonian-made furniture has been used all over the country (private and public office spaces, schools, universities etc.). As a result, the volume of sales and exports has increased more than other production categories. Accordingly, the future prospects of the furniture (wood) sector are gener-ally considered bright and promising. However, as with other sectors in Estonia, the furniture sector struggles with a limited number of suppliers. Moreover, the sector suffers to some extent from a reputation of producing goods of low reliability and durability.

ict equipmentICT equipment has only been of significance to the Estonian economy in the last five years. Due to Estonia’s status as a pioneer among transition countries in the field of ICT, that sector has experienced significant growth during the last five years. The sector has, in particular, gained a competitive advantage from low prices combined with good know-how in building computers, servers and other equipment compared to Western Europe. With Estonia’s membership of the EU, the opportunities for exploiting this competitive advantage have improved. However, the future growth of the sector is constrained by a lack of affordable skilled labour, with skilled workers becoming more expensive or even leaving the country.

retailFor the retail sector, success is mostly dependent on best location, rental prices, and potential clients. During the past years several new shopping areas have been constructed and more internation-ally known trademarks are represented in them. As long as the prices of consumables and other merchandise remain at a lower level compared to the northern and western neighbors—Finland and

Sweden—the growth of retail business is unlikely to slow down. Besides, the Estonian population is saving less and spending nearly all of their in-comes, which, in part, explain Estonia’s economic growth.

bankingThe banking sector is of critical importance to the Estonian economy, as a well functioning economy requires a sophisticated and functioning banking system. The Estonian banking sector has developed fast internally and externally. Services have reached high levels, with competition now increasingly based on the interest offered on loans. Externally the development is mainly about opening new branches in the Baltic States and in Russia. As for the future of the sector, the main threat to the domestic banks is the potential entry of European competitors into the Estonian market.

ict ServicesThe ICT services sector does not differ much from the ICT equipment sector, in so far as it is often the same companies that are involved in the two sectors—e.g. Microlink Computers and Fujitsu-Siemens. The last 5–10 years have seen a noticeable increase of companies that are oriented towards ICT services. Those firms are mainly micro-enterprises and do not have a substantial influence on the market. The level of ICT knowledge of Estonian companies (i.e. employees) is comparable to Western European countries. Although a key threat for the sector is the attraction of higher salaries abroad, there is no reason to predict a shortage in IT personnel during the next few years. Rather, the future prospects for the sector look good and the demand for ICT services is continuing to increase due to the technological developments and growing use of ICT.

country region primary sector Secondary sector tertiary sector

Estonia Tallinn and Tartu region Food Retail

Furniture (wood value chain) Banking

ICT equipment ICT services


9.2.2 Latvia

FoodUntil the collapse of the Russian economy in the late 1990s, this sector was the largest part of Latvia’s manufacturing total, with nearly 45 percent of total production. The food-processing sector has been hit heavily by the adverse economic situation in Russia, upon which it relied heavily for exports. However, according to the forecasts of a study (“The overview of food trade market in Latvia” by Marketing a Konsultaciju Centers SIA), the food industry in Latvia has a bright future in the long-term and there are good prospects.

The positive outlook for the sector is further indicated by the attraction of foreign investments, and till the end of the year 2001 the sector received € 70 million from foreign investors, mainly Swedish, British and Finish.

Furniture (Wood)Furniture manufacturing makes up 36 percent of Latvia’s timber industry. The value of the furniture manufactured in Latvia for 2003 in comparison with 2002 has increased by 11.3 percent, and the sector employs approximately 12,900 people in about 400 mainly small and medium-sized enter-prises. Almost 80 percent of the furniture was exported, mainly to Denmark, Germany, and United Kingdom. There are good opportunities for the development of furniture manufacturing in Latvia, but the main priorities for the realization of these opportunities are investments in human resources and technologies.

Latvia’s forest sector is explicitly focused on the external market, since it exports approximately 70 percent of the production to more than 50 different countries all over the world, but mostly to the EU.

It is of interest to note that every year the share of higher value-added products in total exports increases.

chemicalsThe chemical industry in Latvia has a long tradition, and the sector contributes 5.5 percent of industrial production and employs 6,500 people. The main areas of manufacturing of the Latvian chemical industry are fibres, pharmaceuticals, paints, var-nishes, soaps, cosmetics, rubber and plastic prod-ucts. More recently, oil and natural gas chemistry, which is supported by the stable transit of oil and gas through Latvia, are becoming areas of impor-tance to the chemicals sector.

The Latvian chemical industry has been attractive to many companies around the world, and has already invested € 41 million. In addition, the largest pharmaceutical companies in Latvia aim tot serve international distribution channels, for which they have an advantageous position in the center of Europe.

light MachineryThere has been considerable restructuring in the machinery and electrical equipment sectors in Latvia over the past decade. The region was heavily dependent on trade with Russia and foreign companies have taken the opportunity to supply machinery and equipment to the country, and to identify and use Latvian subcontractors.

Latvia has a long tradition of mechanical engineer-ing and metalworking, with many such companies having been established to use Latvia as a route to the Russian market. The output of machinery and electrical equipment in Latvia has been approxi-mately € 60 million per annum, representing some 6 percent of total manufacturing output, though


latvia Riga region Food Retail

Furniture (wood value chain) Banking

Chemicals ICT services

light machinery

ICT equipment


there was a large fall in production in 1999, due to reduced demand from Russia. This further illustrates the continued dependency of the sector on the Russian market.

ict SectorICT equipment and services is the fastest growing economic sector in Latvia with a yearly growth rate of 20–30 percent during the last decade. Exports of the sector have been rapidly increasing in recent years with an annual growth rate of approximately 15 percent. The industry’s main asset is highly qualified human resources with more than 8,000 graduated ICT specialists and an additional 6,000 in universities and colleges. The key competence area of the Latvian ICT industry includes customized IT solutions, financial applications, localization, implementation of large-scale projects, and applica-tion services. Besides the development of software, Latvian ICT companies offer integrated solutions in complex areas like project implementation, business process engineering and business strategy. The competence of Latvian ICT sector has been proven by the successful outsourcing activities of IT giants like IBM, Microsoft, Unisys, Sybase, Lotus, and Sun, as well as by the acquisition of Latvian companies by Exigen, TietoEnator and others.

These developments also reflect Latvia’s full embrace of the Information Age. Latvia has embarked on an ambitious plan to become the recognized regional leader in the information technology and telecom-munications sector. Latvia offers a wide range of opportunities for ICT businesses, with Latvian software companies having developed excellent skills in developing major systems, and is successfully providing ERP (enterprise resources planning system) implementation services to Western companies.

The unique mix of strong industrial traditions in advanced systems and software engineering, well-developed transport infrastructure and skilled IT professionals, suggests Latvia is the ideal hub for high-tech manufacturing. Latvia is thus an attractive location for outsourcing the development of E-commerce solutions, and for the development of web-design and web hosting.

bankingConstituting almost 16 percent of the FDI stock (2003) the banking (financial services) sector has experienced remarkable growth rates with tripled commercial bank assets and a six-fold increase in

loans since 1996. Experts estimate that the financial market in Latvia will maintain the same growth speed, considerably higher than average indicators on the EU, for at lest 3–8 more years (as of 2005).

The Latvian banking and insurance market is dominated by important regional players (e.g. Förenings-Sparbanken, SEB, Nord/LB, Nordea) who are present either as owners of, or important/majority shareholders in banking operations initially established locally. However there are still a number of niche opportunities within the domestic financial services market, especially in the field of corporate banking. Particular growth within the banking sector is expected in the financing of loan opera-tions, export/import deals and online banking. It is expected that the most rapidly growing insurance markets will be services related to corporate and social insurance. Growth is expected also in new and yet not thoroughly explored areas such as pension and investment funds. The most important driving force for further growth remains the constants increase of purchasing power and overall economic activity in the country. This, in combination with the stable, conservative monetary policy of the Bank of Latvia makes Latvia an attractive financial environment. Key advantages of the sector are the stable monetary policy, constantly growing purchas-ing power and demand for financial services (source: LIDA).

retailThe retail sector in Latvia has been growing steadily during the last few years with a growth rate of around 12 percent per year on average. The struc-ture of the sector has changed dramatically, as five years ago more than half of the turnover came from food-products, but now around 65 percent of the retail turnover comes from non-food products (Ministry of Economics of Latvia). Some of the retail sub-sectors like textile and clothing, building, and household goods and appliances had a growth of around 30 percent last year (Central Statistical Bureau of Latvia).

The high growth in retail trade in Latvia in the last few years is explained by the growth if people’s incomes and by the development of crediting and leasing services. Also development of retail trade networks and distribution of bigger quantities of goods through retail companies have influenced the growth of retail trade in Latvia. The changes of the


structure of the retail sector are linked with changes in consumption structure triggered by the growth of people’s incomes. However, the majority of changes in the retail trade structure were determined by difference in the dynamics of consumer prices in various groups of products. The turnover has increased most rapidly in enterprises trading clothes, footwear and textiles comprising 36 percent, and household goods up by 32 percent (www.ambriga.um.dk). Key advantages of the sector are rapid real-estate development; continuously growing purchas-ing power, demand for more qualitative better products and services and competition among big retail and wholesale chains.

9.2.3 Lithuania

Secondary Sector (Food, Furniture, Automotive industry, textiles and ict equipment)Manufacturing in Lithuania comprises some 9,000 companies (14.8 percent of total), of which 24 are larger than 1000 employees, which is remarkable for Lithuania compared to other Baltic States. Industry, which includes furniture, automotive industry and textiles, contributes 4.2 Billion Euro to the national GDP, equivalent to 23.5percent of total GDP. The productive activities, which include the food sector, ICT equipment and retail sector contribute 5.3 billion Euros, approximately 30 percent of total GDP.

The secondary sector is also becoming increasingly internationalized, with growing exports. Hence, the food industry exported a total 693 million Euros in 2004, while the exports from the automotive industry amounted to 406 million Euros in the same year, and the textile sector exported goods for a


lithuania Klaipeda-Vilnius corridor Food Banking

Furniture (wood value chain) Retail

Automotive industry ICT services

Textiles

ICT equipment

total value of 825 million Euros. Exports from the ICT equipment sector amounted to 350 million Euros in 2004.

The internationalization of the secondary sector is further reflected in increasing foreign direct investment, with the manufacturing sector receiving cumulative foreign direct investment (as of 2002) of almost 600 million Euros.

tertiary sector (banking, retail, ict Services)Banking and ICT services belong to the classifica-tion of financial intermediation and business services activities that has 8,573 companies and constitutes a share of 14 per cent of the total, and contributes 2 billion Euros to the economy, equivalent to approximately 11 percent of total GDP. The retail sector is part of wholesale and retail trade section, which has the most number of enterprises—24,804 that is equivalent to a share of 40.6 percent of the total.

As with the secondary sector, the tertiary sector is becoming more internationalized. This is primarily reflected in significant amounts of foreign direct investment, with wholesale and retail receiving total cumulative foreign direct investment (as of 2002) of more than 450 million Euros, equivalent to almost 20 percent of the total foreign direct investment to Lithuania. The equivalent figure for financial intermediation is almost 500 million Euros, while post and telecommunication received more than 350 million Euros in foreign direct investment.


9.2.4 Poland

Food SectorThe blossoming of the food sector began at the start of the 1990s when the role played by private capital increased significantly33. In the 1980s, the state controlled 80 percent of the food industry. This fell in the 1990s to 15 percent. Inflows of the foreign capital helped to accelerate development and lift the standards of companies in the sector. By the end of 2000 about $5 billion in foreign investment had been directed to the sector (by comparison, the whole Polish industry in this period accumulated about $20 billion). Investors were mainly interested in the Polish sugar production, tobacco, beer companies and meat industry. The largest foreign investors in the food sector are: Coca Cola Hellenic Bottling Company, Germany’s Reemtsma Cigarettenfabrik GmbH, the U.S.’s Philip Morris, Swiss Nestle, U.S. Pepsico and Dutch Harbin BV and Heineken.

Automotive industryPoland has become one of the most attractive markets in Europe for companies engaged in the automotive industry34 (however, competing strongly against Slovakia, Czech Republic and Hungary). Several multinational auto companies are manufac-turing or have announced firm commitments and plans to open their factories in Poland. General Motors’ Opel Division has completed construction of modern car manufacturing operation in south-western Poland, in Gliwice near Katowice, where it manufactures approximately 140,000 latest models

annually (e.g. Zafira). Fiat has been manufacturing its cars in the southwestern region of Tychy (Śląskie Region) for several years now and will continue activities here (the new Cinquecento model will be assembled only in Poland). Other car companies presently assembling cars in Poland include Volkswagen, in Poznań.

Machinery In the 1990s the highly centralized bureaucratic machinery industry was reorganized into a large number of small and medium-sized private firms. The reorganization targeted mainly but not solely at expansion of the housing construction industry. The second goal of this reorganization was to revive demand for relatively modern and sophisticated construction machines that Polish industry was able to produce. Currently this sector becomes subject of many foreign investments, e.g. Whirlpool invested in Polar in Wrocław, Merloni, Bosh and Siemens in the neighborhood of the second Polish town—Łódź, etc.

ict SectorSome Polish computer companies have developed strongly: Prokom, ComputerLand, Softbank and Comarch are among the biggest companies. All are listed on the Warsaw Stock Exchange and are also investing abroad.

The value of the Polish IT market is estimated at about $2.7 billion, excluding telecom operators. The

See http://poland.gov.pl/?document=481; See http://www.millercanfield.com/services/practice/automotive.asp;

33�34�

country region (capital) primary sector Secondary sector tertiary sector

Poland Mazowieckie (Warszawa) — Food Banking

Automotive industry Retail

Construction materials ICT services

ICT equipment

Poland Slaskie (Katowice) Petroleum refining Food Banking

Automotive industry ICT services

ICT equipment

Poland Pomorskie (Gdansk) Petroleum refining Food Banking

Shipbuilding Transport

ICT equipment ICT services


dynamic growth in the value of this market is therefore huge, the largest in the Polish economy and many times higher than the rate of the national GDP growth.

The IT branch structure has also changed, with the share of hardware production and sell falling—from 62 percent in 1997 to almost 43 percent in 2000, with sales of services and software growing, respec-tively, from 38 percent to more than 57 percent.

Internet is another factor that makes the IT sector growth even more dynamic. It is estimated that between 6 and 8 million people in Poland have access to the Internet (while in 2000 it was 1 million). Additionally, as research centre findings indicate, the number of connections to the Internet is rising very rapidly, both among private and corporate users. Results of the research show that about 60 percent of the Polish enterprises thought they could not develop without the Internet.

ShipbuildingPolish shipbuilding expanded rapidly in the 1960s and 1970s, spurred by the Soviet drive to become a maritime “superpower”35. In the 1980s the industry included six shipyards, 21 equipment factories and three research and development centres, altogether employing about 57,000 people. In that decade, Poland became the fifth largest producer of ships in the world, exporting most of its products to the Soviet Union. At the end of that decade, however, the industry suffered greatly from drastic reduction in orders from the Soviet Union and other custom-ers, the loss of government subsidies in the midst of production, and a rapid rise in domestic material costs for ships already contracted.

Poland is now still one of the largest ship makers in the world, successfully competing with the Asian shipyards. In 2000, Poland was in “fourth spot,” after South Korea, Japan and China, in the world ranking of shipbuilding, with 5.7 percent of world orders on trading vessels36.

Today, Poland has two main centers of shipbuilding: Gdynia and Szczecin. Grupa Stocznia Gdynia S.A. (to date, about 550 ships built there, a hundred different types for fleets from 20 countries) and in Gdańsk (the largest repair yard in Poland; its main clients are fleets from the Baltic region: Germany,

Norway, Denmark. Stocznia Szczecińska Nowa, over 50 years old, has built more than 600 ships. It specializes in building large chemical tankers and container ships.

bankingMost banks in Poland operate as multipurpose institutions. They are involved in various types of deposit taking and financing activities, offering a wide range of commercial and personal banking services. Many of them are also active on the capital markets through their own brokerage houses. Some of the banks are involved in invest-ment banking activities, such as underwriting issues of bonds and stocks, or advisory services. The number of banks offering i-banking services has also increased.

The banking network has been developing very fast for a few years. In 2000, the domestic office network of commercial banks (excluding head offices and representative offices) comprised over 2,400 branch offices and over 8,600 other offices (sub-branches, customer service offices, etc.). Moreover, co-operative banks operated just over 2,000 offices, including 1,148 branch offices. Investments in ATMs (Automatic Teller Machines) are progressing at an even swifter rate. By the end of 2003 their number exceeded 6,000.

To meet the challenges of growing competition, Polish banks are investing heavily in their network, as well as in automation and information technol-ogy. There are already very strong Polish virtual banks operating on the market as well as bank services available via the Internet and cellular phones using WAP technology. Some of the banks are considering their development of Internet banking in other central and eastern European countries.

The banking sector has also been dominated by foreign investors, which have acquired majority stake in almost all top Polish banks (with exception of state owned Pekao BP): UniCredito Italiano (Peako SA), Commerzbank (BRE Bank), ING (Bank Śląski), Allied Irish Bank (Bank Zachodni Wielkopolski Bank Kredytowy), etc.

See http://www.country-studies.com/poland/industry.html; See http://poland.gov.pl/?document=478;

35�36�


transportPoland’s central location in Europe means that transport, especially surface transport, plays an important role as the country is crossed by many of important transport routes connecting Western and Eastern Europe37.

In total, there are 357, 700 kilometres of roads or 114, 4 kilometres of roads per 100 square km. The network and its quality still require a lot of invest-ment in order to put its density and quality on the European standards.

An extended railway network (23,420 km in total) links all the major cities and towns. The density of that network, 7.5 km per 100 sq km, is lower than in Germany, Switzerland, and Belgium, but higher than in the United Kingdom, Italy, and France. Approximately 95 percent of railways lines are standard-gauge lines of the same track width as in Western Europe and over 50 percent of the total is electrified.

There are 3, 812 km of navigable waterways. The best opportunities for inland navigation can be found on the Odra River and its tributaries, while the largest ports in Poland are Gdańsk, Szczecin, Gdynia and Świnoujście and the main airports are situated in Warszawa, Kraków, Katowice, Poznań and Wrocław.

The Polish transport system offers services of a transit character, renders storage and transport

services and also provides tourist transport. Integration with the European Union contributes to further growth of road transit through Poland and increase of income from this source.

9.2.5 Russia

Food SectorThe food sector accounts for more than 15 percent of Russia’s output (2004), with annual growth of approximately 4 percent in 2003–2004. The sector is mainly producing for the domestic, with its contribution to total exports falling from 2.5 percent in 2002 to 1.8 percent in 2003.

Furniture and paper (Wood)The forestry, wood-processing and pulp-and-paper sectors account for a little more than 4 percent of GDP in Russia, and experienced growth of approxi-mately 3 percent in 2003–2004. The sector accounts for approximately 4 percent of Russian exports.

Machinery The mechanical engineering and metal working sector is the most important part of the Russian economy, accounting for more than 20 percent of GDP, and experiencing a growth rate of almost 12 percent in 2003–2004. The sector accounted for less than 8 percent of exports in 2003, down from 9 percent in 2002.


Russia Moscow city Food Transport

Furniture (wood value chain) ICT services

Paper (wood value chain)

Machinery

Construction materials

ICT equipment

Russia St. Petersburg city Food Transport

Furniture (wood value chain) ICT services

Paper (wood value chain)

Machinery

Construction materials

ICT equipment

See http://www.polbizbkk.com/main_sector_of_the_economy.htm;37�


construction MaterialsThe construction materials sector accounts for less than 3 percent of Russian GDP and grew by more than 5 percent in 2003–2004.

ict SectorRussian ICT developed into an independent industry in the beginning of the new century. It is one of the youngest industries in the Russian economy (the first companies emerged in 1987–1988), and key features of the sector are the dominance of private capital, absence of influence of the government and strong dependence on the foreign suppliers. As part of country’s economy, ICT is almost not consolidated. It is a fragmented mass of small companies permanently struggling with the lack of reserves necessary for their future develop-ment. The volume of the Russian information communication technologies industry equals USD 12,130 billion, where 72 percent accounts for telecommunications and only 28 percent for the IT market (equipment, software, IT services). Moreover, the average growth of the investments of Russian companies in IT is 11 percent.

According to various research data, the most profitable of the medium Russian ICT companies are those offering IT services (from 35 percent to 42 percent) and software (20 percent-34 percent). On the other hand, the profitability of the equipment and telecommunication services markets is respec-tively 12 percent and 20 percent. But, they differ from the IT and software market because they are more stable and not so risky. In general, after 10 years of development of the ICT industry there are 15,000 companies in Russia. It is noticed that 20 percent of the participants in the market are producing 80 percent of the gross product. Next to it, private capital is the leading type of capital in this industry. It stays far ahead of the state; foreign and mixed types of capital and major users of ICT services are big private companies. They account for more than 50 percent in all sub-industries (for example in telecommunications the division is 60/40 for the private enterprises).

Annex 6

Properties of the Dataset

10.2 Company S�ze ClassesThe average company size in 2004 was 215 employ-ees with a minimum of one employee and a maximum of 7,000. Median value for employment size was 48 persons. The next table provides an overview by size class and country. In total, 24 firms did not provide an answer on the employment size in 2004, of which 11 were located in Latvia and 9 in Poland. The distribution across the four SME classes is relatively balanced for the sample as a whole. Yet for individual countries some significant variances remain.

The Russian sample is more skewed towards the medium-sized and large enterprises, with virtually no micro firms. Poland is the opposite case with a firm size distribution that is skewed towards micro and medium enterprises. The Baltic States have a strong representation in the small and medium-sized SME classes.

10.1 General Propert�esThe dataset contains information on 620 firms. It has 989 variables, which are all uniquely defined and labelled so that the answers of each question and each option can be traced easily in the dataset. The information has been stored in the most disaggre-gate form possible, and in a simple and logic manner, namely each variable corresponds to a data entry field. Separate country and region variables were added on the base of the uniquely defined identification variable ID. The next table provides an overview of the observations by region and country.

From the 620 firms, 47 acquired other firms or merged with other firms in the past three years. For about 80 firms the name of the holding company was provided. The dataset also contained informa-tion of the business incubators in Latvia and companies located at the business incubator in Estonia, Latvia and Poland.

TABlE 11.1. The Distribution of Firms in the Sample by Country

region/country number of observations percent share in total cumulative percentage

Estonia 69 11 11

lithuania 57 9 20

latvia 70 11 32

Mazovia 63 10 42

Pomorski 77 13 54

Silezia 60 9 64

Poland 200 32 64

St.-Petersburg 124 20 84

Moscow 100 16 100

Russia 224 36 100

Total 620 100

Annex 6: Properties of the Dataset 8�

�0 ICT, Innovation, and Economic Growth in Transition Economies

10.3 SectorsThe number of respondents is not equally divided among sectors. Sectors with the most respondents include manufacturing of food products (89), retail trade (82) and ICT services (81) followed by trans-port (48), heavy machinery (46) and finance (43).

Respondents in the food sector, retail trade are fairly equally divided among Russia, Poland and the Baltic States but for the other sectors one or two countries dominate the sample. Textiles and pulp and paper products are concentrated in one country (Lithuania, respectively Russia); shipbuilding, transport and repair of motor vehicles mostly from Poland; building materials, heavy machinery, and furniture from Russia; and motor vehicles and financial services mostly from the Baltic States aggregated.

More than half of the micro enterprises are only in three sectors, computer and related activities, retail trade and transport.

10.4 The RespondentsWho answered the questionnaire? This can be analyzed by looking at question A5 that inquired about the position of the interviewee in the enterprise. 159 respondents indicated that they had ICT-related positions. An ICT-related position was defined as a position where the terms “IT”, “information”, “computer”, “network”, “system” or “programmer” were included. The other respon-dents were mainly directors, proprietors or managers.

TABlE 11.2. Distribution of Firms in the Sample Across Size Classes and Countries

estonia lithuania latvia poland russia total

Micro

Small

Medium

large

Total

6(8,96)

23(34,33)

21(31,34)

17(25,37)

67(100)

8(14,29)

16(28,57)

18(32,14)

14(25,00)

56(100)

14(23,73)

23(38,98)

11(18,64)

11(18,64)

59(100)

101(52,9)

58(30,4)

24(12,6)

8(4,2)

191(100)

3(1,34)

51(22,77)

98(43,75)

72(32,14)

224(100)

130(21,81)

172(28,86)

172(28,86)

122(20,47)

596(100)

Note 1: The number between brackets indicates the percent shares in the column total; the size classes are defined as <10 is micro, 10< <50 is small, 50< < 250 is medium-sized and > 249 is large.Note 2: 24 enterprises did not indicate the number of employees and therefore could not be attributed to a size class.

Annex 6: Properties of the Dataset �1

TABlE 11.3. Distribution of Firms in the Sample by Sectors and Countries

country where the firm is located

Sector estonia latvia lithuania poland russia total

Unknown 0 2 0 2 2 6

Food products and beverages 17 7 8 26 31 89

Textiles and textile products 0 0 9 0 0 9

Wood and wood products 9 5 0 0 11 25

Pulp, paper and paper products 0 0 0 0 4 4

Publishing, printing and reproduction of recorded media 0 2 0 0 5 7

Chemicals and chemical products 0 2 0 5 4 11

Non-metallic mineral prod. (inc. building materials) 0 2 1 7 29 39

Basic metals and fabricated metal products 0 4 2 0 3 9

Machinery and equipment 0 1 2 9 34 46

Computers (inc. info processing equipment) 4 0 1 1 2 8

Electrical machinery and apparatus 0 1 3 4 2 10

Motor vehicles 0 0 10 4 1 15

Other transport equip. (inc. shipbuilding; repair) 0 0 0 20 1 21

Furniture 3 10 0 0 14 27

Construction (services) 0 1 2 2 2 7

Sale, maintenance; repair of motor vehicles and parts 1 1 0 13 3 18

Retail trade 11 7 6 28 30 82

Transport 1 1 0 37 10 49

Post and telecommunication 4 2 1 2 5 14

Financial intermediation (inc. banking; lending) 7 17 12 7 0 43

Computer and related services (inc. activities) 12 5 0 33 31 81

Total 69 70 57 200 224 620


TABlE 11.4. Distribution of Firms in the Sample Across Size Classes and Sectors

SMe class in 2004 by employment

Micro Small Medium-sized large total

Others 3 2 1 0 6

Food products and beverages 6 17 28 34 85

Textiles and textile products 0 1 4 4 9

Wood and wood products 1 8 11 3 23

Pulp, paper and paper products 1 0 2 1 4

Publishing, printing and reproduction of recorded media 0 0 3 2 5

Chemicals and chemical products 4 2 3 1 10

Non-metallic mineral prod. (inc. building materials) 7 5 22 5 39

Basic metals and fabricated metal products 3 3 2 1 9

Machinery and equipment (referred to as heavy machinery) 6 7 15 18 46

Computers (inc. info processing equipment) 2 3 3 0 8

Electrical machinery and apparatus 0 7 2 1 10

Motor vehicles 3 6 3 1 13

Other transport equip. (inc. shipbuilding; repair) 6 7 4 0 17

Furniture 1 9 7 10 27

Construction (services) 1 1 2 3 7

Sale, maintenance; repair of motor vehicles and parts 6 8 3 1 18

Retail trade 27 29 17 7 80

Transport 16 21 8 3 48

Post and telecommunication 2 1 5 6 14

Financial intermediation (inc. banking; lending) 10 9 9 11 39

Computer and related services (inc. ICT activities) 27 25 18 10 80

Total 132 171 172 122 597

Annex 7

Results of the Survey – Tables

TABlE 1. How Firms are Connected to the Internet (last 3 years)

Analog-modem (dial-up via standard phone line) 142 17.80%

ISDN 108 13.6%

Other narrowband 43 5.4%

DSl (ADSl, SDSl, VDSl etc) with contractual download speed < 2Mbps 161 20.2%

DSl (ADSl, SDSl, VDSl etc) with contractual download speed >= 2Mbps 56 7.0%

Cable modem with contractual download speed < 2Mbps 53 6.6%

Cable modem with contractual download speed >= 2Mbps 45 5.6%

Other broadband with contractual download speed < 2Mbps 92 11.5%

Other broadband with contractual download speed >= 2Mbps 74 9.3%

Not applicable 5 0.6%

Don’t know 18 2.3%

TABlE 2. Use of Information Technologies by Firms (last 3 years)

E-mail 608 98.1%

Web presence 478 77.6%

local area network (lAN) 427 68.9%

Intranet within enterprise 296 68.9%

Extranet between enterprise and other organizations (including related enterprises) 154 24.8%

Wide area network (WAN) 149 24.0%

Other computer (proprietary or closed non-IP based) networks than the Internet 77 12.7%

TABlE 3. Purchases and Procurement of Goods and Services Using Computer Networks

How orders for goods and services are placed

of which via computer Via computer networks of which via the internet networks other than the internet

Yes 322 (51.9%) 294 48

No 287 (46.3%) NA NA

Don’t know / NA 11 (1.8%) NA NA

Annex 7: Results of the Survey – Tables �3


TABlE 4. Electronic Links between Computer Networks Used to Place Or-ders for Goods and Services and other Aautomated Systems within the Firm (March 2005)

Systems for ordering or stock control 99 27.9%

Systems for invoicing customers 117 33.0%

Systems for production or service operations 82 23.1%

Systems for delivery of products (including electronic delivery) 78 22.0%

Marketing and customer relations systems 103 29.6%

Other internal or external systems 18 5.1%

Computer system(s) for receiving orders not linked to any of the above 26 7.3%

TABlE 5. Sales and Purchases Via the Internet: A Comparison

Sales: firms receiving orders via the internet purchases: firms placing orders via the internet

Yes 247 39.8% 294 47.4%

No 362 58.3% 35 48.3%

Don’t know / NA 11 1.8% 26 4.1%

TABlE 6. Way in which the Orders over the Internet are Received

Via website with e-mail link 197 77.0%

Via an online ordering facility on the website 91 35.5%

Through a third party website 37 14.5%

Via EDI over the Internet 20 7.8%

Don’t know / NA 11 4.3%

TABlE 7. Electronic links Between Computer Networks Used for Receiving Orders/Sales and other Systems within the Firm (on March 2005)

Customer systems (including related enterprises) 70 27.5%

Systems for ordering or stock control 70 27.5%

Systems for invoicing customers 90 35.3%

Systems for production or service operations 62 24.3%

Systems for delivery of products (including electronic delivery) 46 18.5%

Marketing or customer relations systems 75 29.4%

Suppliers’ computer systems 36 14.1%

Computer system/s for receiving orders not linked to any of the above 16 6.3%

Other internal or external systems 8 3.1%

Don’t know / NA / Refusal 103 40.4%


TABlE 8. Use of the Internet or other Computer Networks for Providing the Customer Services (last 3 years)

Product catalogues or price lists 382 62.0%

Product specifications or configuration on-line 192 31.2%

Inquiry or contact facility on web site 309 50.2%

Customized web page for repeat clients 103 16.7%

Order tracking on-line 79 12.8%

Customer information collected on-line 186 30.2%

After sales support 118 19.2%

Other 7 1.1%


TABlE 9. Top 5 in Business Applications and Use of Computer Networks (last 3 years)

Marketing 61.5%

Purchasing/procurement 51.0%

Finance 50.6%

Sharing and distribution of information or data 45.8%

Customer service 41.3%

Selling goods and services 39.8%

TABlE 10. Business Applications and Use of Internal and External Computer Networks (last 3 years)

Marketing 381 61.5%

Purchasing/procurement 316 51.0%

Inventory management 141 22.7%

Production or services operations 208 33.5%

Selling goods and services 247 39.8%

Processing orders 217 35.0%

Delivery and logistics 196 31.6%

Customer service 256 41.3%

Finance 314 50.6%

Budget and account management 231 37.3%

Asset and facility management 143 23.1%

Payroll 194 31.3%

Human resources management 147 23.7%

Training 160 25.8%

General management and decision making 187 30.2%

Sharing and distribution of information or data 284 45.8%

Other 3 0.5%



TABlE 11. Use of the Internet or Other Computer Networks for Dealing with Government Organizations (last 3 years)

Did not use 191 30.8%

Obtaining information 340 54.8%

Downloading or requesting government forms 325 52.4%

Completing or loading forms on-line 180 29.0%

Purchasing good and services from government organizations 39 6.3%

Selling goods and services to government organizations 36 5.8%

Making online payments to government organizations 155 25.0%

Other dealings with government 30 4.8%


TABlE 12. How are Outputs per Employee Different from What they were Three Years Ago?

Frequency percent

lower 28 4.9

Equal 257 44.7

Higher 290 50.4

Total 575 100.0

TABlE 13. How are Outputs per Employee Different from What they were Three Years Ago? – Percentage Increase/Decrease

With what percentage have outputs per employee increased/decreased compared to three years ago?

outputs per employee 0–10% 10–25% 25–50% 50–75% 75–100% 100–150% >150% total

lower Count 7 10 5 1 3 0 0 26

% within C1 26.9% 38.5% 19.2% 3.8% 11.5% 0.0% 0.0% 100.0%

% of Total 2.6% 3.8% 1.9% 0.4% 1.1% 0.0% 0.0% 9.8%

Higher Count 84 88 49 7 0 5 6 239

% within C1 35.1% 36.8% 20.5% 2.9% 0.0% 2.1% 2.5% 100.0%

% of Total 31.7% 33.2% 18.5% 2.6% 0.0% 1.9% 2.3% 90.2%

Total Count 91 98 54 8 3 5 6 265

% within C1 34.3% 37.0% 20.4% 3.0% 1.1% 1.9% 2.3% 100.0%

% of Total 34.3% 37.0% 20.4% 3.0% 1.1% 1.9% 2.3% 100.0%


TABlE 14. How are Outputs per Employee Different from What they were Three Years Ago? – Change in the Output per Employee of the Business is due to ICT and Others

change in the output per employee of the business is due to

outputs per employee Mainly ict ict and other Mainly other total

lower Count 2 5 20 27

% within C1 7.4% 18.5% 74.1% 100.0%

% of Total 0.7% 1.8% 7.2% 9.7%

Higher Count 33 118 100 251

% within C1 13.1% 47.0% 39.8% 100.0%

% of Total 11.9% 42.4% 36.0% 90.3%

Total Count 35 123 120 278

% within C1 12.6% 44.2% 43.2% 100.0%

% of Total 12.6% 44.2% 43.2% 100.0%

TABlE 15. How are Average Operational Costs per Unit of Output Different from Three Years Ago?

Frequency percent

lower 102 18.6

Equal 220 40.2

Higher 225 41.1

Total 547 100.0

TABlE 16. With what percentage have your operational costs per unit of output increased/decreased compared to three years ago?

operational costs per unit of output 0–10% 10–25% 25–50% 50–75% 75–100% 100–150% >150% total

lower Count 55 20 9 2 0 0 0 86

% within C5 64.0% 23.3% 10.5% 2.3%t 0.0% 0.0% 0.0% 100.0%

% of Total 20.1% 7.3% 3.3% 0.7% 0.0% 0.0% 0.0% 31.4%

Higher Count 93 60 30 2 1 1 1 188

% within C5 49.5% 31.9% 16.0% 1.1% 0.5% 0.5% 0.5% 100.0%

% of Total 33.9% 21.9% 10.9% 0.7% 0.4% 0.4% 0.4% 68.6%

Total Count 148 80 39 4 1 1 1 274


TABlE 17. Change in Operational Costs per Unit of Output is due to ICT and Others

change in operational costs per unit of output is due to

Average operational costs Mainly ict ict and other Mainly other total


% within C5 15.7% 51.7% 32.6% 100.0%

% of Total 4.9% 16.1% 10.2% 31.2%


% within C5 5.1% 28.1% 66.8% 100.0%

% of Total 3.5% 19.3% 46.0% 68.8%

Count 24 101 160 285

Total % within C5 8.4% 35.4% 56.1% 100.0%

% of Total 8.4% 35.4% 56.1% 100.0%

TABlE 18. How are Total Revenues from Sales Different from Three Years Ago?

Frequency percent

lower 59 10.8

Equal 185 33.9

Higher 301 55.2

Total 545 100.0

TABlE 19. How are Total Revenues from Sales Different from Three Years Ago? – Percentage Increase/Decrease

With what percentage have total revenues from sales increased/decreased compared to three years ago?

total revenues 0–10% 10–25% 25–50% 50–75% 75–100% 100–150% >150% total

lower Count 26 14 4 1 0 0 0 45

% within C9 57.8% 31.1% 8.9% 2.2% 0.0% 0.0% 0.0% 100.0%

% of Total 8.8% 4.8% 1.4% 0.3% 0.0% 0.0% 0.0% 15.3%

Higher Count 83 94 45 9 4 6 8 249

% within C9 33.3% 37.8% 18.1% 3.6% 1.6% 2.4% 3.2% 100.0%

% of Total 28.2% 32.0% 15.3% 3.1% 1.4% 2.0% 2.7% 84.7%

Total Count 109 108 49 10 4 6 8 294

% within C9 37.1% 36.7% 16.7% 3.4% 1.4% 2.0% 2.7% 100.0%

% of Total 37.1% 36.7% 16.7% 3.4% 1.4% 2.0% 2.7% 100.0%

Annex 7: Results of the Survey – Tables ��

TABlE 20. Change in the Total Revenues from Sales of the Business is due to ICT and Others

change in the total revenues from sales of the business is due to

total revenues from sales Mainly ict ict and other Mainly other total


% within C9 0.0% 6.3% 93.8% 100.0%

% of Total 0.0% 1.0% 14.7% 15.7%


% within C9 7.0% 43.4% 49.6% 100.0%

% of Total 5.9% 36.6% 41.8% 84.3%

Total Count 18 115 173 306

% within C9 5.9% 37.6% 56.5% 100.0%

% of Total 5.9% 37.6% 56.5% 100.0%

TABlE 21. How are Profits from Sales Different from Three Years Ago?

Frequency percent

lower 85 16.2

Equal 209 39.8

Higher 231 44.0

Total 525 100.0

TABlE 22. How are Profits from Sales Different from Three Years Ago? – Percentage Increase/Decrease

With what percentage have profits from sales increased/decreased compared to three years ago?

Sales profits 0–10% 10–25% 25–50% 50–75% 75–100% 100–150% >150% total

lower Count 25 23 13 4 1 1 0 67

% within C13 37.3% 34.3% 19.4% 6.0% 1.5% 1.5% 0.0% 100.0%

% of Total 10.0% 9.2% 5.2% 1.6% 0.4% 0.4% 0.0% 26.9%

Higher Count 83 59 19 8 2 5 6 182

% within C13 45.6% 32.4% 10.4% 4.4% 1.1% 2.7% 3.3% 100.0%

% of Total 33.3% 23.7% 7.6% 3.2% 0.8% 2.0% 2.4% 73.1%

Total Count 108 82 32 12 3 6 6 249

% within C13 43.4% 32.9% 12.9% 4.8% 1.2% 2.4% 2.4% 100.0%

% of Total 43.4% 32.9% 12.9% 4.8% 1.2% 2.4% 2.4% 100.0%


TABlE 23. Change in the Profits from Sales is due to ICT and Others

change in the profits from sales is due to

Sales profits Mainly ict ict and other Mainly other total


% within C13 1.4% 11.1% 87.5% 100.0%

% of Total 0.4% 3.0% 24.0% 27.4%


% within C13 10.5% 48.2% 41.4% 100.0%

% of Total 7.6% 35.0% 30.0% 72.6%

Total Count 21 100 142 263

% within C13 8.0% 38.0% 54.0% 100.0%

% of Total 8.0% 38.0% 54.0% 100.0%

TABlE 24. How is the Amount of Capital Investment in Innovation Different from Three Years Ago?

Frequency percent

lower 24 4.3

Equal 248 44.2

Higher 289 51.5

Total 561 100.0

TABlE 25. Change in the Amount of Capital Investment in Innovation – Percentage Increase/Decrease

capital invested in innovation 0–10% 10–25% 25–50% 50–75% 75–100% 100–150% >150% total

lower Count 11 5 2 2 2 0 0 22

% within C17 50.0% 22.7% 9.1% 9.1% 9.1% 0.0% 0.0% 100.0%

% of Total 4.2% 1.9% 0.8% 0.8% 0.8% 0.0% 0.0% 8.4%

Higher Count 95 81 38 9 6 3 8 240

% within C17 39.6% 33.8% 15.8% 3.8% 2.5% 1.3% 3.3% 100.0%

% of Total 36.3% 30.9% 14.5% 3.4% 2.3% 1.1% 3.1% 91.6%

Total Count 106 86 40 11 8 3 8 262

% within C17 40.5% 32.8% 15.3% 4.2% 3.1% 1.1% 3.1% 100.0%

% of Total 40.5% 32.8% 15.3% 4.2% 3.1% 1.1% 3.1% 100.0%

With what percentage has the amount of capital investment in innovation increased/decreased compared to three years ago?

Annex 7: Results of the Survey – Tables 101

TABlE 26. Change in the Amount of Capital Investment in Innovation due to ICT and Others

change in the amount of capital investment in innovation is due to

capital invested in innovation Mainly ict ict and other Mainly other total


% within C17 4.5% 18.2% 77.3% 100.0%

% of Total 0.4% 1.5% 6.3% 8.1%


% within C17 16.1% 41.4% 42.6% 100.0%

% of Total 14.8% 38.0% 39.1% 91.9%

Total Count 41 107 123 271

% within C17 15.1% 39.5% 45.4% 100.0%

% of Total 15.1% 39.5% 45.4% 100.0%

TABlE 27. How is the Amount of Capital Investment in ICT Different from Three Years Ago?

Frequency percent

lower 20 3.7

Equal 276 50.9

Higher 246 45.4

Total 542 100.0

TABlE 28. How is the Amount of Capital Investment in ICT Different from Three Years Ago? – Percentage Increase/Decrease

With what percentage has the amount of capital investment in ict increased/decreased compared to three years ago?

0–10% 10–25% 25–50% 50–75% 75–100% 100–150% >150% total

lower Count 12 1 2 1 2 0 0 18

% within C21 66.7% 5.6% 11.1% 5.6% 11.1% 0.0% 0.0% 100.0%

% of Total 5.2% 0.4% 0.9% 0.4% 0.9% 0.0% 0.0% 7.8%

Higher Count 85 79 22 11 8 1 7 213

% within C21 39.9% 37.1% 10.3% 5.2% 3.8% 0.5% 3.3% 100.0%

% of Total 36.8% 34.2% 9.5% 4.8% 3.5% 0.4% 3.0% 92.2%

Total Count 97 80 24 12 10 1 7 231

% within C21 42.0% 34.6% 10.4% 5.2% 4.3% 0.4% 3.0% 100.0%

% of Total 42.0% 34.6% 10.4% 5.2% 4.3% 0.4% 3.0% 100.0%


TABlE 29. Change in the Amount of Capital Investment in ICT in due to ICT and Others

change in the amount of capital investment in ict in due to

capital invested in ict Mainly ict ict and other Mainly other total


% within C21 11.1% 5.6% 83.3% 100.0%

% of Total 0.9% 0.4% 6.4% 7.7%


% within C21 30.2% 46.0% 23.7% 100.0%

% of Total 27.9% 42.5% 21.9% 92.3%

Total Count 67 100 66 233

% within C21 28.8% 42.9% 28.3% 100.0%

% of Total 28.8% 42.9% 28.3% 100.0%

TABlE 30. How is the Amount of Capital Investment in ICT Different from Three Years Ago?

Frequency percent

less important 34 6.0

The same 208 36.9

More important 322 57.1

Total 564 100.0

TABlE 31. How Important is Competition on Price for Market Share Compared to Three Years Ago?

With what percentage has competition on price increased/ decreased your market share compared to three years ago?

0–10% 10–25% 25–50% 50–75% 75–100% total

less important Count 20 7 0 0 0 27

% within C25 74.1% 25.9% 0.0% 0.0% 0.0% 100.0%

% of Total 7.5% 2.6% 0.0% 0.0% 0.0% 10.1%

More important Count 120 72 36 8 5 241

% within C25 49.8% 29.9% 14.9% 3.3% 2.1% 100.0%

% of Total 44.8% 26.9% 13.4% 3.0% 1.9% 89.9%

Total Count 140 79 36 8 5 268

% within C25 52.2% 29.5% 13.4% 3.0% 1.9% 100.0%

% of Total 52.2% 29.5% 13.4% 3.0% 1.9% 100.0%


TABlE 32. How Important is Competition on Price for Gaining Market Share Compared to Three Years Ago?

change in the intensity of competition on price is due to

Mainly ict ict and other Mainly other total

C25 less important Count 3 5 20 28

% within C25 10.7% 17.9% 71.4% 100.0%

% of Total 1.0% 1.7% 6.8% 9.6%

More important Count 14 77 174 265

% within C25 5.3% 29.1% 65.7% 100.0%

% of Total 4.8% 26.3% 59.4% 90.4%


% within C25 5.8% 28.0% 66.2% 100.0%

% of Total 5.8% 28.0% 66.2% 100.0%

TABlE 33. How are Your Average Sales Prices Different from Three Years Ago?

Frequency percent

lower 92 14.9

Equal 269 43.6

Higher 256 41.5

Total 617 100.0

TABlE 34. How Important is Competition on Quality for Gaining Market Share Compared to Three Years Ago?

Frequency percent

less important 8 1.4

Remained the same 197 34.8

More important 361 63.8

Total 566 100.0


TABlE 35. How Important is Competition on Quality for Gaining Market Share Compared to Three Years Ago? – Percentage Increase/Decrease

With what percentages has competition on quality increased/ decreased your market share compared to three years ago?

0–10% 10–25% 25–50% 50–75% 75–100% >150% total

less important Count 3 2 0 0 1 0 6

% within C29 50.0% 33.3% 0.0% 0.0% 16.7% 0.0% 100.0%

% of Total 1.1% 0.7% 0.0% 0.0% 0.4% 0.0% 2.2%

More important Count 128 94 38 8 2 1 271

% within C29 47.2% 34.7% 14.0% 3.0% 0.7% 0.4% 100.0%

% of Total 46.2% 33.9% 13.7% 2.9% 0.7% 0.4% 97.8%

Total Count 131 96 38 8 3 1 277

% within C29 47.3% 34.7% 13.7% 2.9% 1.1% 0.4% 100.0%

% of Total 47.3% 34.7% 13.7% 2.9% 1.1% 0.4% 100.0%

TABlE 36. Change in the Intensity of Competition on Quality is due to ICT and Other

change in the intensity of competition on quality is due to

competition on quality Mainly ict ict and other Mainly other total

C29 less important Count 0 2 4 6

% within C29 0.0% 33.3% 66.7% 100.0%

% of Total 0.0% 0.7% 1.3% 2.0%

More important Count 29 115 147 291

% within C29 10.0% 39.5% 50.5% 100.0%

% of Total 9.8% 38.7% 49.5% 98.0%

Total Count 29 117 151 297

% within C29 9.8% 39.4% 50.8% 100.0%

% of Total 9.8% 39.4% 50.8% 100.0%

TABlE 37. Levels of Speed and Reliability of Companies

During the past three years, has your company increased the speed and reliability of business processes? Frequency percent

No 186 32.3

Yes 389 67.7

Total 575 100.0


TABlE 38. Levels of Speed and Reliability of Companies – Effect on Overall Business Process Costs?

During the past three years, has your company increased the speed and reliability of business processes? lower equal Higher total

Yes Count 114 87 171 372

% within D1 30.6% 23.4% 46.0% 100.0%

% of Total 30.6% 23.4% 46.0% 100.0%

Total Count 114 87 171 372

% within D1 30.6% 23.4% 46.0% 100.0%

% of Total 30.6% 23.4% 46.0% 100.0%

What was the effect of improved speed and reliability on your overall business process costs, compared to three years ago?

TABlE 39. Improved Process Speed and Reliability was due to ICT and Others

What was the effect of improved speed and reliability of business processes on your overall business process costs, compared to three years ago? Mainly ict ict and other Mainly other total


% within D2 37.7% 47.4% 14.9% 100.0%

% of Total 15.4% 19.3% 6.1% 40.7%


% within D2 14.5% 50.0% 35.5% 100.0%

% of Total 8.6% 29.6% 21.1% 59.3%


% within D2 23.9% 48.9% 27.1% 100.0%

% of Total 23.9% 48.9% 27.1% 100.0%

improved process speed and reliability was due to

TABlE 40. During the Past Three Years, has your Company Automated Tasks?

Frequency percent

No 238 41.0

Yes 343 59.0

Total 581 100.0


TABlE 41. What was the Effect of Task Automation on your Overall Business Process Costs, Compared to Three Years Ago?

During the past three years, has your company automated tasks? lower equal Higher total

D5 Yes Count 161 70 89 320

% within D5 50.3% 21.9% 27.8% 100.0%

% of Total 50.3% 21.9% 27.8% 100.0%


% within D5 50.3% 21.9% 27.8% 100.0%

% of Total 50.3% 21.9% 27.8% 100.0%

costs

TABlE 42. The Effect of Task Automation on Overall Business Process Costs, Attributed to ICT and Others.

What was the effect of task automation on your overall business process costs, compared to three years ago? Mainly ict ict and other Mainly other total


% within D6 38.1% 43.2% 18.7% 100.0%

% of Total 24.2% 27.5% 11.9% 63.5%


% within D6 13.5% 58.4% 28.1% 100.0%

% of Total 4.9% 21.3% 10.2% 36.5%


% within D6 29.1% 48.8% 22.1% 100.0%

% of Total 29.1% 48.8% 22.1% 100.0%

TABlE 43. During the Past Three Years, has your Company Improved Information Management?

Frequency percent

No 148 24.9

Yes 446 75.1

Total 594 100.0


TABlE 44. Effect of Improving Information Management on Overall Business Process Costs, Compared to Three Years Ago?

During the past three years, has your company improved information management? lower equal Higher total

D9 Yes Count 170 130 114 414

% within D9 41.1% 31.4% 27.5% 100.0%

% of Total 41.1% 31.4% 27.5% 100.0%

Total Count 170 130 114 414

% within D9 41.1% 31.4% 27.5% 100.0%

% of Total 41.1% 31.4% 27.5% 100.0%

What was the effect of improving information management on your overall business process costs, compared to three years ago?

TABlE 45. Effect of Improved Information on Overall Business Process Costs, Attributed to ICT and Others

What was the effect of improving information on your overall business process costs, compared to three years ago? costs Mainly ict ict and other Mainly other total


% within D10 46.2% 37.9% 16.0% 100.0%

% of Total 27.7% 22.7% 9.6% 59.9%


% within D10 24.8% 60.2% 15.0% 100.0%

% of Total 9.9% 24.1% 6.0% 40.1%

Total Count 106 132 44 282

% within D10 37.6% 46.8% 15.6% 100.0%

% of Total 37.6% 46.8% 15.6% 100.0%

improvement in information management can be attributed to

TABlE 46. Amount of Organizational Change

During the past three years, has your company been through organizational changes? Frequency percent

No 223 37.2

Yes 376 62.8

Total 599 100.0


During the past three years, has your company been through organizational changes? lower equal Higher total

Yes Count 148 94 106 348

% within D13 42.5% 27.0% 30.5% 100.0%

% of Total 42.5% 27.0% 30.5% 100.0%

Total Count 148 94 106 348

% within D13 42.5% 27.0% 30.5% 100.0%

% of Total 42.5% 27.0% 30.5% 100.0%

What was the effect of these organizational changes on your overall business process costs, compared to three years ago?

TABlE 47. Organizational Change – Effect on Overall Business Costs

What was the effect of these organizational changes on your overall business process costs, compared to three years ago? Mainly ict ict and other Mainly other total


% within D14 10.1% 46.6% 43.2% 100.0%

% of Total 6.0% 27.5% 25.5% 59.0%


% within D14 3.9% 45.6% 50.5% 100.0%

% of Total 1.6% 18.7% 20.7% 41.0%

Total Count 19 116 116 251

% within D14 7.6% 46.2% 46.2% 100.0%

% of Total 7.6% 46.2% 46.2% 100.0%

organizational changes were driven by

TABlE 48. Effect of Organizational Change Attributed to ICT and Others

TABlE 49. New Products and/or Services

Have you placed new or substantially new products and/or services in the market during the past three years? Frequency percent

No 233 39.3

Yes 360 60.7

Total 593 100.0

Annex 7: Results of the Survey – Tables 10�

TABlE 50. Change in the Value of Sales of New or Different Products over the Last Three Years.

Have you placed new or substantially new products and/or services in the market during the past three years? lower equal Higher total

Yes Count 7 84 242 333

% within D21 2.1% 25.2% 72.7% 100.0%

% of Total 2.1% 25.2% 72.7% 100.0%


% within D21 2.1% 25.2% 72.7% 100.0%

% of Total 2.1% 25.2% 72.7% 100.0%

compared to three years ago, has the value of sales of new or different products/services as a percentage of total sales revenue?

compared to three years ago, has the value of sales of new or different products/ services as a percentage of total sales revenue? Mainly ict ict and other Mainly other total

lower Count 1 3 4 8

% within D22 12.5% 37.5% 50.0% 100.0%

% of Total 0.4% 1.2% 1.6% 3.3%


% within D22 9.2% 42.9% 47.9% 100.0%

% of Total 8.9% 41.5% 46.3% 96.7%

Total Count 23 105 118 246

% within D22 9.3% 42.7% 48.0% 100.0%

% of Total 9.3% 42.7% 48.0% 100.0%

new products and/or service developments are driven by

TABlE 51. New Products and/or Service Developments are Driven by ICT or others

TABlE 52. Offering of Customized Products or Services

Do you offer customized goods or services to your customers Frequency percent

No 279 46.4

Yes 322 53.6

Total 601 100.0


TABlE 53. Change in the Value of Customized Products and Services Offered

Do you offer customized goods or services to your customers lower equal Higher total

Yes Count 10 146 141 297

% within D17 3.4% 49.2% 47.5% 100.0%

% of Total 3.4% 49.2% 47.5% 100.0%

Total Count 10 146 141 297

% within D17 3.4% 49.2% 47.5% 100.0%

% of Total 3.4% 49.2% 47.5% 100.0%

compared to three years ago. has the value of sales of customised products as a percentage of total sales revenue?

compared to three years ago, has the value of sales of customized products as a percentage of total sales revenue? Mainly ict ict and other Mainly other total

lower Count 2 1 3 6

% within D18 33.3% 16.7% 50.0% 100.0%

% of Total 1.4% 0.7% 2.1% 4.2%


% within D18 8.7% 45.7% 45.7% 100.0%

% of Total 8.3% 43.8% 43.8% 95.8%


% within D18 9.7% 44.4% 45.8% 100.0%

% of Total 9.7% 44.4% 45.8% 100.0%

changes in the value of sales of customized goods and services are due to

TABlE 54. Changes in the Value of Sales of Customized Goods and Services are due to ICT or Others

TABlE 55. Amount of New Bundled Offerings

During the last three years, have you started offering new bundled offerings Frequency percent

No 376 64.7

Yes 205 35.3

Total 581 100.0


TABlE 56. Change in the Value of New Bundled Offering as a Percentage of Total Revenue.

During the last three years, have you started offering new bundled offerings? lower equal Higher total

D25 Yes Count 3 58 138 199

% within D25 1.5% 29.1% 69.3% 100.0%

% of Total 1.5% 29.1% 69.3% 100.0%


% within D25 1.5% 29.1% 69.3% 100.0%

% of Total 1.5% 29.1% 69.3% 100.00%

compared to three years ago, has the value of sales of new bundled offerings as a percentage of total sales revenue?

compared to three years ago, has the value of sales of new bundled offerings as a percentage of total sales revenue? Mainly ict ict and other Mainly other total

lower Count 0 1 1 2

% within D26 0.0% 50.0% 50.0% 100.0%

% of Total 0.0% 0.7% 0.7% 1.4%


% within D26 13.0% 42.8% 44.2% 100.0%

% of Total 12.9% 42.1% 43.6% 98.6%


% within D26 12.9% 42.9% 44.3% 100.0%

% of Total 12.9% 42.9% 44.3% 100.0%

new bundled product and/or service offering are driven by

TABlE 57. Value of New Bundled Offerings – New Bundled Product and/or Service Offering are Driven by ICT or Others

TABlE 58. Number of Customers of your Enterprise

compared to three years ago, has the number of customers of your enterprise Frequency percent

lower 38 6.5

Equal 192 32.9

Higher 353 60.5

Total 583 100.0


TABlE 59. Change in the Number of Customers due to ICT and Others

compared to three years ago, has the number of customers of your enterprise Mainly ict ict and other Mainly other total

D29 Increased Count 0 1 36 37

% within D29 0.0% 2.7% 97.3% 100.0%

% of Total 0.0% 0.3% 9.4% 9.6%

Decreased Count 22 154 171 347

% within D29 6.3% 44.4% 49.3% 100.0%

% of Total 5.7% 40.1% 44.5% 90.4%

Total Count 22 155 207 384

% within D29 5.7% 40.4% 53.9% 100.0%

% of Total 5.7% 40.4% 53.9% 100.0%

is change in the number of customers due to

TABlE 60. Value of Sales in Customer Base

compare the value of sales in your customer base to three years ago. Has the value of sales per customer Frequency percent

Valid Decreased 53 9.9

Remained equal 238 44.7

Increased 242 45.4

Total 533 100.0

compare the value of sales in your customer base to three years ago. Has the value of sales per customer Mainly ict ict and other Mainly other total


% within D32 2.0% 6.0% 92.0% 100.0%

% of Total 0.3% 1.0% 16.0% 17.4%

Increased Count 16 98 123 237

% within D32 6.8% 41.4% 51.9% 100.0%

% of Total 5.6% 34.1% 42.9% 82.6%

Total Count 17 101 169 287

% within D32 5.9% 35.2% 58.9% 100.0%

% of Total 5.9% 35.2% 58.9% 100.0%

change in the total value of sales per customer in due to

TABlE 61. Value of Sales in Your Customer Base – Change in the Total Value of Sales per Customer in due to ICY and Others


TABlE 62. Share of Retained Customers

compared to three years ago, the share of retained customers has Frequency percent

Decreased 36 6.5


Increased 262 47.0

Total 557 100.0

TABlE 63. Share of Retained Customers due to ICT and Others

compared to three years ago, the share of retained customers has Mainly ict ict and other Mainly other total


% within D35 0.0% 5.9% 94.1% 100.0%

% of Total 0.0% 0.7% 10.9% 11.6%


% within D35 6.9% 41.7% 51.4% 100.0%

% of Total 6.1% 36.9% 45.4% 88.4%

Total Count 18 110 165 293

% within D35 6.1% 37.5% 56.3% 100.0%

% of Total 6.1% 37.5% 56.3% 100.0%

change in the share of retained customers is due to

TABlE 64. Comparison between the Values of Sales per Retained Customer

compare the value of sales per retained customer to three years ago. Has the value of sales per retained customer Frequency percent

Decreased 39 7.9


Increased 218 44.2

Total 493 100.0


TABlE 65. Change in the Value of Sales per Retained Customer

compare the value of sales per retained customer to three years ago. Has the value of sales per retained customer Mainly ict ict and other Mainly other total


% within D38 0.0% 7.9% 92.1% 100.0%

% of Total 0.0% 1.2% 13.8% 15.0%


% within D38 5.6% 39.8% 54.6% 100.0%

% of Total 4.7% 33.9% 46.5% 85.0%


% within D38 4.7% 35.0% 60.2% 100.0%

% of Total 4.7% 35.0% 60.2% 100.0%

change in the value of sales per retained customer is due to

TABlE 66. Number of Suppliers of your Enterprise

compared to three years ago, has the number of suppliers of your enterprise Frequency percent

Decreased 36 6.5


Increased 219 39.7

Total 551 100.0

compared to three years ago, has the number of suppliers of your enterprise Mainly ict ict and other Mainly other total


% within D41 8.6% 14.3% 77.1% 100.0%

% of Total 1.2% 2.0% 10.8% 13.9%


% within D41 5.6% 43.5% 50.9% 100.0%

% of Total 4.8% 37.5% 43.8% 86.1%


% within D41 6.0% 39.4% 54.6% 100.0%

% of Total 6.0% 39.4% 54.6% 100.0%

is the change in the number of supplies due to

TABlE 67. Change in the Number of Suppliers to your Enterprise due to ICT and Others


TABlE 68. Value of Purchases in your Supplier Base

compare the value of purchases in your supplier base to three years ago. Has the value of purchases per supplier Frequency percent

Decreased 34 6.6


Increased 218 42.6

Total 512 100.0

compare the value of purchases in your supplier base to three years ago. Has the value of purchases per supplier Mainly ict ict and other Mainly other total

D44 Decreased Count 1 3 28 32

% within D44 3.1% 9.4% 87.5% 100.0%

% of Total 0.4% 1.2% 11.3% 12.9%


% within D44 2.8% 35.2% 62.0% 100.0%

% of Total 2.4% 30.6% 54.0% 87.1%


% within D44 2.8% 31.9% 65.3% 100.0%

% of Total 2.8% 31.9% 65.3% 100.0%

change in the total value of purchases per supplier is due to

TABlE 69. Change in the Value of Purchases in your Supplier Base due to ICT and Others

TABlE 70. Number of Repeat Suppliers of your Enterprise

compared to three years ago, has the number of repeat suppliers of your enterprise has Frequency percent

Decreased 6.8

Remained the same 3.6 67.0

Increased 358 26.1

Total 528 100.0


compared to three years ago, has the number of repeat suppliers of your enterprise Mainly ict ict and other Mainly other total


% within D47 2.9% 8.8% 88.2% 100.0%

% of Total 0.6% 1.8% 17.9% 20.2%


% within D47 4.5% 35.8% 59.7% 100.0%

% of Total 3.6% 28.6% 47.6% 79.8%


% within D47 4.2% 30.4% 65.5% 100.0%

% of Total 4.2% 30.4% 65.5% 100.0%

change in the number of repeat suppliers is due to

TABlE 71. Change in the Number of Repeat Suppliers to your Enterprise due to ICT and Others

TABlE 72. Value of Purchases in your supplier Base per Repeat Supplier

compare the value of purchases in your supplier base to three years ago. Has the value of purchases per repeat supplier Frequency percent

Decreased 32 6.5


Increased 200 40.7

Total 492 100.0

compare the value of purchases in your supplier base to three years ago. Has the value of purchases per repeat supplier Mainly ict ict and other Mainly other total


% within D50 3.1% 12.5% 84.4% 100.0%

% of Total 0.4% 1.7% 11.7% 13.9%


% within D50 4.5% 35.9% 59.6% 100.0%

% of Total 3.9% 30.9% 51.3% 86.1%


% within D50 4.3% 32.6% 63.0% 100.0%

% of Total 4.3% 32.6% 63.0% 100.0%

change in the value of purchases per repeat supplier is due to

TABlE 73. Change in the Value of Purchases per Repeat Supplier is due to ICT and Other


TABlE 74. Available In-house Know-how

number of firms %

Was insufficient to support uptake of new ICT 130 21.0

Was sufficient to support uptake of new ICT 410 66.1

Not applicable 34 5.5

Don’t know 31 5.0

Refusal 13 2.1

Multiple options 618 99.7

Total 2 0.3

Missing 130 21.0

Total, including missing observations 620 100.0

TABlE 75. Existing Staff Skills and Training

number of firms %

Was insufficient to support the uptake of new ICTs 137 22.1

Was sufficient to support the uptake of new ICTs 429 69.2


Don’t know 19 3.1

Refusal 10 1.6

Total 620 100.0

TABlE 76. Investment Costs in ICT

number of firms %

Could not easily be justified 108 17.4

Could easily be justified 403 65.0


Don’t know 67 10.8

Refusal 15 2.4

Total 620 100.0

TABlE 77. Management Attitude

number of firms %

Management was reluctant in promoting ICT 58 9.4

Management was proactive in promoting ICT 455 73.4


Don’t know 26 4.2

Refusal 18 2.9


Total 2 0.3


TABlE 78. Lock-in Effects in Relations with Suppliers

number of firms %

My enterprise finds it more difficult to switch between suppliers because of ICT usage 61 9.8

My enterprise finds it easier to switch between suppliers because of ICT usage 306 49.4



Refusal 21 3.4

Total 617 99.5

Missing 3 0.5

Total 620 100.0

TABlE 79. Outsourcing of Activities

number of firms %

Was discouraged by ICT 45 7.3

Was encouraged by ICT 240 38.7



Refusal 26 4.2

Total 619 99.8

Missing 1 0.2

Total 620 100.0

TABlE 81. Telecommunication Costs

number of firms %

Was discouraged by ICT 43 6.9

Was encouraged by ICT 227 36.6



Refusal 23 3.7

Total 619 99.8

Missing 1 0.2

Total 620 100.0

Annex 7: Results of the Survey – Tables 11�

TABlE 81. Telecommunication Costs

number of firms %

Inhibited the success of the ICT usage initiative 117 18.9

Did not inhibit the ICT usage initiative 435 70.2


Don’t know 33 5.3

Refusal 10 1.6

Total 620 100.0

TABlE 82. Network Reliability

number of firms %

Has been a problem to ICT usage 108 17.4

Has not been a problem to ICT usage 453 73.1


Don’t know 24 3.9

Refusal 11 1.8

Total 620 100.0

TABlE 83. Network Flexibility and Range of Services

number of firms %

Was insufficient to engage in ICT usage 70 11.3

Was sufficient to engage in ICT usage 482 77.7


Don’t know 36 5.8

Refusal 10 1.6

Total 620 100.0

TABlE 84. Geographic Coverage of the Network

number of firms %

Was insufficient to encourage the enterprise to engage in ICT usage 47 7.6

Was sufficient to encourage the enterprise to engage in ICT usage 485 78.2


Don’t know 43 6.9

Refusal 10 1.6

Total 619 99.8

Missing 1 0.2

Total 620 100.0


TABlE 87. Existing Authentication and Certification Systems

number of firms %

Discouraged ICT usage 79 12.7

Encouraged ICT usage 273 44.0



Refusal 22 3.5

Total 617 99.5

Missing 3 0.5

Total 620 100.0

TABlE 86. Available Level of Transaction Security

number of firms %

Discouraged the enterprise to engage in ICT usage 85 13.7

Encouraged the enterprise to engage in ICT usage 351 56.6



Refusal 18 2.9

Total 620 100.0

TABlE 85. Which Iinformation Technology is the Most Important to your Enterprise?

number of firms %

E-mail 142 22.9

Website 36 5.8

Mobile phones 126 20.3

Fixed telephony 139 22.4

General internet access 176 28.4

Total 619 99.8

Missing 1 0.2

Total 620 100.0


TABlE 88. Commercial Law in Place

number of firms %

Was insufficient to encourage ICT usage 142 22.9

Was sufficient to encourage ICT usage 262 42.3



Refusal 21 3.4

Total 619 99.8

Missing 1 0.2

Total 620 100.0

TABlE 89. Protection of Intellectual Property

number of firms %





Refusal 21 3.4

Total 620 100.0

TABlE 90. Taxation Measures

number of firms %

Discouraged the enterprise to engage in ICT usage 260 41.9

Encouraged the enterprise to engage in ICT usage 129 20.8



Refusal 31 5.0


Total 619 99.8

Missing 1 0.2

Total 620 100.0


TABlE 93. Government Provision of On-line Electronic Services

number of firms %

Made it less attractive to engage in ICT usage 79 12.7

Made it more attractive to engage in ICT usage 238 38.4



Refusal 24 3.9

Total 618 99.7

Missing 2 0.3

Total 620 100.0

TABlE 92. Education System

number of firms %

Provided inadequately trained personnel 176 28.4

Provided adequately trained personnel 272 43.9



Refusal 19 3.1


Total 2 0.3

Missing 620 100.0

Total 176 28.4

TABlE 91. Public Financial Support for R&D, Diffusion or Uptake

number of firms %





Refusal 20 3.2


Total 614 99.0

Missing 6 1.0

Total 620 100.0


TABlE 94. Public Awareness Raising and Demonstration Programs

number of firms %

Contributed insufficiently to the success of ICT usage 144 23.2

Contributed sufficiently to the success of ICT usage 195 31.5



Refusal 17 2.7

Total 620 100.0

TABlE 95. Private Awareness Raising and Demonstration Programs

number of firms %

Contributed insufficiently to the success of ICT usage 131 21.1

Contributed sufficiently to the success of ICT usage 233 37.6



Refusal 12 1.9

Total 620 100.0

TABlE 96. Government Training Programs

number of firms %

Insufficiently supported the enterprise 247 39.8

Sufficiently supported the enterprise 93 15.0



Refusal 14 2.3

Total 620 100.0

TABlE 97. Private Training Programs

Insufficiently supported the enterprise 119 19.2

Sufficiently supported the enterprises 265 42.7



Refusal 12 1.9

Total 620 100.0

Annex 8

Company Case Studies

13.2 The Case of BankServ�ss – Latv�aBankServiss is the leading company for payment card data processing services in the Baltic States. The company was the first multiple-bank owned payment card data processing center in Latvia and started operations in 1992. The company has been certified to process transactions for the world’s foremost payment card networks: Europay/MasterCard, VISA, American Express and Diners Club. Besides these international cards BankServiss operates proprietary cards for several local banks and fuel companies such as Shell and Neste.

The main operations of the company are issuing processing, acquiring processing, clearing and settlement with domestic and international banks and payment schemes. The high technological level and professionalism of employees in the company allows for running large projects and BankServiss was the first payment card-processing center in the Baltics to entirely prepare its card processing systems for the issuing and acquiring of chip cards.

In 2005 BankServiss started two important proj-ects—payment authentication through 3 D Secure and EMV smart card personalization center. Implementation of 3 D Secure will stimulate banks and merchants participation in e-commerce. BankServiss implements these e-commerce techno-logical solutions to ensure reliable and secure Internet payments for banks, merchants and cardholders. BankServiss processes more than 1,300, 000 cards (international and local debit and credit cards) per month and over 4 million issuing and acquiring authorizations38.

13.1 The case of Data Telecom OÜ – Eston�aData Telecom OÜ, is a company offering informa-tion technology and telecommunication services to the Estonian business. The quality and reliability related issues of the services are of paramount importance. The services are delivered under the trademark Data Telecom.

The company offers high-quality communications and server related services, tailored to the individual customer’s necessities. A considerable amount of turnover comes from providing local telecom operators with international IP connectivity with superb parameters. The company’s services are:

Communication services (Business Connect, IP Transit, ATM services, Traveller) E-mail Web hosting (Administration Interface, Database Support, Resource Utilisation) Hosting and housing services (Server Housing, Public FTP Server, Entry Level Housing) Multimedia Streaming (Video Archives in the Internet, Digitalising Service)

It has been proven to be very useful to dispose of a wide area network from bureaus serving technical infrastructure (servers). This is positive at least in two ways—first, the easy movement for offices and workspaces is guaranteed and second, the possibility of working at home is much more enhanced. Thus clients can save considerable resources.

When working home or abroad, the company uses VoIP technology for calling (telephoning). This ensures considerable savings on communication expenses.

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http://www.bankserviss.lv/en/about/38�

Annex 8: Company Case Studies 125


The company’s recommendation to all companies that are working almost exclusively with processing of data is to choose the right supplier. Here experience and knowledge is more important than price or quantity, because one is going to work with the selected hard- and software presumably for a very long time. In addition, compatibility of programs is very important so that cooperation with or competition over potential clients would be possible.

ICT also has a major role in our quality manage-ment system as well. The registration of customers’ problems, requests and new tasks and the tracing of the executive process are essentially improved by implementing a new task executive process tracing system. The quality documentation is established in an electronic form that ensures rapid document turnover and links between documents exploiting e-mail.

13.3 The Case of AB “Kla�pedos Duona” (KD) – L�thuan�aAB “Klaipėdos duona” (KD) is one of the largest and most modern baking enterprises not only in the Klaipėda district but also in Lithuania. Every 24 hours the company bakes about 50 tons of bread and cake, confectionery products, and wafers. The enterprise can offer such an abundant—over a hundred names—assortment of bread, cake, confectionery products, and wafers. Over 90 percent of production is packed at the request of customers either in loaves, split into several parts, or sliced.

KD has developed its own programs for taking and accepting of orders online, which enabled to increase the number of clients without any increase in the number of employees. This improves several aspects of the company’s competitiveness and efficiency—productivity, lower prise, less time-consuming sale-process, lower labor costs etc.

Using ICT technologies, KD improved the obliga-tory document processing. As authorities removed strict requirements for reporting and reporting became possible, the internal programs of the

company have been modified in order to supply the required information with a minimum of manual work. For example, taxes and fees can be paid online. All information on servers and computers is safe-copied on data-carriers that ensure the backup database.

13.4 Implementat�on of a New IT Product – Russ�aEstablished in the 2000, company Industrial Information System, is engaged in development and promotion of new administrative technologies and automated systems. The basic activities of Industrial Information System include:

development of technology Business Reality and Business Reality Suite platform; development of typical and custom-made software products and decisions on basis of proprietary technology Business Reality ™; training and support of the partners developing and delivering finished decisions based of our technologies; customized exploitations and support of corporate systems of various purpose; consulting services in the field of construction of effective control systems and carrying out of organizational changes; performance of complex projects on automation of control systems of corporations "on a turn-key basis"; information audit; integrating the hardware-software systems; and management of projects of system integration.

In May 2004 OAO “Industrial information systems” released a new system of electronic document circulation called Globus, based on the platform Business Reality™. This system has received favorable assessment at the international exhibition CeBIT 2004.

Globus™ takes into account specific needs of Russian enterprises. This technology includes personnel training, consulting, and technical support.

Although there is still great interest in electronic document circulation, the market is still not yet mature. There is no infrastructure, and there are no

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Annex 8: Company Case Studies 127

qualified experts capable of rendering professional services. Therefore, in many cases, the type of a document circulation system is determined by availability of a strong support team. Frequently, customers reject more advanced technologies or systems because of the lack of appropriate support services. Until recently, even the largest providers were unable to provide support.

Three key lessons can be learned from the experi-ences of Russian companies with the introduction of IT systems:

The client should be sufficiently mature to establish the system. In this case, the director takes care of all the problems related to worker resistance. The role of IT advisers in the given situation is not to persuade personnel. It is appropriate to begin introduction of the new technologies at the highest levels of a company’s hierarchy, where there is the highest visible effect. Further actions will pass more easily. It is expedient beforehand to determine the degree of computer literacy of the personnel and to determine the terms and the times they are available for training. Pre-design inspection is very important at this stage where both the customer and the executor formulate the answers to various questions: What is necessary to introduce the program? Which problems is it solving? In the Russian example, there is the possibility to save considerable amount of resources without having to obtain a program with an excess of functions (for example SAP), but at the same time bearing in mind that the development of the company will influence the use of the program.

Major mistakes and failures of the introduction of IT systems are connected with prolonging the deadlines of the project, political intrigues, and insufficient political will of the management. In this case, the program is bought already, but there is a huge resistance to introduction and its purchase is seen as mistake. In the worst case there are two programs working at the same time—the old and the new one. This situation reduces the overall performance of the company instead of increasing it.

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13.5 Integrat�on of ICT �n a Large Company – “Electropr�bor”, Russ�aThe State Centre of Science of the Russian Federation “Electropribor” is a leading centre in Russia in the area of development and production of sea and space navigation, radio communications, and wind energy In many of its fields the company is internationally competitive.

The problems of the effective utilization of ICT in a company having more than 2,000 employees were that from the point of view of functional application the company can be distinguished in three groups of users:

High-level developers, using in their work most advanced IT systems for designing and manag-ing projects and life cycle of products, and focusing on IT systems of leading global firms, particularly Windchill.Production-workers of pilot production which work is under the management of an “internally-developed” Management Information System that is outdated and is supported by a special group of programmers.The financial-economic block of the company also using “internally-developed” financial—accounting system of a low level.

Electropribor has a network of a few hundred computers. Key problems include maintenance of these computers and low qualification of the personnel operating the technical equipment.

The management of the company had in very short time to solve the problem of development and implementation of a plan for the integration of ICT that would move the company at a principally new usage level of ICT and allow its integration into the global environment of development and production.

The solution to the problem can be developed in a few stages within the framework of the general strategy for integrating ICT.:

Creation of a powerful IT division and the post of an “Assistant to the General Director” who would develop information technologies, allocate

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a solid budget for ICT and use of project control systems for ICT tasks. ICT service was created in 2004 and united the isolated IT experts solving problems of creating and maintaining databases, supporting management information systems, purchasing hardware, and maintaining networks. However, in the future, some of these tasks will be outsourced, because having an extensive IT services division within the company is too expensive.Development of ICT rules that determine what software should be installed, location of the software, how many workplaces should exist in a certain divisions, what tools (applied software) should be available, qualification of personnel and certification of users. Other rules should be developed about the relationship between the IT service and its users, and general rules for the workplace, etc. This stage is completed. There are more than 1,200 workplaces operating that are equipped with modern computers, 70 percent of which are incorporated into the corporate network.Creation of an integrated dialogue environment of ICT users by replacing communication through circulating paper documents with information interchange through a computer Intranet—network with a speed of data transmission up to 100 Mb / sec. This leads to improvement in the skills of all workers in the company, including ICT personnel.Selecting a proper ERP-system: Electropribor is in the stage of choosing a proper ERP-system. Contrary to other large industrial enterprises, where the implementation of the Western ERP-systems takes very long due to the enterprises being unprepared and the relatively low qualifi-cation of the personnel of partner firms (the implementation of SAP R/3 at “Electrosila” lasts already three years), “Electropribor” is making its choice of ERP-system according to criteria such as cost, speed of introduction, integration oppor-tunities, and experience of the partner company. From the considered variants of the Russian (“Galaxy”) and foreign (Axapta, SAP) the preferred one is ERP-Axapta of Microsoft. For the pilot project, Electropribor has prepared about 10 key business-processes. Basic require-ments for the introduction include: full testing of all the operations on key users, and a constant presence of the IT company-partner during the introduction.

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In the field of financial accounting, planning, and control: the preference will be probably given to the Russian ERP-system “Galaxy” which to a bigger extent meets the needs of the financial administration of the enterprise and allows to keep the accounts, in Russian, as well as in international accounting and reporting systems.

ConclusionsIntroduction of ICT completely from scratch in an already working environment under Russian conditions is impossible. At the moment there are no large enterprises in which all the processes are automated. In first instance key business—processes determining the quality of the end production should be automated.

In large Russian companies, developing and producing innovative products, distinguished by different target requirements; different levels of readiness to use ICT; and already having “island” automation of separate processes; an integrated approach for the use of ICT are necessary. Such an approach using the experience of “Electropribor” can be generalized in few strategic principles:

Dedicated top management to a fast and complete introduction of ICT. Concentration of staff responsible for managing the process of ICT introduction in one com-mon, qualified ICT division with authority and a budget. Careful analysis and reengineering of key business processes for the preparation of complex automa-tion, and regulation of workplaces and processes. Continuous target preparation of the personnel for overcoming the natural resistance to ICT introduction. Orientation to the best ICT-solutions with strict selection of suppliers. Maximum outsourcing of ICT support and introduction processes.

13.6 WebServ�ce – PolandThe WebService Internet company is one of Poland’s largest and fastest developing interactive agencies. Established in 1996, the company has implemented almost 300 integrated marketing,

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Annex 8: Company Case Studies 12�

consulting, and IT projects for the main Polish and foreign companies.

WebService provides solutions based on the knowledge and experience of experts in consulting, IT, programming, graphics, Internet services and multimedia presentations.

A key competence of WebService is the skill to develop consistent concepts of distinguishing the client’s company and building its brand. The compa-ny’s offering goes far beyond standard proposals of interactive agencies and includes:

E-marketing – developing Internet services, preparing advertising campaigns, loyalty programs, eCRM, multimedia presentations and NetPR activities. E-consulting – consulting on the implementa-tion of Internet solutions and the application of new technologies. E-technologies – developing and implementing Content Management Systems (CMS), e-learning, Internet and extranet solutions and corporate portals, developing applications upon request, developing visualization systems of the Corporate Identity type, creating the presenta-tion layer for advanced e-commerce applications, e-learning platforms and electronic banking.

WebService e-competences:Focus on network application solutions Internet systems solutionsInternet strategies solutionsAdvisory solutions – communicationsAdvisory solutions – technologyCorporation portalsMultimedia solutionsExtranet Dedicated solutions

WebService Uses Many Different ICT Solutions in its Business:

Tools for presentations E-mail boxes Internet chat Internet communicators Video-conferences Broadband access to the Internet (headquarter and local offices) Mobile access to the Internet (GPRS, WAP, WiFi solution)

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IP telecommunication VPN – Virtual Private Network Office applications Project management systems CRM – Customer Relationship Management Intranet (work flow, organizational structure, address e-book, access to files) Extranet (communication client support, after sales support, orders, etc).

In terms of internal costs of using new technologies, the time and tools of implementation are covered by the company and its staff. The total cost of imple-mentation for WebService clients is not revealed. Asked about the barriers to ICT introduction (internal and external) the company points to the following:

Barriers to ICT introduction – people: They have their daily duties and they do not want to participate in new activities, which would mean another duty for them. They are afraid of changes. Communication problems between client representatives and consultant/ implementer.

2. Barriers for implementation – Client: After the implementation process every organization has to work normally while every implementation of new technologies brings period of training during which problems with using those technologies may appear. Integration of new and old processes is a time-consuming process. The implementation process must take into consideration possible requirements from the client side. The implementation process of new ICT tools requires some specific changes (in service process, contacts with IT users, etc.).

3. Barriers for implementation – technology: Based on users’ needs—not always easy to be incorporated into the new technologies. Integrated with present technologies. Reliability of new technologies is usually lower than after few months of getting experience in using them. Flexibility and graduation of new technolo-gies is required and these two factors are not always possible to predict during the introduction phase.

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13.7 Comarch – Poland3�

Comarch is an international software house and systems integrator that provides innovative IT solutions to telecommunications, finance, banking, service sector companies and public administration. The IT solutions cover billing, ERP systems, IT security, CRM and sales support, electronic communication and business intelligence. Comarch also offers outsourcing and consulting services.

In 1993, a group of the most gifted telecommunica-tions experts at the Kraków University of Science and Technology, led by professor Janusz Filipiak (Comarch’s founder, president, and CEO), was commissioned to conduct analysis, expertise, and feasibility studies for TPSA (a Polish incumbent operator and part of the France Telecom Group). This was, in effect, the birth of Comarch. Less than one year later, the group, know as the “COMputer ARCHitects”, was awarded a contract to implement a billing system for TPSA’s satellite service. Following the success of this first project, TPSA extended its relationship with Comarch by imple-menting other billing and network management systems.

In 2000, Comarch expanded its solutions to offer new modules based on different technologies for new types of customers. In 2001 the telecommuni-cation unit was awarded its first international contract. Development of new services and modules continued. 2002 saw the expansion of the group’s client base to Latin America, the Middle East and the United States.

The background of one of the services of Comarch was a gap in the emerging IT market in Poland, i.e., the need for a network inventory management solution.

13.8 Ep�cor – Poland

IntroductionFor 20 years, Epicor has been a recognized leader dedicated to providing integrated:

enterprise resource planning (ERP); customer relationship management (CRM); and

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supply chain management (SCM) software solutions to mid-market companies around the world.

Epicor leverages innovative technologies like Web services in developing end-to-end, industry-specific solutions for various sectors such as:

manufacturing; distribution; enterprise service automation; and hospitality.

Motivation for ICT Implementation Include:

control and transparency of company’s perfor-mance; need of transparency and complete picture of who is earning and spending how much, for what, and when; with numerous built-in key performance indicators (KPIs), the company wants to measure internal process performance and suppliers’ performance.

How was ICT Used to Resolve Internal Problems:The company implements and uses its business software to supply its own needs in such fields as:

accountancy; client relationship management (CRM); and project management.

As result of using ICT technologies, the company dramatically increased both profits as customer satisfaction.

Barriers to ICT Introduction: The main barrier relates to the human factor—general fear of change and introduction of new things. This requires time as well as internal attention and a positive management attitude.

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this case has been adapted from the project “Strengthening govern-mental policy and institutional cohesion to enhance innovativeness of polish economy before accessing the european union” under ppA (Dutch bilateral programme) carried out by ecoryS in 2002-2005.

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Annex 9

Electronic Business Survey (EBS) Baseline Questionnaire

have to receive appropriate training. Experience has shown indeed that researchers need extensive training in order to be able to understand the scientific principles underlying the questionnaire and its formal rationale in order to be able to use it in practice.

SamplingAs mentioned above, the EBS methodology has been designed to allow comparability between different types of economic activity and geographical settings. Cross-industry and geographical compari-sons, however, require different sampling proce-dures, which can be combined. Sampling procedures may also differ depending on the scope of the project. Is it to be representative nationally or regionally, or does it need to reflect a specific type of economic activity?

Updates and AdaptationsPart B of the questionnaire on technology usage is a selection of questions originally designed for an OECD questionnaire. This questionnaire has substantially evolved since we used it. Consequently, Part B of the EBS questionnaire needs to be substan-tially revised if it is to remain comparable with OECD data.

The core of the EBS questionnaire is sections C and D, which deal with the effects of innovation in relation to the usage of ICT in different business processes. Both sections have been duly tested and repeatedly improved. Nevertheless, the application of each new iteration of the questionnaire reveals possible improvements. This is not different for this version. The same applies to section E and F.

Finally, users need to be aware that the question-naire is modular. Which modules to use will depend on the aim of the project and the resources available.

Some Methodolog�cal RemarksThe EBS methodology has been designed to allow comparisons between industries, sectors, countries and regions. In order to encourage its worldwide usage infoDev has decided to make the EBS ‘Baseline Questionnaire’ available on-line. Its usage and the sharing of results by different parties throughout the world will lead to more diverse and richer datasets, and this to the benefit of all participants.

Before applying the methodology, however, candidate users need to be cautioned about some of its characteristics, in particular relating to the usage of the baseline questionnaire, the sampling procedures and the need to update and adapt the questionnaire. These different aspects are briefly outlined below. For more details and assistance, as well as to obtain access to the datasets contact info Dev ([email protected]).

Baseline QuestionnaireAs its denomination indicates, the baseline questionnaire is not the actual questionnaire, but a standard from which the actual questionnaire(s) will be inferred. The questionnaire has been constituted with scientific rigor. Even though exces-sive economic jargon has been avoided, certain terminology may not be accessible to interviewees. Moreover, the questionnaire is generic and has to be adapted to the different settings (industries, sectors, etc.) to which it will be applied. For example, some industries will prefer the term service to the term product. As trivial as they may seem, such small changes have a major impact on the comprehensibility of the questionnaire.

In sum, research teams and interviewers will have to adapt the questionnaire to context and circum-stances. To be able to make this conversion, they will

Annex 9: Electronic Business Survey (EBS) Baseline Questionnaire 131


ICT Usage/Electron�c Commerce �n Enterpr�ses Survey �n Eastern EuropeThis survey consists of the following modules:

Module A: General Information

Module B: ICT Usage in the Enterprise

Module C: Productivity and Competitiveness

Module D: Effects of Innovation

Module E: Strategic Factors

Module F: Policy and Regulatory Factors

Module A: General Information

A1. Unique Survey Identification Number

........................................................................

A2. NACE Code of the sector

.....................................................................

A3. Name of the Interviewer

........................................................................

A4. Name of the interviewee

........................................................................

A5. Position of interviewee in the enterprise

........................................................................

A6. Telephone number of the interviewee

........................................................................

A7. Activity of the enterprise. Please specify

........................................................................

A8. Name of enterprise

........................................................................

A9. What was the total number of employees in your enterprise in 2002, 2003 and 2004?

December 2002 ..............................................

December 2003 ..............................................

December 2004 .............................................

A10. Has your company acquired or merged with other companies in the past three years?

[ ] Yes [ ] No

A11. Total turnover of the enterprise in 2004In national currency, excluding value added taxes

........................................................................

A12. Value of goods and services purchased in 2004In national currency, excluding value added taxes

........................................................................

A12. Name of holding company (if applicable)

........................................................................

Module B: ICT Usage in the Enterprise

Questions B1 and B2 need to be positive to complete the rest of the questionnaire. This should be checked before the actual interview is taking place.

B1. Did your enterprise use computer/s during the past three years?A computer includes: a personal computer, laptop, personal digital assistant (handheld computer), minicomputer, mainframe.

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal


B2. Did your enterprise use the Internet during the past three years? Internet refers to Internet Protocol (IP) based networks: WWW, Extranet over the Internet, EDI over the Internet, Internet accessed by mobile phones, Internet email.

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B3. How did your enterprise connect to the Internet during the past three years?Tick all which apply

[ ] Analog modem (dial-up via standard phone line)

An analog modem converts a digital signal into analog for transmission by traditional (copper) telephone lines. It also converts analog transmis-sions back to digital.

[ ] ISDN (Integrated Services Digital Network)

ISDN is a telecommunication service that turns a traditional (copper) telephone line into a higher speed digital link, typically 64 Kbps or 128 Kbps. It is generally regarded as narrowband.

[ ] Other narrowband

Includes mobile phone access.

[ ] DSL (ADSL, SDSL, VDSL etc) with contractual download speed < 2Mbps

Digital subscriber line; it is a high-bandwidth, local loop technology carrying data at high speeds over traditional (copper) telephone lines. Contractual download speed is equivalent to advertised speed. A 1.5Mbps (megabits per sec) cut-off may be used in those countries (e.g. US, Canada) where this is more applicable than 2 Mbps.

[ ] DSL (ADSL, SDSL, VDSL etc) with contractual download speed >= 2Mbps

[ ] Cable modem with contractual down-load speed < 2Mbps

A modem which uses cable TV lines for connec-tion to the Internet. Contractual download speed is equivalent to advertised speed. A 1.5Mbps cut-off may be used in those countries (e.g. US, Canada) where this is more applicable than 2 Mbps.

[ ] Cable modem with contractual down-load speed >= 2Mbps

[ ] Other broadband with contractual download speed < 2Mbps

Likely to include technologies such as leased lines, optic fibre cable, some mobile phone access (such as UMTS), satellite and fixed wireless. Contractual download speed is equivalent to advertised speed. A 1.5Mbps cut-off may be used in those countries (e.g. US, Canada) where this is more applicable than 2 Mbps.

[ ] Other broadband with contractual download speed >= 2Mbps

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B4. Which of the following information technologies, if any, did your enterprise use during the past three years?Tick all which apply

[ ] Internet email

Electronic transmission of messages, including text and attachments, from one computer to another by the Internet.

[ ] Intranet within your enterprise

A network using the same protocol as the Internet and allowing communication within an organisation. It is typically set up behind a firewall to control access.

[ ] Extranet between your enterprise and other organisations (including related enterprises) A private, secure extension of the intranet running on Internet protocol that allows selected external users to access


some parts of an organisation’s intranet.

[ ] Local area network (LAN)

Local area network: a network connecting computers within a localised area such as a single building, department or site; may be wireless.

[ ] Wide area network (WAN)

Wide area network: a network that connects computers over long distances.

[ ] None of the above information tech-nologies. Specify

........................................................................

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B5. Did your enterprise use computer networks other than the Internet during the past three years?This includes proprietary or closed networks which are not IP based (for example, the closed computer networks originally set up to facilitate Electronic Data Interchange – EDI).

Excluding: the Internet

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B6. Did your enterprise have a Web presence during the last three years?Web presence includes your own Web site/home page as well as a presence on a third party’s site (including a related entity) where your enterprise has full control over the content of the site/page. It excludes a listing in an on-line directory or other Web pages where the enter-prise does not have full control over the page’s content.

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

purchases/procurement of goods or services via computer networks

B7. Did your enterprise place orders for goods or services (that is, make purchases) via any computer networks during the past three years?Including: the Internet and other computer networks (e.g. EDI over proprietary networks)

[ ] Yes [ ] No If no, go to B11

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B8. Did your enterprise place orders for goods or services (that is, make purchases) via the Internet during the past three years?Refers to purchasing/procurement

Including: via Web sites, specialised Internet marketplaces, extranets, EDI over the Internet, Internet-enabled mobile phones e.g. WAP

Including: orders placed via the Internet whether or not payment was made on-line

Excluding: orders submitted via conventional email

Excluding: orders which were cancelled or not completed

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B9. Did your enterprise place orders (make purchases) for goods or services via com-puter networks other than the Internet during the past three years?For instance: EDI over proprietary networks

Including: orders placed via those networks whether or not payment was made on-line


Excluding: orders which were cancelled or not completed

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B10. Did the computer system/s used by your enterprise to place orders via the Internet or other computer networks link electronically with any of the following as at March 2005?Tick all which apply

[ ] Your enterprise’s systems for ordering or stock control

[ ] Your enterprise’s systems for invoicing customers

[ ] Your enterprise’s systems for production or service operations

[ ] Your enterprise’s systems for delivery of products (including electronic delivery)

[ ] Your marketing or customer relations systems

[ ] Other internal or external systems (please specify)

........................................................................

[ ] Computer system/s for receiving orders not linked to any of the above

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Selling goods and services via computer networks

B11. Did your enterprise receive orders (make sales) via the Internet during the past three years.Including: via Web sites, specialised Internet marketplaces, extranets, EDI over the Internet, Internet-enabled mobile phones e.g. WAP

Including: orders received on behalf of other organisations and orders received by other organisations on behalf of your organisation

Including: orders placed via the Internet whether or not payment was made on-line

Excluding: orders submitted to your enterprise via conventional email.

Confirm the exclusion of email orders.

Excluding: orders which were cancelled or not completed.

[ ] Yes [ ] No If no, go to B18

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B12. How were those (Internet) orders received?Tick all which apply

[ ] Via Website with an email link

[ ] Via an online ordering facility on your website

[ ] Through a third party website e.g. specialised Internet marketplace

[ ] Via EDI over the Internet

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B13. What proportion of your enterprise’s total turnover during the past three years (exclud-ing value added taxes) did Internet orders (sales) represent?Internet orders are as defined in B7.

.......%

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Note: For Internet orders received on behalf of other organisations, include only fees or commissions earned on those orders. However, include the value of Internet sales orders received by other organisations on your behalf (e.g. by agents).


Note: For financial services, include only fees earned in respect of services provided over the Internet.

B14. Please provide a percentage breakdown of the value of Internet orders (sales), by location of customer:

Customers within your country .................. %

Customers outside your country ................. %

=100

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B15. Did your enterprise receive orders (make sales) for goods or services via computer networks other than the Internet during the past three years?For instance: EDI over proprietary networks

[ ] Yes [ ] No

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B16. What proportion of your enterprise’s total turnover during the past three years (exclud-ing value added taxes) did those orders (sales) represent?

.......%

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B17. Did the computer system/s used by your enterprise to receive orders (make sales) via the Internet or other computer networks link electronically with any of the following systems as at March 2005?Tick which apply

[ ] Your customers’ systems (including related enterprises)

[ ] Your enterprise’s systems for ordering or stock control

[ ] Your enterprise’s systems for invoicing customers

[ ] Your enterprise’s systems for production or service operations

[ ] Your enterprise’s systems for delivery of products (including electronic delivery)

[ ] Your marketing or customer relations systems

[ ] Your suppliers’ computer systems

[ ] Computer system/s for receiving orders not linked to any of the above

[ ] Other internal or external systems (please specify)

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

use of ict for other business processes within your enterprise

B18. Did your enterprise use the Internet or other computer networks for dealing with government organisations during the past three years?Note that government organisations are defined per the SNA93. They include government organisations at local, regional and national level. See http://unstats.un.org/unsd/sna1993/glossform.asp?getitem=219

Tick all which apply

[ ] Did not use the Internet or other com-puter networks for dealing with govern-ment organisations Go to B19

[ ] For obtaining information

[ ] For downloading or requesting govern-ment forms e.g. taxation forms


[ ] For completing or lodging forms on-line e.g. applications, claims for grants, tenders

[ ] For purchasing goods and services from government organisations,

[ ] For selling goods and services to govern-ment organisations,

[ ] For making on-line payments to govern-ment organisations.

[ ] Other dealings with government (please specify)………………..………….……

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B19. Did your enterprise use the Internet or other computer networks for providing the following customer services during the past three years?

[ ] Providing product catalogues or price lists

[ ] Product specification or configuration on-line

[ ] Inquiry or contact facility on web site

[ ] Customised web page for repeat clients

[ ] Order tracking on-line

[ ] Customer information collected on-line

[ ] After sales support

[ ] Other. Specify

........................................................................

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

B20 Did your enterprise use internal or external computer networks in any of the following areas of your business during the past three years?

[ ] Marketing

[ ] Purchasing / procurement

[ ] Inventory management

[ ] Production or service operations

[ ] Selling goods and services

[ ] Processing orders

[ ] Delivery and logistics

[ ] Customer service

[ ] Finance

[ ] Budget and account management

[ ] Asset and facility management

[ ] Payroll

[ ] Human resource management

[ ] Training

[ ] General management and decision making

[ ] Sharing and distribution of information or data

Other, specify

........................................................................

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Module C: PRODUCTIVITY

C1. How are the outputs per employee different from what they were three years ago? Are they:In other words, this is a question on labour productivity. Outputs can be either goods or services.

[ ] More or less equal (go to C5)

[ ] Higher

[ ] Lower

[ ] Not applicable

[ ] Don’t know

[ ] Refusal


C2. With what percentage have outputs per employee increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C3. Change in the output per employee of the business is due:

[ ] Mainly To ICT usage (go to C5)

[ ] To ICT usage and other factors

[ ] Mainly to other factors

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C4. What is the most important of these other factors?

[ ] .................................................................

[ ] Organisational change

[ ] Capital investment in equipment

[ ] Changes in salary structure

[ ] Training of staff

[ ] New marketing strategy

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C5. How are your average operational costs per unit of output different from three years ago?This includes depreciation, maintenance and operational costs, but excluding labour costs. Units of output can be measured in terms of items sold, services delivered, customers con-tracted.


[ ] Higher

[ ] Lower

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C6. With what percentage have your operational costs per unit of output increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C7. Change in operational costs per unit of output is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Annex 9: Electronic Business Survey (EBS) Baseline Questionnaire 13�


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C9. How are total revenues from sales different

from three years ago?Number of units sold X price, excluding other revenues, for example from financial investments


[ ] Higher

[ ] Lower

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C9b. Please provide a percentage breakdown of the value of revenue, by location of cus-tomer:



=100

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C10. With what percentage have total revenues from sales increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C11. Change in the total revenues from sales of the business is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal


C13. How are profits from sales different from three years ago?Pre-tax profits but excluding other profit sources such as financial investments.


[ ] Higher

[ ] Lower

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C13b. Please provide a percentage breakdown of the value of profits from sales, by location of customer:



=100

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C14. With what percentage have profits from sales increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C15. Change in the profits from sales is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................




[ ] Taining of staff


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C17. How is the amount of capital investment in innovation different from three years ago?This includes research and development, renewal of technology and the re-engineering of business processes and organisation.


[ ] Higher

[ ] Lower

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C18. With what percentage has the amount of capital investment in innovation increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %


[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C19. Change in the amount of capital investment in innovation is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C21. How is the amount of capital investment in ICT different from three years ago?This is all investment in ICT, regardless of whether it is innovative or not.

[ ] More or less equal (go to D1)

[ ] Higher

[ ] Lower

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C22. With what percentage has the amount of capital investment in ICT increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C23. Change in the amount of capital investment in ICT is due:

[ ] Mainly To ICT usage (go to D1)



[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................







[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C25. How important is competition on price for gaining market share compared to three years ago?

[ ] More or less the same (go to C21)

[ ] More important

[ ] Less important

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C26. With what percentage has competition on price increased/decreased your market share compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C27. Change in the intensity of competition on price is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C29. How important is competition on quality for gaining market share compared to three years ago?

[ ] More or less the same (go to C21)

[ ] More important

[ ] Less important

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C30. With what percentage has competition on quality increased/decreased your market share compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal


C31. Change in the intensity of competition on quality is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C33. How are your average sales prices different from three years ago?

[ ] more or less equal (go to Q X)

[ ] higher

[ ] lower

C34. With what percentage have your average sales prices increased/decreased compared to three years ago?

[ ] 0–10 %

[ ] 10–25 %

[ ] 25–50 %

[ ] 50–75 %

[ ] 75–100 %

[ ] 100–150 %

[ ] more than 150 %

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

C35. Change in your average sales prices is due:

[ ] mainly to ICT usage (go to Q X)

[ ] to ICT usage and other factors

[ ] mainly to other factors


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Module D: EFFECTS OF INNOVATION

effects of process innovation

D1. During the past three years, has your company increased the speed and reliability of business processes?

[ ] Yes [ ] No If no, go to D5

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D2. What was the effect of improved speed and reliability of business processes on your overall business process costs, compared to three years ago? Costs (i.e. all costs including operational and net labour costs)


[ ] Increased

[ ] Decreased

[ ] Remained about the same

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D3. Improved process speed and reliability was due

[ ] Mainly to the usage of ICT [go to D5]


[ ] entirely to other factors

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D4. What is the most important of these other factors?

[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D5. During the past three years, has your company automated tasks?

[ ] Yes [ ] No if no, go to D9

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D6. What was the effect of task automation on your overall business process costs, com-pared to three years ago? Costs(i.e. all costs including operational and net labour costs)

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D7. Improvements in task automation can be attributed

[ ] Mainly To ICT usage [go to D9]



[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D9. During the past three years, has your company improved information management?That is the production, collection, storage, processing and usage of information for efficient management.


[ ] Yes [ ] No if no, go to D 13

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D10. What was the effect of improving informa-tion management on your overall business process costs, compared to three years ago? Costs:That is all costs including operational and net labour costs

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D11. Improvements in information management can be attributed

[ ] Mainly to the increased usage of ICT [go to D13]

[ ] to increased ICT usage and other factors



[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D13. During the past three years, has your company been through organisational changes?


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D14. What was the effect of these organisational changes on your overall business process costs, compared to three years ago? Costs:(i.e. all costs including operational and net labour costs)

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D15. Organisational changes were driven


[ ] To increased ICT usage and other factors


[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................







[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Effects of product innovation

D17. Do you offer customised goods or services to your customers?


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D18. Compared to three years ago, has the value of sales of customised products as a percent-age of total sales revenue

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D19. Changes in the value of sales of customised goods and services are due




[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D20 What is the most important of these other factors?

[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D21. Have you placed new or substantially new products and/or services in the market during the past three years?


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D22. Compared to three years ago, has the value of sales of new or different products/services as a percentage of total sales revenue

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D23. New product and/or service developments are driven

[ ] Mainly to the usage of ICT [ go to D25]



[ ] Not applicable

[ ] Don’t know

[ ] Refusal



[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D25. During the last three years, have you started offering new bundled offerings (i.e. linked the purchase of one good or service to the purchase of another good or service?)

[ ] Yes [ ] No (if no, go to D29)

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D26. Compared to three years ago, has the value of sales of new or different products/services as a percentage of total sales revenue

[ ] Increased

[ ] Decreased


D27. New bundled product and/or service offerings are driven

[ ] Mainly to the usage of ICT



[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Effects of innovation on customer relationships

D29. Compared to three years ago, has the number of customers of your enterprise

[ ] Increased

[ ] Decreased

[ ] Remained about the same [go to D32]

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D30. Is change in the number of customers due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................







[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D32. Compare the value of sales in your customer base to three years ago. Has the value of sales per customer

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D33. Change in the total value of sales per customer is due

[ ] Mainly to our ICT capability

[ ] To our ICT capability and other factors


[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D35. Compared to three years ago, the share of retained customers has

[ ] Increased

[ ] Decreased

[ ] Remained about the same [ go to D38]

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D36. Change in the share of retained customers is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Annex 9: Electronic Business Survey (EBS) Baseline Questionnaire 14�

D38. Compare the value of sales among retained customers to three years ago. Has the value of sales per retained customer

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

Effects of innovation on supplier relationships

D39. Compared to three years ago, has the number of suppliers of your enterprise

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D40. Is the change in the number of suppliers due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D42. Compare the value of purchases in your supplier base to three years ago. Has the value of purchases per supplier

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D43. Change in the total value of purchases per supplier is due

[ ] Mainly to our ICT capability

[ ] To our ICT capability and other factors


[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal


D45. Compared to three years ago, the number of repeat suppliers has

[ ] Increased

[ ] Decreased

[ ] Remained about the same [go to

[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D46. Change in the number of repeat suppliers is due :




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D48. Compare the distribution of the value of purchases among repeat suppliers to three years ago. The value of purchases per repeat supplier has

[ ] Increased

[ ] Decreased


[ ] Not applicable

[ ] Don’t know

[ ] Refusal

D49. Change in the value of purchases per repeat supplier is due:




[ ] Not applicable

[ ] Don’t know

[ ] Refusal


[ ] .................................................................






[ ] Not applicable

[ ] Don’t know

[ ] Refusal


Module E: STRATEGIC FACTORS

Which internal and external factors acted as obstacles and/or advantages in exploiting the potential of ICT usage during the last three years?

Factors internal to the enterpriseChoose the statement that best applies. Tick only one answer per row.

Strategic factors Choose the statement that best applies. Tick only one answer per row.

Available in- house know-how

Existing staff skills and training

Investment costs in ICT

Management attitude

Other (please specify)

Was sufficient to support the uptake of new ICTs

Were sufficient to support effective ICT usage

Could easily be justified

Management was proactive in promot-ing ICT

Were insufficient to support the uptake of new ICTs

Were insufficient to support effective ICT usage

Could not easily be justified

Management was reluctant in promoting ICT

No effects

No effects

No effects

No effects

...................................................................................................................................

Lock-in effects in relations with suppliers

Outsourcing of activities

‘In-sourcing’ of activi-ties

Lock-in effects in customer relations


My enterprise finds it more difficult to switch between different suppliers because of ICT usage

Was encouraged by ICT usage

Was encouraged by ICT usage

My enterprise uses ICT to make it more difficult for its customers to switch between different suppliers

My enterprise find it easier to switch between different suppliers because of ICT usage

Was discouraged by ICT usage

Was discouraged by ICT usage

My enterprise uses ICT to make it easier for its customers to switch between different suppliers

No effects

No effects

No effects

No effects

...................................................................................................................................


Module F: POLICY AND REGULATORY FACTORS

telecommunications infrastructureChoose the statement that best applies. Tick only one answer per row.

regulatory factorsChoose the statement that best applies. Tick only one answer per row.

Available in- house know-how

Existing staff skills and training

Investment costs in ICT

Management attitude


Encouraged ICT usage

Encouraged ICT usage

Was sufficient to encourage ICT usage

Was sufficient to encourage ICT usage

Discouraged ICT usage

Discouraged ICT usage

Was insufficient to encouraged ICT usage

Was insufficient to encourage ICT usage

No effects

No effects

No effects

No effects

Telecommunication costs

Network reliability

Network flexibility and range of services

Geographic coverage of the network


Did not inhibit the ICT usage initiative

Has not been a problem to ICT usage

Was sufficient for the enterprise to engage in ICT usage

Was sufficient to encourage the enter-prise to engage in ICT usage

Inhibited the success of the ICT usage initiative

Has been a problem to ICT usage

Was insufficient for the enterprise to engage in ICT usage

Was insufficient to encourage the enter-prise to engage in ICT usage

No effects

No effects

No effects

No effects

...................................................................................................................................

...................................................................................................................................


Government policyChoose the statement that best applies. Tick only one answer per row.

Support measures

Public awareness raising & demonstra-tion programmes

Private awareness raising & demonstra-tion programmes

Government training programmes

Private training programmes


Contributed suf-ficiently to the success of ICT usage

Contributed suf-ficiently to the success of ICT usage

Sufficiently supported the firm’s capacity to engage in ICT usage

Sufficiently supported the firm’s capacity to engage in ICT usage

Contributed insuf-ficiently to the success of ICT usage

Contributed insuf-ficiently to the success of ICT usage

Insufficiently sup-ported the firm’s capacity to engage in ICT usage

Insufficiently sup-ported the firm’s capacity to engage in ICT usage

No effects

No effects

No effects

No effects

Taxation measures

Public financial support for R&D, diffusion or uptake

Education system

Government provi-sion of on-line electronic services


Encouraged the firm to engage in ICT usage

Was sufficient to encourage the firm to engage in ICT usage

Provided adequately trained personnel to engage in ICT usage

Made it more attrac-tive to engage in ICT usage

Discouraged the firm to engage in ICT usage

Was insufficient to encourage the firm to engage in ICT usage

Provided inadequately trained personnel to engage in ICT usage

Made it less attractive to engage in ICT usage

No effects

No effects

No effects

No effects

...................................................................................................................................

...................................................................................................................................


What is the most useful measure the government can take to stimulate the uptake of ICT usage? Give a brief description and context of the proposed measure(s).

Measure 1 ................................................................

.................................................................................

.................................................................................

.................................................................................

.................................................................................

.................................................................................

Measure 2 ...............................................................

.................................................................................

.................................................................................

.................................................................................

.................................................................................

.................................................................................

Measure 3 ...............................................................

.................................................................................

.................................................................................

.................................................................................

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About infoDev

infoDev is global development financing program among international development agencies, coordinated and served by an expert Secretariat housed at the World Bank Group, one of its key donors and founders. It acts as a neutral convener of dialogue, and as a coordinator of joint action among bilateral and multilateral donors—supporting global sharing of information on ICT for development (ICT4D), and helping to reduce duplication of efforts and investments. infoDev also forms partnerships with public and private-sector organizations who are innovators in the field of ICT4D. The infoDev Secretariat is housed in the Global ICT Department (GICT) of the World Bank Group.

For additional information about this study or more general information on infoDev, please visit www.infodev.org/innovation or contact Seth Ayers, infoDev (email: [email protected] or tel: +1.202.473.4868).

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Information for Development Program

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ICT-ENAblED INNOVATION AND ENTREPRENEURSHIP SERIES



ECORYS Nederland b.V.in collaboration with

TNO and IDEA

2007


ict, innovation, and economic growth in transition …2 ict, innovation, and economic growth in...

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