Investment in Information and Communication Technologies (ICT): The Role of Geographic Distance and Industry Proximity

Employing data from Italian manufacturing firms, this paper attempts to check the existence of geographic and industry distance effects on the investment in information and communication technology (ICT). Geographic distance is defined by the Euclidean distance between each possible pair of locations (municipalities) according to their geographical coordinates. Industry proximity is measured by the firms’ industry distance according to the trade intensity between sectors. The model specified here refers to the combined spatial autoregressive model with autoregressive disturbances (SARAR), which are modelled simultaneously. The results show that both geographical and industry proximity have positive effects on the amount of ICT investment by firms. Furthermore, an econometric analysis shows that productivity, R&D activity, subsidies, reorganization, and labor composition are jointly correlated to ICT investment.