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Theories of Infrastructure

This document discusses several theories related to how information and communication technologies (ICT) can drive growth in the service sector: 1) The Digital Divide Theory suggests that greater access to ICT infrastructure like the internet leads to greater economic growth and development in the service sector. 2) The Innovation Diffusion Theory focuses on how adoption of ICT within a region can increase innovation and productivity in the service sector. 3) The Network Externalities Theory suggests that the value of service sector increases as more people and businesses adopt ICT infrastructure. 4) The Resource-Based View Theory posits that ICT infrastructure can provide a competitive advantage for regions in the service sector. 5) The Institutional Theory suggests

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Peter Christopher
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68 views3 pages

Theories of Infrastructure

This document discusses several theories related to how information and communication technologies (ICT) can drive growth in the service sector: 1) The Digital Divide Theory suggests that greater access to ICT infrastructure like the internet leads to greater economic growth and development in the service sector. 2) The Innovation Diffusion Theory focuses on how adoption of ICT within a region can increase innovation and productivity in the service sector. 3) The Network Externalities Theory suggests that the value of service sector increases as more people and businesses adopt ICT infrastructure. 4) The Resource-Based View Theory posits that ICT infrastructure can provide a competitive advantage for regions in the service sector. 5) The Institutional Theory suggests

Uploaded by

Peter Christopher
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Granger, C.W.J. and Newbold, P. (1974) Spurious Regressions in Econometrics.

Journal of Econometrics,
2, 111-120. http://dx.doi.org/10.1016/0304-4076(74)90034-7

Rao, B. (2007). Cointegration: for the Applied Economist, Springer.

Gujarati, D.N. (2004). Basic Econometrics, Fourth Edition.

The Digital Divide Theory: This theory suggests that access to and use of ICT infrastructure, particularly
the Internet, is a key determinant of service sector growth. It posits that regions or countries with
greater access to ICT infrastructure will experience greater economic growth and development in the
service sector. The Organization for Economic Cooperation and

Development has defined the term digital divide as the “gap between individuals, households,
businesses and geographic areas at different socio-economic levels with regard both to their
opportunities to access ICTs and to their use of the Internet for a wide variety of activities” OECD (2011).
The digital divide exists for a number of reasons. One of the chief reasons is the widening economic gap
in incomes. A rise in income leads to a rise in the accessibility and usage of technology such as the
internet. Poverty and economic barriers cut peoples’ access to technology and information.

OECD, “Understanding the digital divide,” OECD Digital Economy Papers 49, OECD Publishing, Paris,
2011.

The Innovation Diffusion Theory: Diffusion of Innovation (DOI) Theory, developed by E.M. Rogers in
1962, is one of the oldest social science theories. It originated in communication to explain how, over
time, an idea or product gains momentum and diffuses (or spreads) through a specific population or
social system. This theory focuses on how the adoption and diffusion of ICT infrastructure and
technology within a region or country can drive service sector growth. It suggests that regions or
countries with higher levels of ICT adoption will experience greater innovation and productivity in the
service sector. The end result of this diffusion is that people, as part of a social system, adopt a new
idea, behavior, or product. Adoption means that a person does something differently than what they
had previously (i.e., purchase or use a new product, acquire and perform a new behavior, etc.). The key
to adoption is that the person must perceive the idea, behavior, or product as new or innovative. It is
through this that diffusion is possible. One key building block of this theory is that the ICT innovation is
posited to be communicated through communication channels to prospective new adopters. This aspect
implies that models fully built based on this theory need to take into account the transmission pathways
for information about the innovation. James and Avijit (2016)
James P. and Avijit Sarkar (2016). Theories of the Digital Divide: Critical Comparison

2016 49th Hawaii International Conference on System Sciences. DOI 10.1109/HICSS.2016.484

The Network Externalities Theory: Network externalities are in fact nothing more than a particular form
of the

externalities just set out. Network externalities are positive externalities, they are consumption
externalities (rather than production externalities), and their most distinctive. feature is that they occur
(strongest) for a well-defined category of consumption goods.

More specifically, network goods are “products for which the utility that a user derives

from consumption of the good increases with the number of other agents consuming

the good” Katz and Shapiro (1985). This theory suggests that the value of a service sector increases as
more people and businesses adopt and use ICT infrastructure. For example, a higher number of internet
users in a region can increase the demand for e-commerce and other online services.

M.L. Katz and C. Shapiro, Network externalities, competition, and compatibility, Amer. Economic. Rev.
75(3) (1985) 424–440.

The Resource-Based View Theory: Resource-based theory contends that the possession of strategic
resources provides an organization with a golden opportunity to develop competitive advantages over
its rivals. These competitive advantages in turn can help the organization enjoy strong profits, especially
over time (Janice, 2014). This theory suggests that ICT infrastructure and technology can be considered a
resource that can be leveraged to gain a competitive advantage in the service sector. It posits that
regions or countries with more advanced ICT infrastructure will have a greater ability to compete in the
service sector. ing because the term resources is used in many different ways within everyday common
language. It is important to distinguish strategic resources from other resources. To most individuals,
cash is an important resource. Tangible goods such as one’s car and home are also vital resources. When
analyzing organizations, however, common resources such as cash and vehicles are not considered to be
strategic resources. Resources such as cash and vehicles are valuable, of course, but an organization’s
competitors can readily acquire them. Thus an organization cannot hope to create an enduring
competitive advantage around common resources. A strategic resource is an asset that is valuable, rare,
difficult to imitate, and nonsubstitutable.

Janice E., (2014). MASTERING STRATEGIC MANAGEMENT – 1ST CANADIAN EDITION

Chapter 4: Managing Firm Resources. https://opentextbc.ca/strategicmanagement/

The Institutional Theory: This theory suggests that the service sector growth can be driven by the
presence of institutions that support the development and use of ICT infrastructure and technology. For
example, the presence of government policies that promote internet access can lead to growth in
service sector like e-commerce, telecommunication,etc. Institutional theory considers the processes by
which structures, including schemes, rules, norms, and routines, become established as authoritative
guidelines for social behavior.

Different components of institutional theory explain how these elements are created, diffused, adopted,
and adapted over space and time; and how they fall into decline and disuse.

Institutional theory, as applied to business organizations, is an approach to understanding organizations


and management practices as the product of social rather than economic pressures.

Adoption and retention of many organizational practices are often more dependent on social pressures
for conformity and legitimacy than on technical

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