Telecommunications Policy 40 (2016) 291–306

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Telecommunications Policy

Cloud adaptiveness within industry sectors – Measurement
and observations
Katharina Candel Haug a, Tobias Kretschmer b,n, Thomas Strobel a
Ifo Institute, Poschingerstr. 5, 81679 Munich, Germany
ISTO and ORG, LMU Munich, Kaulbachstr. 45/II, 80539 Munich, Germany

a r t i c l e i n f o abstract

Available online 14 September 2015 Cloud computing combines established computing technologies and outsourcing advan-
Keywords: tages into a new ICT paradigm that is generally expected to foster productivity and
Cloud computing economic growth. However, despite a series of studies on the drivers of cloud adoption,
Information and communication evidence of its economic effects is lacking, possibly because many of the datasets on cloud
technologies computing are of insufficient size and often lack a time dimension as well as precise
Technology diffusion definitions of cloud computing, thus making them unsuitable for rigorous quantitative
Firm organization analysis. To overcome these limitations, we propose a proxy variable for cloud computing
Productivity usage—cloud adaptiveness—based on survey panel data from European firms. Observations
based on a descriptive analysis suggest three important aspects for further research. First,
cloud studies should be conducted at the industry level as cloud computing adaptiveness
differs widely across industry sectors. Second, it is important to know what firms do with
cloud computing to understand the economic mechanisms and effects triggered by this
innovation. And third, cloud adaptiveness is potentially correlated to a firm’s position in
the supply chain and thus the type of output it produces as well as the market in which it
operates. Our indicator can be employed to further analyze the effects of cloud computing
in the context of firm heterogeneity.
& 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC
BY license (

1. Introduction

Although mention of “the Cloud,” or cloud computing, is now ubiquitous in daily life, our understanding of what it
actually is and how it changes private and corporate structures is surprisingly limited. Most people recognize cloud
computing as a fairly recent development in information and communication technology (ICT). However, the wide range of
opinions of what constitutes cloud computing and how it affects households and enterprises is a partial reflection of the
many different uses of cloud computing and the resulting lack of a universally accepted and understood definition of it.
Beginning several decades ago, advances in processor and related technologies and the spread of the personal computer,
as well as server structures and communication infrastructure like the Internet, helped automatize production and supply
chains and facilitate management and administration. ICT as a whole was expected to have a great influence on the
productivity of industries and economies. Indeed, as suggested by Cardona, Kretschmer, and Strobel (2013), ICT has some of
the hallmarks of enabling or general purpose technologies that are widely adopted and induce further innovations.

Corresponding author. Tel.: þ49 89 2180 6270.
E-mail addresses: (K. Candel Haug), (T. Kretschmer), (T. Strobel).
0308-5961/& 2015 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license

Jorgenson (2005) finds that despite productivity growth rates being by far the highest in ICT- producing industries. We aim to advance the understanding of enterprise cloud computing as well as of the firms using it and the potential mechanisms triggered by implementation of this innovation. Do they intend to increase productivity or flexibility. 2001. 2. its main growth contribution came from total factor productivity (TFP) growth in ICT-using industries while growth rates in ICT-producing industries plateaued (Jorgenson. mostly for hosting their e-mail systems and storing files in electronic form. data on this phenomenon continue to be scarce. and open design platforms (Gansky. Bresnahan. These were mostly found in universities and governmental organizations. Section 5 presents six observations from descriptive analyses of this dataset. frustratingly for researchers wanting to investigate and quantify the growth impact of cloud computing. who therefore shared the infrastructure. “The Cloud” as a logical continuation of ICT-specific services emerged as an architectural innovation (Henderson & Clark. 2001). started renting out idle computing capacity to other companies around 1970. 2014) reports that 19% of EU enterprises used cloud computing in 2014. IBM was the most important producer and developer of this kind of computing architecture (Bresnahan & Greenstein. The economic benefits of cloud computing adoption in the business segment of Europe’s largest economies are estimated to have created 2. For example.6 billion (on public cloud services only) in 2014 and it is projected to more than double that by 2018 (IDC. Eurostat (Giannakouris & Smihily. Hence. 1996. 2005). Jorgenson. 2002. hardware advances favored decentralization. Candel Haug et al. Market research estimated the global private and corporate cloud computing market to have reached $56. Cloud adaptiveness is potentially correlated to a firm’s position in the supply chain and thus suggests a linkage of cloud adaptiveness and the type of output the firm produces as well as the market in which it operates. Interestingly. Mainframes had high upfront costs for hardware and software and were therefore optimized for efficiency. We need to understand why firms implement cloud solutions and what they actually do with the Cloud. Ho. / Telecommunications Policy 40 (2016) 291–306 Various authors identify positive productivity effects from ICT utilization (Brynjolfsson & Hitt. We utilize the widely used Harte Hanks technology database for 13 European countries and the years 2000 through 2007 to develop our cloud indicator and then merge this technology data with balance sheet information from the ORBIS database. We derive the following three suggestions for further research: 1. Similar empirical evidence is given by Brynjolfsson and Hitt (1995. As ICT became more widely used. 2007). As adaptiveness of cloud computing differs widely across industry sectors. Brynjolfsson. Applying our indicator to the data. 1990) that was the result of isolated innovative processes and extended data transmission possibilities. 2003. introducing capacity sharing across organizations. where one machine filled a large room and served all the researchers or employees of an institution. This was the first step toward a network of computers. & Hitt. 2. A primer in cloud computing 2. in our sample. such as the Commodore PET (introduced in 1977) and the Amiga 1000 (1985). Jorgenson. crowdsourcing. Personal computers. services exhibit especially high adoption rates. This is of particular importance as many extant surveys do not employ a precisely defined or even generally accepted measure and longitudinal studies are yet to be conducted. 1996. which has spurred investment in IT and communication equipment (Jorgenson. sharing companies. Section 4 introduces the data and our measure of cloud adaptiveness. 2014). However. Pallis. In Section 3. One of our contributions is that we propose an indirect measure of current or prospective cloud computing adoption that allows researchers to use existing large-scale firm-level panel datasets to analyze cloud diffusion and productivity effects via a reliable and plausible proxy. compile existing first steps toward a theory of cloud computing economics and review the empirical literature on the topic. However. 2010). (2013) give an overview of research on aggregate and firm-level ICT productivity effects. 2010). Erik. Section 6 concludes. confirming aggregate findings and painting a more nuanced picture. Cardona et al.3 million net new jobs between 2010 and 2015 (Center for Economics & Business Research. the commercial world is characterized by a trend toward sharing. studies on cloud computing should be conducted at the industry level. the overall contribution of these industries to economic growth in the United States has been rather limited due to their low share of the economy. 2010). These productivity effects coincided with a massive reduction in hardware prices over the last decades. major structural changes and productivity-enhancing effects are expected from the usage and diffusion of cloud computing. The newly founded insurance company CompuServe. The history of computing and IT begins in the late 1950s with the arrival of the first mainframe computers. & Stiroh. were . or both? 3. We first outline the concept and market of cloud computing (Section 2). 2005. 2003) and Tambe and Hitt (2012) on the effect of computers on firm-level productivity.1. These observations show how the economic effects of cloud computing could be analyzed using our indicator so as to provide initial insight into empirical cloud computing economics and shape an agenda for further research on cloud computing. we make six observations on firm-level cloud computing regarding possible correlates of adoption and the correlation between firm productivity and cloud computing in the context of structural differences in industry sectors. From shared infrastructure to cloud These days. for example.292 K. information technology sharing has a long tradition.

This definition mirrors the widely accepted definition of cloud computing by Mell and Grance (2011) of the US National Institute of Standards and Technology (see Fig. in contrast to simple server usage. Candel Haug et al. renting storage space or computing power from specialized providers. Importantly. 2009). / Telecommunications Policy 40 (2016) 291–306 293 Fig. which reduced the upfront investment costs of IT-using firms and also improved the systems’ agility. cloud computing involves pooling IT resources such as storage or processing in a virtual system serving multiple users. the Internet spread farther and farther and became faster and faster. hosted and run in the cloud. the idea of using a mainframe to centralize vital functions and capacities continued to survive. simplicity. While mainframes required terminals with a command-line interface. 2009. Grossman (2009) identifies scale. The services provided are automatically measured. Suciu. An early innovation quite similar to actual cloud computing involved application service providers (ASP). 1. allowing for hosts to be less capable (Bresnahan & Greenstein. Firms outsource their IT systems either completely or partially.” involving preexisting computing concepts and a novel combination of established components (Armbrust et al. There are three deployment models of cloud computing. 1 shows. and pricing as the key defining features of cloud relative to conventional computing. users therefore cannot locate their data in a certain geographic area. cloud users often can purchase computing resources without any human interaction and at short notice (on-demand self-service). such as enterprise resource planning (ERP) or customer relationship management (CRM). Apostu. 2009). 2013. to test or deploy their own applications in the cloud. 2013). Mell & Grance. Capacities are assigned dynamically according to demand. this thin client network system was a precursor to cloud computing (Leavitt. As Fig. broad network access is indispensable to access and use cloud services (Armbrust et al. cloud computing allows rapid elasticity (scalability) of resources and firms order and pay for only the capacity they actually need at that specific moment. 2010) and eventually prevailed. K. However. 1996). & Todoran. PCs were easy to use and assumed some of the computing tasks. Resource pooling allows for specialization and the realization of economies of scale on the provider side. Halunga. The key characteristic of cloud computing is the virtualization of resources and services. Cloud computing combines the efficiency of a mainframe with the agility of a client/server system. 2009). Suciu et al.. Finally. . From the mid-1990s onwards. OECD. it took the development of open-source software and the adoption of Web 2. (3) Infrastructure as a service (IaaS) is a more basic service mostly offering access to storage capacities (National Institute of Standards and Technology. 2009. So what is cloud computing? Cloud computing is actually a new manifestation of an “old trend. which not only leads to resource optimization but also facilitates billing. linked up to build a firm network. The spread of reliable. However. high-speed networks further drove the development of cloud computing (OECD. While traditional computing requires heavy upfront investment with fixed capacity. (2) Platform as a service (PaaS) refers to access to platforms that allow customers.. 2012). 2013). where thin client systems or the Internet were used to provide software services to a small number of users. 1).0 standards before a system using relatively simple code and that could be widely accessed was possible (Grossman. 2. Cloud computing is billed based on a pay-per-use pricing scheme. NIST definition of cloud computing. Vulpe. Together with grid and utility computing.. This is somewhat similar to earlier hosting services. 2011). 2009. where a customer purchases access to an application. (1) Software as a service (SaaS). but cloud users also benefit from additional services and scalability of capacities (Lin & Chen. This type of client/server structure predominated in the 1980s and 1990s. began to compete with the IBM System 360 family of mainframes (Cusumano. modern thin clients could run applications and services hosted by a server with a graphical user interface. Operating systems and software were written and licensed by software companies. especially software developers.2. Source: Mell and Grance (2011).

so that most cloud carriers are telecommunication operators providing Internet access and connection (National Institute of Standards and Technology. cloud auditors are expected to become of increasing importance in the near future due to growing security concerns. Microsoft (Windows Azure). positively affects firm productivity. with products ranging from a complete cloud-based IT solution to select individual services. A prominent example is Dropbox. The biggest consumer groups are firms. 2011. prior work studies the possible economic effects using small samples or individual firms. Other enablers include consultancies that help firms implement cloud architecture. Moreover. Stepping. adoption and use of cloud computing” (Marston et al. or additional-value service providers. Amazon (with Amazon Web Services) is the dominant provider. the firm can react more quickly to changing conditions in its business environment. and IBM (BlueCloud) distant followers (SearchCloudComputing. National Institute of Standards and Technology. / Telecommunications Policy 40 (2016) 291–306 2. & Tai. In other words. Cloud users can benefit from these efficiency gains. and enablers or complementors (Gerpott & May. First.294 K. Cloud computing economics A review of the literature on cloud computing reveals that academic research is still exploratory and generalizable results few and far between. Cloud enablers or complementors are auditors. Green. we focus on the user side of the market. in which tasks and peak times can be more diversified (Armbrust et al.. Haucap. John. & Stühmeier. there are no comparable data on cloud computing. Finally. and risk while gaining flexibility. making them cloud complementors. Etro (2009) conducted a macro-simulation and finds that by lowering entry barriers. Cardona et al.. there is as yet no empirical evidence confirming this cost advantage. The common view in the literature is that cloud computing enables firms to reduce their fixed investments. Cloud computing users do not have to invest in powerful personal computers and servers and hence do not incur high upfront investment and related capital costs. but stores its data on Amazon’s Simple Storage Service (S3) (TechTarget Glossary. making cloud computing an important business- to-business (B2B) market. 2011. using cloud services avoids opportunity costs due to underutilization of local IT equipment and outdated software and security standards (Prasad. cloud computing could create up to 1 m jobs in the European Union. the number of IT staff on-premises can be reduced as cloud services handle many tasks previously undertaken by traditional IT staff. Costs. and suppliers refining their business models to meet them. 2009. 2013). brokers. A third organizational and 1 In this paper. such as maintenance. Candel Haug et al. This changing cost structure is considered to chiefly benefit small. Conley. Lam (2013) studies cloud providers’ capacity investment incentives according to different market structures. 2011). overall costs. they incur variable expenses in the form of operating costs or pay-per-use fees (Armbrust et al.. Marston. interesting economic issues include competition and industry structure. (2013) document that IT usage. Also. The cloud computing market is close to a state of maturity. Yoo. 2 Hecker and Kretschmer (2010) further state that markets with high scale economies tend to concentrate.. Cloud carriers provide interconnection from providers to consumers. there is consensus in the literature that cloud computing reduces total IT costs for firms or at least for SMEs. Google. 2011. 2011). Li. This cost advantage could originate from a specialized cloud computing vendor reaping economies of scale vis-à-vis an in-house IT solution. & Heales.and medium-sized enterprises (SME). To our knowledge. Marston et al. 2014. or Amazon is cost efficient for less demanding applications. flexibility. Brumec and Vrček (2013) model the costs of cloud computing usage and compare them with the costs of a de-novo on-premise computing system and show that leasing computing resources from Microsoft. 2012.”2 and better utilization of equipment (Brumec & Vrček. 2011).1. cloud enablers “sell products and services that facilitate the delivery. Bayrak. 2014). Bayrak et al. and firm organization One of the central economic results of cloud computing is the changing cost structure at the firm level. which offers storage and file sharing solutions. The cloud computing market The cloud computing market is comprised of four major groups of actors: cloud consumers. 2011. capacity investment (Lam 2013). 2011). and pricing. we have vendors that own and operate the required data centers and platforms. Second.3. 2013). as they have limited funds to invest in assets and suffer from unused peak capacities more than do large firms. cloud enablers add value to bare-bones cloud services. The flexibility of cloud computing even lowers entry barriers for new firms or sectors. Nimis. but that it is still preferable to execute highly complex applications on-premises. & Wilkie. 2013). 3. 2011). but have to weigh them against the transaction costs of the outsourcing process (Riordan & Williamson. Flexibility gains from cloud computing also affect firm organization. with users having developed a more precise idea of their needs. updates. which might lead clients to change their outsourcing behavior as they are losing bargaining power. . typically measured as the number of PCs in a firm. In addition to the changing cost structure. specialization. providers. Etro. with Google (Google Drive). Instead. & Ghalsasi. Zhang.. including maintenance and upgrades of the system (Marston et al.1 3. 2013). Bandyopadhyay. 1985). Bräuninger. 2009. On the supply side of the public cloud market. Hence. 2009. However. Hecker and Kretschmer (2010) call it “general wisdom [that] specialized outsourcing providers can produce more cost efficiently due to economies of scale. On the provider side. Klems.. they identify no universal cost advantage of cloud computing over on-premises IT systems. carriers. and the like.

the lack of time for implementation. smaller firms are more likely than larger ones to adopt cloud computing. Candel Haug et al. Second. allowing for changes in corporate culture. and Li (2013) study cloud adoption in SMEs by conducting semi-structured interviews and analyzing the resulting data using the Technology-Organization-Environment (TOE) framework (explained in more detail in the following section). the adoption of cloud computing is expected to shift the production possibility frontier of firms outward and thus should result in higher total factor productivity. none of the studies we found explicitly address heterogeneity between industries or discuss explicit productivity effects. Kern. Alshamaila et al. All three parts of the TOE framework seem to affect cloud computing adoption. we structure our argument along the lines of Tornatzky and Fleischer (1990). It is shown that firm mechanisms and dynamics differ significantly by size (Mack & Rey. which is why the literature has thus far focused on SMEs. and the resulting research agenda we take a first step toward closing this gap. or work from various or different locations. its market power. 2009).1. 2014). ERM. 4. First. Finally.3. / Telecommunications Policy 40 (2016) 291–306 295 potentially productivity enhancing effect of cloud computing is the alteration of business processes. However. and so forth. Conversely. The third determinant identified by Tornatzky and Fleischer (1990) is the firm’s environment. Kreijger. the necessity and success of an innovation adoption depends on the firm’s organizational characteristics. all factors of the TOE framework were relevant for the adoption of cloud services. Papagiannidis. need to exchange data with clients. The Technology-Organization-Environment (TOE) framework applied to the cloud Based on the findings discussed above. neither study explains how cloud computing is defined. 3. & Willcocks. In the case of cloud computing. Benlian. the firm’s position in the supply chain. and Solana-González (2013) and Stieninger and Nedbal (2014) include 94 firms from Spain and nine from Austria. by Carcary. Another interview-based study.3 An important prerequisite for cloud computing is an interconnected IT system within the firm and a broadband connection to the Internet. 2012. so that “alignment between the objectives of an organization’s IT strategy and business strategy is directly related to IT effectiveness and overall business/organizational performance” (Carcary et al. Data 4. Unfortunately. the innovation has to fit the firm’s existing equipment and processes. They find that except for competitive pressure.. regulation. Existing microdata Benlian et al. who identify three broad areas that determine a firm’s adoption decision and the subsequent efficiency gains. Moreover. and a generally low level of cloud computing in the company’s sector. Alshamaila. Further. While 3 Note. a firm needs to be able to assimilate the innovation.. Stieninger & Nedbal. The service sectors are expected to especially benefit from adopting cloud computing as they often dispose of huge amounts of data. Most of the studies on SMEs involve a fairly small sample and typically focus on one sector and/or one country. By contrast. 2008). 2013). Pérez-González. g. regulatory factors across countries may also matter for cloud adoption.2. Doherty. 3. 2002. consisting of the industry. and the industry in which it is active all may (or may not) result in external pressure or requirements to adopt cloud computing. Overall. that a high current level of technological infrastructure may also reduce the incremental benefits of adopting a new technology. and Conway (2013) finds that the most important reasons for cloud non-adoption are security concerns. The study did not investigate drivers of adoption but a surprising 35% of survey participants claimed to be unaware of any cloud computing benefits. and customer-faced services (Klems et al. CRM) with regard to potentially adopting them in the form of software as a service (SaaS). this one of Irish SMEs. (2013) show that among SMEs. While most studies assume SMEs to be more likely to adopt cloud computing. 2014). If a firm already has a sufficient technological infrastructure. With our indicator. first observations. collaboration with business partners. production processes. K. the firm is more likely to be able to implement the innovation successfully and to realize economic benefits. such as size. and Buxmann (2009) find that large firms have a head start in SaaS adoption. the literature focuses on small firms as the decrease in upfront investment and the increase in flexibility are of particular advantage for these firms (Aljabre. small and medium-sized enterprises (SME) are expected to benefit most from adopting cloud computing. . Stieninger and Nedbal (2014) find that firms are afraid that their corporate image will be negatively affected if they use cloud computing and that they are also concerned about security and privacy management. however. The survey samples of Trigueros-Preciado. For cloud computing. a firm’s incumbent ERP system may be just such a substitute. Cloud computing and SMEs As mentioned above. Similar transforma- tions occurred after the implementation of earlier technologies such as ERP and CRM (McAfee & Brynjolfsson. Hess. respectively. 1996). (2009) asked approximately 400 top IT executives of German firms to rate different application systems (e.. albeit an insignificant one. as a well-performing substitute is already available (Shy. as well as its needs (technological context). 2013). market structure and competition. and the like. firms with a security-sensitive environment might deliberately choose not to use cloud computing (Kshetri.

We proxy a firm’s organizational readiness by its usage of groupware software and the share of laptop computers. A WAN indicates that a firm has a good network connection. but also likely to be particularly open to data transfer and interconnection. 4 Varian (2010) terms this combinatorial innovation. Candel Haug et al. Our dataset covers the years 2000 through 2007 and includes general firm characteristics like the number of employees and industry classification. Laptops point to flexible working patterns. A firm is considered cloud adaptive if all four criteria are met (see Fig. 2). To do this. Firms using this kind of IT structure are likely to introduce cloud computing at some point. which is that an innovation is not always a departure from core concepts or a radical change of components’ architecture. A cloud adaptive firm might already be using cloud computing or may adopt in the near future.296 K. with a slight bias toward medium-sized and large enterprises. The same drawbacks are found in studies conducted for or published by firm research entities such as Deutsche Bank (Heng & Neitzel. When studying potential drivers of innovation adoption. and Ullrich (2012) and Carcary et al. Firms using groupware and with a high share of laptops have already implemented organizational patterns compatible with a centralized and flexible IT structure. We build our indicator of cloud adaptiveness as a dummy variable that takes the value 1 if all four variables that describe the conditions for cloud adoption take the value 1. and the standardization of data were and are well-known components. and platforms as a service. which was developed by the market intelligence firm Harte Hanks and covers more than 260. platforms. most likely in the form of leased priority lines and broadband. To proxy a firm’s technological readiness for cloud computing adoption we use information on the number of network devices per employee and on the existence of a wide-area network (WAN) in the firm. / Telecommunications Policy 40 (2016) 291–306 these first exploratory results on the drivers of cloud computing adoption and economic effects are helpful. such as Lotus Notes. There is information on cloud computing usage in the latest Harte Hanks data waves. (2002). Our data and measure of cloud adaptiveness We use the CI Technology Database (CITDB). the idea of virtualizing computer and server structures and offering software. (3) share of laptops among all firm PCs. The variables are: (1) number of network devices per employee. Groupware. We transform the two continuous input measures—number of network devices per employee (1) and share of laptop computers (3)—into dummy variables. thus creating a common workspace. rather. we compute the average across firms for each year and attribute a value of 1 to all firms with a number of network devices per employee or a share of laptops above the respective year’s mean value. laptops. We merged the technology data with financial data from the Bureau van Dijk ORBIS database so as to have company information on sales. helps employees communicate or share documents.000 European firm locations. This is exactly how cloud computing came to be. Loebbecke. However. including mobile access to firm data. 2012). (2013) state that cloud computing is an evolutionary regrouping of earlier IT elements. we need a variable for cloud computing usage that is consistently measured and invariant to who responds to the survey. Centralized computing and storage. they are cloud ready or cloud adaptive. 1990). Network devices allow direct access to internal networks or the Internet. and usage of different hardware and software. and (4) usage of groupware software (Fig.2. We assume that a firm with extensive network access possibilities and a good connection infrastructure is not only ready to use cloud computing in a next step. in other words. and Kretschmer. Goldfarb. as well as IT-specific information such as the number of desktop PCs. CITDB contains detailed information on other IT resources and elements used in firms. The CITDB has been used in prior studies such as Bresnahan et al. Forman. (2) usage of a wide-area network (WAN). allowing particularly fast data transfers. we neither know exactly what was measured nor can we say anything about diffusion patterns given these studies are in a cross-section. and Pernias (2012). With this information we construct a composite indicator of cloud adaptiveness based on the concept of architectural or combinatorial innovations (Henderson & Clark.4 We define technological and organizational readiness and will assess other organizational characteristics and the firm environment in our subsequent empirical analysis. Thomas. We therefore construct our measure by studying the usage and combination of crucial IT resources that together lay the groundwork for cloud computing in a firm. interconnected IT resources. IT employees. The number of observations with cloud computing information is very low in our sample. “the essence of an architectural innovation [is] the reconfiguration of an established system to link together existing components in a new way” (Henderson & Clark. This means that firm employees are connected via IT and use common platforms. Miravete. 4. To identify economic effects. network devices. The sample is largely representative. and so forth. an important feature of cloud applications. This concept is based on the notion that existing technologies offer a vast set of components that can be combined and recombined to create new products and services. 1990). Kretschmer (2004). however. However. 1990) and the TOE framework (Tornatzky & Fleischer. especially if the surveys also include non-adopters. and Deutsche Telekom AG (2010). changes the linkages between the components and therefore constitutes an architectural innovation. For them. or software. infrastructure. . Our definition of cloud adaptiveness matches the concept of architectural innovation developed by Henderson and Clark (1990). adopting cloud computing is less costly and acceptance among employees likely to be high. KPMG (2013). surveys revealing decision makers’ preferences are the correct methodological choice. 2). but the variable’s informative value is limited as there is no information on the underlying definition of cloud computing or on how the technology is understood by the person interviewed. assets. and Greenstein (2012).

Moreover. the readiness of a firm to use it. TFP). While the structure of our measure can be used for other datasets as well. implying that all four factors are equally important in classifying a firm as cloud adaptive.g. see the Appendix. we use a second sample (productivity sample) that is more restricted than the first sample due to the availability of variables needed to estimate the productivity measure (total factor productivity. 5. thus providing an early set of empirical findings on cloud computing at the firm level. instead. We use two unbalanced panel datasets for our analysis.434 companies in 13 European countries. The correlation between the sophistication dummy and the cloud dummy is 0. In a survey. we abstained from such an approach in our study. a limitation of our indicator is that it does not measure cloud computing as a technology or computing paradigm.985 observations from 25. Clearly. For the paper’s productivity analyses. Another limitation is the equal weighting of the indicator’s four input variables. This means that the sampling methodology does not guarantee representativeness and the questions are derived from practical considerations.5 We now apply our measure of cloud adaptiveness to the data and investigate the distribution and characteristics of cloud adaptive firms. the indicator was constructed by focusing on the technological and organizational readiness for cloud computing and therefore measures a particular form of sophistication. a period during which actual cloud services were not yet widely used. adaptiveness serves as a proxy for cloud computing. but. Cloud adaptiveness indicator. while 47% of the non-cloud-adaptive firms have a PC intensity above the median so that one does not automatically imply the other. Our data cover the years 2000–2007. we document the productivity levels of cloud adaptive firms. We develop a first measure of the phenomenon based on more precise firm-level data. However. The first sample (adoption sample) is comprised of 73. However. we split the sample into technologically sophisticated firms (firms whose PC intensity is above the sample median of PC intensity) and non-sophisticated firms: 99% of the non-sophisticated firms are also non-cloud- adaptive. the questions that need to be asked to obtain our input variables can be answered clearly and unambiguously. such as size) and at the firm environment (such as industry or supply chain position). As a robustness check. The descriptive observations in this section follow the TOE framework by looking at correlates of cloud adaptiveness (e.. Source: Authors’ own diagram. This is a simplification that cannot be remedied as long as there are no other studies on cloud computing and the transition from more traditional IT systems. Alternative approaches of varying weighting schemes like e. we might be measuring a firm’s technological sophistication rather than its actual cloud adaptiveness. a limitation of our analysis is that the Harte Hanks data were not collected by a research institution.28. This is a typical problem when working with proxies and cannot be entirely overcome. Candel Haug et al. 5 For more information on the data. 2. K. organizational characteristics of cloud adaptive firms. regression-based approaches of constructing composite indicators typically require a priori information on the selection of a dependent variable as target variable. However. / Telecommunications Policy 40 (2016) 291–306 297 Fig. . Our measure of cloud adaptiveness contributes to the literature by allowing researchers to use existing large-scale datasets for their work. We cannot measure the outsourcing and the scalability characteristics of a cloud and thus provide a lower bound of potential effects associated with being cloud adaptive. to date.g. Firm-level surveys asking about the “usage of cloud-computing” are thus of limited explanatory power. Observations on cloud adaptiveness Our cloud adaptiveness measure captures a firm’s technological and organizational readiness to adopt cloud computing. Further. as we preferably wanted to set up a general measure of cloud adaptiveness. Additionally. Given the variables and timeframe of our dataset. the term “cloud computing” has not been well defined—neither in academic research nor by practitioners. the dataset has been proven useful and reliable in a number of academic studies.

2011. while small firms are less able to make this type of investment and thus are not expected to be among the early adopters (Mack & Rey. 2014). which could explain this sector’s high share of cloud adaptive firms (Fig. 5. Sample: Adoption sample. For example. The characteristics of cloud technology differ from those of general IT and the literature contends that SMEs benefit more from cloud computing due to its pay-per-use and scalability features. / Telecommunications Policy 40 (2016) 291–306 Fig. the market in which it operates.. In our panel. Source: Harte Hanks. Later in the sample period. large firms have the financial means to afford high investment in IT. However. Second. which is lower than that of large firms. The tertiary or services sector6 is typically more data intensive than the manufacturing sector. standardized systems often cannot satisfy the varying needs of the different firm departments.” 5. and. 2014. small firms catch up within several years whereas medium-sized firms do not. allowing firms a degree of financial and capacity flexibility (Sultan. While the different structures and challenges of small and large firms are intuitive to a large extend. However. it does capture whether firms have a highly interconnected IT structure and use central communication platforms. Our adaptiveness dummy cannot reflect this property.1. However. small firms’ tasks tend to be more homogenous and generate rather uniform data. authors’ own calculations. 2009) and are expected in the case of cloud computing as well. the situation of medium-sized firms is ambiguous. Cloud adaptiveness by firm size. Candel Haug et al. ORBIS. Large firms tend to have a more complex task structure than small ones and thus need various types of software and hardware (Kretschmer. 4).298 K. This coincides with Benlian et al. there is no significant difference between small and large enterprises. Shy. . Hence. this also means that they might achieve lower cost advantages from cloud computing adoption than smaller firms as large firms might already be realizing economies of scale with their original data centers and IT networks (Marston et al. Hence. firms with 249 employees and less (small and medium-sized) have similar levels of adaptiveness. Finally. First. 3). small firms exhibit the same level of cloud adaptiveness as large firms in 2002 and 2003. but this finding does not lead to easily interpretable stylized facts about firm adoption behavior. Prasad et al. large firms often have professional IT departments that keep abreast of trends and constantly work to optimize the company’s IT structure. 6 Our definition of the service sector includes business and financial services as well as trade and partly privatized sectors such as health or education. While our results match our expectations at the beginning and end of our panel period. almost by definition. Large firms are early adopters but small firms catch up quickly Differences in adoption behavior between smaller and larger firms are found in several empirical studies on general IT (Nguyen. 2011) while avoiding high upfront investment. Service firms are more cloud adaptive than manufacturing firms We expect to find heterogeneity across sectors in cloud adaptiveness. 2004). Further. the cloud adaptiveness of small firms plateaus. 1996).2.. large firms may have experience with early cloud-like structures. The transaction costs of becoming cloud adaptive are therefore lower for small than for large firms. whereas the share of large-firm adopters continues to rise. at the organizational level. We would expect large firms (those with more than 249 employees) to be clearly ahead of small firms (those with less than 50 employees) when implementing productivity-enhancing IT. the early catching up of small firms is not that surprising after all. firm size seems to be associated with cloud adaptiveness.’s (2009) finding that when it comes to SaaS adoption. financial services are highly data intensive. for the years 2004 through 2007. It does not cover public administration or utilities. our results over time are somewhat surprising (Fig. Rogers (1995) states that size is “probably a surrogate measure of several dimensions that lead to innovation. Conversely. The industry in which a firm is active shapes the firm’s technological needs as well as its organizational characteristics. there is empirical evidence that large firms imitate innovations more quickly than small ones (Geroski. 2000). 3. However.

.0” (Hermann. storing and transmitting large amounts of data. upstream firms provide materials and intermediate inputs to firms more downstream the supply chain. In their survey of Irish SMEs. These are then used by firms farther down the supply chain to produce consumer goods. which themselves produce capital goods. labor. 4. where supply-chain optimization.8 A possible reason for this is that upstream sectors are not incorporated into e-business operations as much as sectors in the middle and closer to the end of the supply chain. In our data. Cloud adaptiveness by sector. K. and requiring time-sensitive communication with clients and trading partners. Musolesi & Huiban. automated processes. Candel Haug et al. processing research and trading operations and computational algorithms for risk management. Scalability and mobility are crucial in services. In manufacturing. but still has higher rates of adoption than intermediate sectors. in manufacturing firms producing on-premises. being upstream industries. (2013) find that the majority of the cloud adopters in their sample are companies active in the KIBS sector. 2014. Source: Harte Hanks. however. In manufacturing.9 Also.7 5. mostly supplying technically advanced machinery for production. indeed. In production theory. are surprisingly non-cloud-adaptive (Fig. 5). 1985). services were viewed as technologically backward and passive adopters of technology. Sample: Adoption sample. but also engages in marketing and sales activities.” in which production is highly interconnected and computer optimized. we use the European statistical definition of main industrial groupings according to Commission Regulation (EC) No 656/2007 of 14 June 2007. More sectoral-level research is needed to better understand the role of cloud adaptiveness in single sectors. More precisely. which requires sophisticated data management and transfer systems. 2010). Data-intensive applications are also required in logistics and transportation. it not only has high technological requirements. 7 In the German-speaking countries. 2010) such as consulting or IT outsourcing that create value by transferring their knowledge to clients. 9 Of course. and consolidation of global supply-chain providers are a source of competitive advantage. particularly in sectors where product lifecycles are short. This statement applies more generally to supply chains.3. but this view has changed dramatically with tertiarization and information technologies (Musolesi & Huiban. factors of production—capital. 2012). The same holds for knowledge- intensive business services (KIBS) (Mack & Rey. industrial electronics. firms in the capital goods sectors such as machinery. and materials—serve as inputs to firms’ internal value chains. as the capital goods sector is embedded at different stages of the value chain. which can be a highly data-intensive process. and measurement equipment show higher cloud adaptiveness than firms in the consumer and intermediate goods industries. The consumer goods sector is less cloud adaptive. authors’ own calculations. Carcary et al. this phenomenon has been termed “Industry 4. Goods are often tailored to customer needs. A survey of the fashion and apparel sector discovered that one reason for the limited use of e-business applications within the industry was the “lack of interoperability between the many systems in use” (DG Enterprise & Industry. ORBIS. this could change with the advent of “smart factories. a traditional server structure is often more appropriate. / Telecommunications Policy 40 (2016) 291–306 299 Fig. upstream capital goods industries are more cloud adaptive than downstream consumer goods industries. 8 To classify industries. intermediate goods sectors are usually more specialized and therefore do not need the same flexible interconnecting capacities as businesses in the capital or consumer goods sectors. Traditionally. & Otto 2015). Pentek. increased use of procurement platforms might result in upstream sectors catching up. However. the latter. which link up to form an industry-wide supply chain (Porter. which depend more on markets and customers.

They resell to retailers. the lack of each of which leads to a lack of trust and security in cloud computing. Candel Haug et al. state-dominated industries. are the most cloud adaptive service sectors. a still incomplete legal framework for (international) cloud services. interconnecting ICT applications in the health-care sector. Fig. 5. that is. but that information exchange and teleconferencing are not widespread. whereas retail shows a very 10 Cloud adaptiveness of a sector is not correlated with firm size in the sector. and social services. and Kühling (2013) analyze the diffusion of e-health. For example. Cloud adaptiveness in the services sectors. Cloud adaptiveness in manufacturing. they have not only a flow of information. who in turn sell the goods to private consumers. unregulated market sectors are more cloud adaptive than nonmarket sectors. the low cloud adaptiveness of these sectors could be due to insufficient service stability.300 K. Haucap. while retail trade and regulated. but also a flow of goods. In our data. such as health. Data security and quality of services are requirements a health-care network or cloud system needs to fulfill. requiring not only the treatment but also the exchange of data permanently and in real time. 6). 6. Wholesale firms work closely with producers but they do not produce goods themselves. the wholesale sector is one of the most cloud adaptive service industries. Falck. Hence. In services. business and financial services. education. and the absence of widespread cloud certification services. as well as wholesaling. . the highest shares of large firms are in the finance (high cloud adaptiveness) and retail (low cloud adaptiveness) sectors. cloud adaptiveness can differ significantly within single supply chains In our sample.4. along the supply chain (Prajogo & Olhager. in contrast to other service sectors. / Telecommunications Policy 40 (2016) 291–306 Fig. They find that doctors and hospitals use some ICT applications. A characteristic of the retail and wholesale businesses is that. 2012). 5. are the least likely to be cloud adaptive firms (Fig.10 This is intuitive as business and financial services are very data-intensive sectors.

Our analysis does not allow drawing causal conclusions on the productivity effects of cloud computing or cloud adaptiveness. and transport equipment. In all service sectors. this is not what we find in the data (Fig. 6). measured by total factor productivity. Candel Haug et al. They find that implementing information technology such as scanners and electronic data interchange (EDI) that allows quicker order processing and sharing of demand and inventory data can reduce supply chain costs by as much as 10%. However. This is surprising at first sight as both are closely vertically related and basically execute very similar tasks. without using the same IT structure and communication channels. as TFP abstracts from the effect of inputs. 2012). Standardized cloud computing solutions might be cheaper and more widely compatible. Brynjolfsson & Hitt. IT integration of a supply chain is not costless. it is a more appropriate measure of technical change. Cloud computing could further enhance these advantages. A global wholesale company needs to be constantly in touch with geographically dispersed producers. Cachon and Fisher (2000) conducted an empirical study on the value of information sharing in a grocery supply chain between supplier and retailer. except for the machinery sector. We find no significant differences in the financial sector or in the health/education/social sector. Tambe & Hitt. The partly insignificant differences might be due to higher within-sector firm heterogeneity. which was reasonable in the 1990s. We would expect similar intra-industry effects driven by modern ICT like cloud computing and its direct precursors. that is. Looking downstream. A causal specification needs to resolve whether these productivity differences are driven by cloud adaptiveness. Not only do cloud adaptive firms achieve higher sales per employee. 2012). the residual in the firm’s output function after having controlled for capital and labor as physical inputs. 13 To estimate TFP at the firm level. a locally operating retail firm requires less e-business interaction.11 In Fig. which can no longer be measured based on capital as services became an essential part of it. Sectors with large differences in labor productivity are instruments. The retail trade market is currently experiencing the emergence of large players that pressure smaller suppliers into the adoption of their specific IT systems (DG Enterprise and Industry. In manufacturing. wholesale tends to operate at a global scale and therefore faces a much greater challenge in organizing both the flow of information and the flow of goods. with regard to cloud adaptiveness. IT-driven intra-industry productivity differences are found in several studies controlling for various other factors (e. which further allows for the incorporation of spillovers and therefore proxies for cloud computing as a general purpose technology. we follow Levinsohn and Petrin (2003). in the near future. 2012). As labor productivity is only a partial productivity measure. Their operations differ in scale and complexity though. there is empirical evidence that cloud computing and firm productivity are highly correlated. chemicals. it is surprising that companies upstream and downstream the supply chain can cooperate without being fully integrated. . An alternative productivity measure is total factor productivity (TFP).. We therefore expect retail companies to catch up. However. Retail business is generally locally oriented. but the picture is less clear. especially since integrated logistics system can help reduce shortages and optimize inventories (Prajogo & Olhager. 2012).14 This finding shows a strong heterogeneity among a sector’s cloud adaptiveness and its firm-level productivity performance. cloud adaptive manufacturing firms generally exhibit higher average labor productivity12 compared to manufacturing firms that are not as cloud adaptive. 5. 7(1). This method accounts for biased coefficients of the production function originating from unobserved productivity shocks by explicitly modeling capital and intermediates within the estimation. the time period most productivity studies focus on (Tambe & Hitt. see also Van Beveren (2012). it reflects the joint influence of a host of factors and therefore it is easily misinterpreted as technical change. 12 Labor productivity is measured as sales divided by employment. Cardona et al. cloud adaptive firms are more productive Evidence on the productivity effects of adopting cloud applications is scarce.13 According to our estimates (Fig. but also observing and analyzing the development of international markets. Interestingly. not only communicating and negotiating. This method ensures consistent estimates of inputs in the production function and thus enables unbiased calculation of total factor productivity by subtracting estimated input contributions from output. 8).6. K. 14 Note that in this section we consider both manufacturing and service sectors. these companies manage and maintain a large distribution network. / Telecommunications Policy 40 (2016) 291–306 301 weak disposition toward cloud computing (Fig. Still. 7(2)). Employing our cloud adaptiveness measure for two different types of productivity measures separated by industries provides some initial observations on the productivity of cloud adaptive and non-cloud-adaptive firms in manufacturing sectors.g. there are TFP differences throughout all manufacturing sectors. The correlation between a sector’s cloud adaptiveness and the productivity difference between adaptive and non-adaptive firms in this sector is slightly negative. Hence. (2013) confirm that most studies use either PC intensity or IT capital as a measure for IT. However. 5. they also are more successful in the choice and employment of technologies. Cloud-similar technologies are not necessarily adopted in the sectors where they allow for the highest productivity We would expect industries in which cloud adaptive firms have a large productivity advantage to also have a high adaptiveness rate. these improvements are either in labor productivity or in TFP. not necessarily both. By contrast.5. These findings underline the importance of accounting for the specific nature of cloud computing as it is incorporated in technical change. cloud adaptive firms are more productive than non-cloud-adaptive ones and we also find significant mean differences for almost every sector. 1996. For further explanation. 11 We find the same qualitative results in the services sectors.

recall that the productivity measure of TFP is not input driven.4). it might take a while to catch up. 7. If a firm observes a cloud productivity potential in its sector. (a) Labor productivity in manufacturing. bounded growth potential of the industry or particular market characteristics. Candel Haug et al. (b) TFP in manufacturing industries. That is. Another reason for adoption is pressure from business partners or the necessity of integrating into a supply chain (see Section 5. However. Further. so that TFP differences between cloud adaptive and non-cloud-adaptive firms in a sector only weakly correlate with the adaptiveness share. the same given adaptiveness is associated with high TFP differences between firms in retail. become cloud adaptive and realize the productivity advantage. This can be due to limited needs of this technology in the sector. One driver of adoption is flexibility gains (see Section 3). more productive firms might be more cloud adaptive in general. Moreover. While these measures might not be productivity-enhancing in the short run. One potential explanation why firms’ productivity advantages are not necessarily associated with its cloud utilization across all sectors is reverse causality. / Telecommunications Policy 40 (2016) 291–306 Fig. adoption of the software and hardware that readies firms for cloud computing might be driven by factors other than direct productivity gains.302 K. firms often choose to adopt for non- . they can secure the survival of the firm in the medium or long run. particularly at the start of an innovation adoption lifecycle. Another explanation of the low adaptiveness in sectors with a high productivity potential is a first-mover advantage meaning that the firms that became cloud adaptive first realize productivity advantages other firms cannot. While e. a given adaptiveness in the print sector is associated with relatively low TFP differences between cloud adaptive and non-cloud-adaptive firms.g.

especially at the firm and industry level. PaaS. Finally. or IT departments that are autonomous and agile in their adoption decisions. TFP differences and cloud adaptiveness. future work should attempt to discover the key characteristics that prompt firms to adopt cloud computing and result in successful. Candel Haug et al. Our approach enables scholars to work on diffusion and productivity and to establish appropriate econometric identification strategies that help test theoretical predictions. it is other firm characteristics that are correlated with the adoption decision. and what they actually do with it. conducts annual telephone surveys to take stock of specific IT types used by individual sites (establishments) of more than 10. however. Conclusion Cloud computing is expected to generate productivity effects in firms and growth in the economy. cloud computing adoption varies based on a firm’s position in the supply chain and thus suggests a linkage of cloud adaptiveness and the firm’s type of output or its market power in addition to its industry. We thus observe firms’ cloud computing adaptiveness over time and study adoption and productivity patterns at a stage where comprehensive firm-level panel datasets on cloud computing are not yet available. Our measure builds on an existing panel of firm-level data and takes into account the genesis of cloud computing as an architectural innovation. Harte Hanks. SaaS. to understand the underlying potentially productivity-enhancing mechanisms. Our findings show that firm size is not a good predictor of cloud adaptiveness per se. K. survey firms on their business and production processes that use a cloud service. With a view to the currently still poor data situation. care should be taken to discover which elements of cloud computing firms actually implement (e. economic reasons. a market intelligence firm. communication.g. More specifically. We also find that the service sector is more cloud adaptive than the manufacturing sector and that it is especially business services and the financial and wholesale sectors that are most cloud adaptive. data-collection efforts should focus on a representative panel. and organization. By modeling and quantifying such underlying mechanisms.. Dataset We use a dataset with data from two sources: (1) the Harte Hanks CI Technology Database (CITDB) and (2) Bureau Van Dijk’s ORBIS. be based on a precise and thorough definition of cloud computing. The first step was the identification of all establishments that belong to one company. We develop a measure of cloud computing that lets us examine its diffusion pattern and its association with firm productivity across industries. / Telecommunications Policy 40 (2016) 291–306 303 Fig. studies on cloud computing should be conducted at the industry level due to massive heterogeneity. This productivity advantage. we aggregated the Harte Hanks dataset to the company level or extrapolated where required. As the CITDB data are collected at the establishment level while the ORBIS database covers the company level. the economic effects of cloud computing can be understood and a consistent framework of cloud computing economics can be developed. we suggest employing our cloud adaptiveness dummy in future empirical research on cloud computing and the underlying economics of it. We . Further. Interestingly. IaaS. does not necessarily benefit a large fraction of the firms in this sector. Appendix A. productivity-enhancing implementation. in the manufacturing sector we find positive productivity differences between cloud adaptive and non-cloud-adaptive firms. or even more fine-grained aspects). Our six empirical observations give us an opportunity to suggest an agenda for further research. and collect information on how cloud computing affects firm costs. rather. 6. In the long run. With the help of the TOE framework and based on this paper’s observations. innovativeness as an important part of corporate image. given that the concept of cloud computing is very broad. for example.000 German firms. 8. a manager’s interest in technology.

698 5.73 7. Table 3 Sample statistics and distribution of cloud adaptiveness in the productivity sample. were summed and expressed as relative numbers (per employee). Transportation. Table 2 Descriptive statistics of input variables in the adoption sample. Financial Sector. Adoption sample Num.65 Other 2598 7. and public administration sectors. Business Services. In this paper we use two different extracts from the resulting panel dataset: (1) The adoption sample for Sections 5. As the data structure is rather complicated and sometimes misleading. Financial Sector.4 of the paper and (2) the more restricted productivity sample for Sections 5. construction.25 14. . matched bvd (Bureau van Dijk) company IDs to the CITDB site IDs using the company name. and repair services. Notes: A firm can grow or shrink throughout the panel.31 3552 7. Business Services. Median Min.68 14.67 2593 2.6. and 0 otherwise. amusement sector).69 7194 4. The service sectors include Retail.072 33.4 Wide-area network (WAN) 73.526 23. Employees 73. % Num. Next.95 Medium (50–249) 39.985 0.304 K.05 Medium (50–249) 16.98 Services 25.53 0 177. of obs. of network devices per employee (NET) 73. / Telecommunications Policy 40 (2016) 291–306 Table 1 Sample statistics and distribution of cloud adaptiveness in the adoption sample. ORBIS balance sheet data. dev. Transportation.396 53.36 Large ( Z 250) 7771 23. not firms. unbalanced panel from 2000 to 2007.985 0.070 Num.17 10.51 9.71 6545 5. Integers.53 9.04 4090. of obs. The service sectors include Retail. and Other Services (legal.50 1 0 1 Share of laptops among all firm PCs (LAP) 73.29 0 0 1 Notes: Descriptive statistics are based on observations. of firms % of cloud adaptive firms In 2000 In 2007 Total sample 73. construction.20 0.61 12.1 0 1 Groupware (GROUP) 73. Mean Std.51 Industries Manufacturing 20.69 0.30 Data: Harte Hanks CI Technology Database. and the three-digit SIC code of every observation. “Other sectors” include the primary. Adoption sample Num. Refer to Tables 1–4 for sample statistics.74 1.89 9143 6. GROUP.13 7.48 Data: Harte Hanks CI Technology Database. of firms % of cloud adaptive firms In 2000 In 2007 Total sample 32.93 11. We chose this approach because of the high number of missing data points for the balance sheet variables required for the productivity analysis. personal.18 Firm size Small ( o 50) 8270 25.985 0. ORBIS balance sheet data.91 11.36 2909 3.608 100.23 105 1 260. such as the total number of PCs.451 62. Candel Haug et al.44 13.16 0.761 56.06 6671 7. and public administration sectors. unbalanced panel from 2000 to 2007. we had two types of technology variables to aggregate: dummy variables were set to 1 at the firm level if any of the company’s establishments used this technology. for example.076 5.65 9.94 Industries Manufacturing 41. public utilities. and Other Services (legal.96 Other 7152 9. Wholesale. Wholesale.90 0.985 100.567 50.091 5.063 23.09 0. Health/Education/Social.985 457. the results were cross-checked carefully and in some cases weighted.83 3328 8.00 25. Notes: A firm can grow or shrink throughout the panel.13 7. public utilities.434 5. “Other sectors” include the primary. % Num. of obs. and repair services. Adoption sample Num.985 0.81 5995 6.09 Large ( Z 250) 17.14 11. personal.00 11. amusement sector).1–5. the zip code.53 0.43 Services 9559 29.30 1 0 1 Cloud adaptiveness (Cloud) 73.58 Firm size Small ( o 50) 17.05 14.71 9.97 994 2. Health/Education/Social. Max.985 0.5 and 5.

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