Technology - development investment and firm Productivity in developing countries. This paperemp irically investigates the impact of IT facilities and develop ment investments on labor productivity to test the “productivity paradox ”, the interaction eff ects off irm-level contextual factors on this relationship , and the determinants of productivity for Vietnamese enterp rises. | ISSN 1859 0020 Journal of Economics and Development , , December 2011, pp. 37 - 57 Technology - Development Investment and Firm Productivity in Developing Countries Nguyen Thi Nguyet Central Institute for Economic Management, Vietnam Email: nguyetnt@ Abstract This paper empirically investigates the impact of IT facilities and development investments on labor productivity to test the “productivity paradox”, the interaction effects of firm-level contextual factors on this relationship, and the determinants of productivity for Vietnamese enterprises. In contrast to most of the existing literature that mainly consider patents or R&D in the relationship with firm productivity, this study investigates actual investments in two main areas: (i) Information technology facilities; (ii) development investment capital. The balanced panel dataset, which corresponds to a strong process of integration and globalization in Vietnam during the period 2001-2005, is investigated separately for the manufacturing and commercial-service sectors as well as the whole economy for comparison. Applying the fixed and random effects models, my findings imply that the “productivity paradox” does not occur for R&D for all firms, for computerization for manufacturing firms, for LAN connection and Internet situation for the commercial firms. In addition, the effects of IT facilities and development investments on labor productivity significantly depend on contextual moderating factors. Keywords: productivity, “productivity paradox”, IT investments, development investments, interaction effects, developing countries JEL Classification: D24, E22, O14, O33, O47 Journal of Economics and Development 37 Vol. 13, , December 2011 1. Introduction Increasing productivity plays an extremely important role in a firm’s business strategy as well as economic growth. From a microeconomic perspective, an increase in productivity is deemed to improve profitability (Ghosal .
