Can IT Service Enhance the Productivity of Japanese Firms? - Cloud Computing, CIO, and Japanese Firms' Performance -

In recent years, IT use by Japanese firms has shifted from accumulating IT assets on their own to purchasing IT services, such as cloud computing. In this paper, we focus on the impacts of the introduction of cloud computing and a Chief Information Officer (CIO) on firm performance.

For this study, we match the microdata of the "ICT Workplace survey" and the "Basic Survey of Japanese Business Structure and Activities" by the Ministry of Economy, Trade, and Industry (METI), and analyze the effects of cloud computing and the presence of a CIO on the performance of firms, such as productivity, sales, number of employees, etc.

The introduction of cloud computing increases firms' sales and productivity, and accelerates their FDI, even after controlling for the fixed effects of firms. Sales increase in the main business, but sales in side businesses increase even further. The number of patents held increases, however R&D expenditure does not increase accordingly. This paper also examines the effect of introducing a CIO, which is one of the personnel systems that Japanese firms have been slow to introduce. Although the introduction of CIOs increases sales, there is no significant impact on productivity because it also increases input volumes. Firms that have introduced CIOs have more sales in their main industries resulting in greater business concentration to the main business. Similarly to the benefits of cloud computing, CIO adoption does increase patent holdings, although it does not increase R&D spending.

The results in this research suggest that the adoption of cloud computing services and the CIO position both contribute to higher productivity, faster sales growth, and more efficient innovation of firms.