Using panel data for German and Dutch firms from the services sector, this paper analyses the importance of ICT capital deepening and innovation for productivity. We employ a model that takes into account that innovation and ICT use may be complementary. The results show that the contribution of...

European business services have experienced about two decades of almost zero productivity growth. The paper investigates whether this is caused by weak dynamic market selection. The time pattern of scale-related inefficiencies is used as an indicator for the effectiveness of market selection.We...