The European e-Business Report 2004 - Berlecon Research GmbH

The European E-Business Report 20043.1 E-Business and Labour Productivity across theEconomyIntroductionby Tony Clayton and Peter Goodridge, UK Office for National Statistics 83Analysis of ONS firm level data suggests that enterprises with automatic links between their e-commerce systems and operating business processes enjoy higher labour productivity. The effectsdepend on specific process links, and on firm size and sector. It appears too that e-commerce in firmsis becoming less 'experimental, with more stability in use.Earlier ONS work in this area has been limited to e-commerce, the buying or selling of goods viaelectronic networks (Criscuolo and Waldron, 2003). However the potential of electronic networks liesin how they transform the operations of an enterprise, not just its transactions. E-commerce isincreasingly seen as one of many applications of e-business.US work in this area includes a study by Atrostic and Nguyen (2002). They show, using the 1999 USBureau of Census Computer Network Use Survey (CNUS), that:• computer networks in firms have a positive impact on Total Factor Productivity (TFP),• only half such networks were used for buying or selling.Case evidence suggests that integration of business processes through computer networks, withorganisational and human capital investments, promotes gains in labour productivity (Brynolffson andYang, 1999). The concept of a firm with integrated systems linking production, distribution, procurementand sales functions making operations more efficient is supported by international case studies.E-business process measurementQuestions on electronic business processes have been included in ONS e-commerce surveys tobusiness in 2001 and 2002. In both years the questions:• focus on links between e-buying / selling and internal business process types (e.g. logistics), andlinks to customers' and suppliers' e-enabled business processes• cover both open systems such as the Internet, and closed systems.Closed electronic business links predate the Internet, and are often known as Electronic DataInterchange (EDI). Such systems are usually set up by firms to organise procurement or orderhandling and involve dedicated business to business links. Many of these systems are migrating to theInternet, but remain "closed" in the sense that they are owned by one firm, which selects partners thatcan do business through them.The business process questions included in the ONS' 2002 survey (see Exhibit 3.1-1) are based on amodel of business processes developed by Michael Porter (Porter 1985). This framework works wellfor manufacturing, but is less applicable to some firms in services. This has given rise to difficulties forrespondents, particularly smaller firms in the service sector, and discussions have been held withother statistics offices to develop improved survey approaches.The analysis which follows:• explores e-business process use in the 2002 E-commerce Inquiry• examines associations between e-business process integration and labour productivity83Tony Clayton and Peter Goodridge work in New Economy Measurement at ONS. They would also like tothank Cecil Prescott and Mark Pollard of ONS Statistical Output Group for data and advice. This article isbased on research published in ONS Economic Trends during 2003/4. Results were presented at the e-Business Annual Event on 7 July 2004.189