Knowledge Spillovers and Productivity : Evidence from Enterprise Software

We evaluate the value to firms of participating in an Internet-enabled network of practice in which IT professionals exchange ideas and help each other resolve problems related to the implementation and use of enterprise software. We show that IT spillovers that take place in these online community networks contribute positively and significantly to firm productivity: by our estimates, a one percent increase in inward IT knowledge spillovers translates to a $0.48 million increase in added value for an average firm in our sample. Further, we highlight the limits of the extent to which firms can benefit from participating in these Internet-enabled networks of practice, by showing that the value of spillovers arises primarily from flows of technical rather than business knowledge related to the enterprise software’s modules.

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