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The analytical firm: estimating the effect of data and online analytics on firm performance

Nesta Working Paper 14/05
Issued: August 2014
JEL Classification: D22, D24, O31, L22
Keywords: Productivity, Analytics, Big Data, Workplace Organisation

Abstract

Despite numerous claims that data is a critical source of competitive advantage for firms, there is little empirical analysis of its link with firm performance. This paper uses a survey of data activity for 500 UK firms which are commercially active online to quantify the contribution that online data use – that is, the collection, analysis and deployment of online customer data – makes to business productivity.

We find that a one-standard deviation greater use of online data is associated with an 8 per cent higher level of productivity (TFP): firms in the top quartile of online data use are, other things being equal, 13 per cent more productive than those in the bottom quartile. When we distinguish between the different data-related activities that firms undertake, we find that greater data analysis and reporting of data insights have the strongest link with productivity, whereas amassing data has little or no effect on its own. Consistent with this, we report significant links between online data analysis and reporting and profitability measures. 

We also study the complementarities between online data activity and other organisational attributes and behaviours. We find that the impact of online data use is stronger for firms with higher levels of employee autonomy, and for firms willing to disrupt their business processes. An implication for managers is that their data investments stand to generate more benefits when they are accompanied by other organisational changes.

Authors

Hasan Bakhshi, Albert Bravo-Biosca and Juan Mateos-Garcia

Authors

Hasan Bakhshi

Hasan Bakhshi

Hasan Bakhshi

Executive Director, Creative Economy and Data Analytics

Hasan leads Nesta's creative and digital economy policy and research.

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Albert Bravo-Biosca

Albert Bravo-Biosca

Albert Bravo-Biosca

Director, Innovation Growth Lab

Albert is Director of the Innovation Growth Lab at Nesta. The Innovation Growth Lab (IGL) is a global collaboration of governments, foundations and researchers that develops and test...

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Juan Mateos-Garcia

Juan Mateos-Garcia

Juan Mateos-Garcia

Head of Innovation Mapping

Juan is the head of innovation mapping at Nesta. There, he leads a team of data scientists, developers, visualisers and innovation experts working in projects using new datasets, ana...

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