UNIVERSITÄT POTSDAM - Prof. Dr. Paul JJ Welfens

3.3 ICT as a General Purpose Technology?
For assessing the impact of ICT on economic growth, we have to differentiate between
two kinds of innovations. Many innovations concern the generation of new products or
changes of production processes within specific sectors. Some innovations, however,
result in the development of new, general purpose technologies, i.e. broad technologies
with wide applications (BRESNAHAN / TRAJTENBERG, 1995; HELPMAN, 1998).
These general purpose technologies give rise to changes in a wide range of industries
and probably affect production processes, interindustry relations, work organization
and skill requirements (OECD, 2000). Two often cited historical examples for such
epoch-making technologies are the steam engine and electricity (the electric motor),
which caused the first and second industrial revolution. On the other hand, there were
very important innovations in the past which affected only one sector but which had a
great impact on overall economic growth. For example, mechanical spinning-machines
developed in the second half of the eighteenth century in the UK (the spinning jenny by
Hargraves (1767) and the water frame by Arkwright (1769) as well as the following
incremental innovations) affected only textile production, but due to the fact that at that
time a large share of economic activity in the UK was textile production, the productivity
gains associated with this new technology had a significant impact on the UK’s total
economic performance.
Various scholars argue that ICT is such a general purpose technology with
broad impact on many sectors of the economy. Furthermore, the advocates of the “New
Economy” assert that ICT products create spillovers which are not appropriated by the
investor or the consumer. Hence, ICT products might increase total output and income
beyond what is indicated by the actual prices paid for it (ARK, 2000). Against this optimism
some other scholars assign ICT the role of the modern “mechanical spinningmachine”
because in their view the growth acceleration at the end of 20th century was
mainly due to improved productivity growth in the ICT-producing sector
(JORGENSEN / STIROH, 2000). Ultimately, it is a question of empirical research to
assess the role of ICT in growth and structural change. However, it is a common feature
of new general purpose technologies that it takes a long time before they are implemented
(including organizational changes) and used in such a way that they could
develop their abilities to the fullest (DAVID, 1991). In this case, the productivity gains
of ICT will only be reflected in increased overall productivity with a rather large delay
(ARK, 2000).
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