The Effect of E-Business on Corporate Performance: Firm Level Evidence for Belgium

E-business offers buyers and sellers a new form of communication and provides an opportunity to create new marketplaces. In general it is suggested that the development of e-business results in higher firm productivity and efficiency as a result of lower search and transaction costs. However, there are a number of recent studies, which demonstrate that firms engaging in e-commerce need not perform better compared to more traditional enterprises. To date, there is little empirical evidence on the impact of information technology on corporate performance. This paper is the first that uses a large representative data set of Belgian firms to study empirically the impact of e-business on productivity and cost efficiency of firms. Our main conclusions can be summarised as follows: (1) The penetration of the Internet in Belgian firms is high; however, the use of e-business is still limited. (2) It is especially the large firms that engage in e-business and mostly in e-procurement. (3) E-business has no effect on total factor productivity in small firms; however, we find positive effects on performance of e-business in large firms.