UNCTAD 2003

1. Enterprise e-commerce; measurement and impact UNCTAD 2003 Evidence and lessons from the UK Tony Clayton ONS 2003

2. Key messages UNCTAD 2003 • UK measurement of enterprise e-commerce started out with a simple objective - to measure the scale of what’s happening • User needs for measurement quickly moved beyond ‘how big is it?’ to focus on how ICT changes behaviour, and policy • Complexity and rapid change in this area has made measurement difficult => ‘Keep the survey simple!’ • Evidence shows how use of electronic networks is associated with productivity gains … not always as policymakers expect • We can also identify some effects of electronic networks on market and price behaviour, and therefore on welfare.

3. UNCTAD 2003 • annual enterprise e-commerce survey, on ICT use across all firm sizes, and the use of electronic transactions and e-business processes • quarterly household surveys on internet access and use for various purposes, on attitudes, and expenditure • monthly survey of Internet Service Providers which tracks the growth in internet accounts • quarterly and annual surveys of investment at firm level, including investment in ICT hardware and software. Main UK surveys on ICT and e-commerce

4. UNCTAD 2003 • Focus on ICT investment and intermediate expenditure and its effects on business behaviour and performance • International growth accounting approaches use ‘ICT investment’ as the determining input • Issues of measurement; including price of capital stock, asset life, capturing software investment • Growth and productivity results for UK / Germany / France rather different from US Macro-economic approach to ICT Impact

5. UNCTAD 2003 • Able to examine firm behaviour, not just inputs • Test models against the wide range of firm experience, success and failure, rather than sector aggregates • Survey data available for the work reported here: • Structural Business Survey (ABI) • e-Commerce Survey • Community Innovation Survey • Producer Price surveys Micro approach - advantages

6. UNCTAD 2003 • Adoption of new business processes takes time, from investment to behaviour change • e-Commerce in UK is even now dominated by closed systems used by larger firms • High level of ‘churn’ in electronic markets • Large - but declining - number of ‘marginal’ internet traders Findings from the UK e-commerce survey

7. UNCTAD 2003 Entry and exit in e-markets is high

8. UNCTAD 2003 E-Commerce sales via internet and other networks (2001)

9. UNCTAD 2003 • Rapid change makes it difficult to reconcile year to year results • Focus on behaviour, rather than technology questions • technology goes out of date • respondents can tell you what they do, not technical details • Simple survey questions give more reliable answers • Pilot test everything you can, and validate extensively What we’ve learned on surveys

10. UNCTAD 2003 • US 1999 Computer Network Use Supplement, linked to Census • ‘Yes / no’ data on a wide range of network applications • 38,000 firm observations (plant level) • Evidence for 5% positive labour productivity effect across all network application / sectors (Atrostic & Nguyen 2002) • Tested for selection bias and model specification US work on productivity and electronic networks

11. UNCTAD 2003 Nearest UK equivalent in ABI (2000 onwards)

12. UNCTAD 2003 e-Procurement associated with higher nominal productivity (manufacturing sectors only)

13. UNCTAD 2003 Similar effects across most manufacturing sectors

14. UNCTAD 2003 • Linking between overlapping surveys is hard • partly because of high level of experimentation and change • wide range of behaviour patterns among smaller enterprises • high rates of error on technical questions • and then there are sampling differences between surveys • Adding qualitative questions to ‘structural’ surveys is easier, even if it limits the range of issues you can tackle • simple questions get more consistent answers • bigger surveys get over the error and uncertainty problems • better chance of picking up differences in different markets • no problem with sampling differences What we’ve learned about measuring impact

15. UNCTAD 2003 • Effects in EU case studies • depends on ‘balance of power’ • supply chain management usually benefits buyer • Effects from the literature • simple products, commodity effect • expanded supply, lower search costs, more competition • closed supply systems, dominant customers • added value services, potential for customising • cutting out step in distribution chain What effects are due to pricing?

16. UNCTAD 2003 Classic ‘buyer advantage’?

17. UNCTAD 2003 Changing competitive framework?

18. UNCTAD 2003 Single pricing regime

19. UNCTAD 2003 • Need to be aware that measurement must address distribution as well as efficiency issues • behaviour as important as economic variables • look for ways to detect ‘winners and losers’ • Tackling different sectors and sizes is worth the effort • needs bigger surveys, even on simple questions • economic effects are highly market specific, so simple ‘one size fits all’ economic models are likely to fail What we’ve learned about market impact

20. UNCTAD 2003 • On productivity analysis • improve quality of e-commerce identifiers (for market effects) • develop data on e-business processes (for efficiency effects) • develop approach for services • develop ICT capital at firm level, to separate investment infrastructure from behaviour • On pricing • extend to all manufacturing sectors, but problem with services • can we develop framework to characterise price effects? Comments or questions to tony.clayton@ons.gov.uk Future Steps