*1.1. ICT and Productivity*

As a general-purpose technology, information and communications technology (ICT) can play an important role in productivity growth, which is the main driver of the wealth of nations and market competitiveness [1,2]. Investment in ICT enables new technologies to enter the production process and is viewed as a key factor in e fficiency gains in ICT using industry [3,4]. The OECD [5] has noted that developments in ICT, combined with internationally fragmented production processes, are making business services increasingly dynamic, transportable and tradeable. According to Miller and Atkinson [6], approximately two-thirds of U.S. growth in total factor productivity (TFP) between 1995 and 2004 was due to ICT, and ICT has contributed roughly one-third of growth ever since. Kvochko [7] identified five common economic e ffects of ICT: direct job creation, contribution to GDP growth, the emergence of new services and industries, workforce transformation, and business innovation. Thus, ICT contributes to economic development through multiple pathways in various sectors.

The energy sector (e.g., electricity and gas supply) is one of the key industries investing in ICT to deliver cost savings and efficiency gains [8]. In particular, distributed energy systems have been widely diffused to efficiently utilize renewable energy generation in recent years. Figure 1 shows the investment trend related to the energy sectors. Figure 1a shows that investment in the global power sector has shifted from fossil fuel to renewable energy and networks in the past decade. Another important trend is that the ICT sector's investment in new energy technology companies has rapidly increased in recent years (see Figure 1b)). The rapid growth in investment by the ICT sector has helped diffuse distributed energy systems with renewable energy generation in networked environments such as smart grids [9].

**Figure 1.** The investment trend related to the energy sector. (**a**) Investment by global power sector; (**b**) Corporate investment in new energy technology companies, by sector of investing company. (Source: IEA World Energy Investment 2018).

According to the Information Technology Industry Council [10], ICT can be used to improve the reliability, resiliency, and efficiency of grids' transmission, storage and distribution infrastructure through better real-time monitoring and control of the grid systems under increasingly complex energy grids. Nagai et al. [11] explained that ICT can be used in energy infrastructure in three ways: (1) as a system for cost-based analysis of operational efficiency, (2) as a support system for optimizing operation and maintenance, and (3) as a visualization tool for the managemen<sup>t</sup> of key performance indicators and risks. They also noted that ICT has the advantage of developing an autonomous decentralized energy system, which is essential for controlling large-scale and various types of renewable energy supplies. According to the World Energy Council [12], ICT, especially software tools, can provide data and information on how to better configure the various elements of an energy generation system so as to optimize its overall performance in a cost-effective manner.

### *1.2. Literature Review and Novelty of This Study*

Many previous studies have analyzed how ICT contributes to productivity growth [13–15]. According to Polák [16], more than 70 articles in the last 20 years have investigated the contribution of ICT. For example, Edquist and Henrekson [17] examined the effect of ICT on the change in TFP in 50 industries in Sweden from 1993 to 2013. They concluded that ICT capital growth is not significantly associated with TFP growth. Strobel [18] compared the contribution of ICT capital to TFP and its spillover effect in thirteen manufacturing industries between the U.S. and Germany from 1991

to 2005. Strobel [18] clarified that ICT has a di fferent function in a ffecting productivity growth. Regarding cross-country analysis, Ceccobelli et al. [19] investigated the impact of ICT capital on labor productivity (LP) using data on 14 countries from 1995 to 2005 and a nonparametric approach to estimate productivity change.

However, most previous studies focus on national-level activities or manufacturing sectors, with few studies addressing the energy sector (e.g., the German energy sector [20]). Additionally, many previous studies cast a spotlight on the di fferences between ICT capital data and non-ICT capital data, and most of them use ICT gross capital stock to investigate the impact of ICT capital on productivity. ICT capital is composed of several di fferent types of capital, including information technology (IT) capital, communication technology (CT) capital, and software capital.

To clarify the details on the relationship between ICT capital and productive performance in the energy sector, the di fferences in the characteristics of ICT capital must be considered. Notably, not all ICTs contribute equally to improved productive performance in the energy sector. Certain ICTs directly contribute to reducing labor costs, such as smart meters and sensors for remote measuring, whereas others contribute to improving e fficiency because they improve the grid managemen<sup>t</sup> system. Therefore, the incentives for the energy sector to invest in ICT vary depending on the type of technology considered. A determinant analysis of productive performance that focuses on the characteristics of each type of ICT is important for suggesting e ffective policies to encourage development and to induce activities in such technology in the energy sector.

Another important contribution of this study is that it focuses on the period from 2000 to 2014. As explained above, previous studies on the e ffect of ICT capital mainly focus on the period from 1990 to 2005. Meanwhile, innovative ICT utilization, such as the internet of things, has dramatically advanced in recent years [21]. Considering recent ICT innovations is important for proposing policy. Energy strategies, especially with regard to nuclear power and renewable energy di ffusion, have been strongly a ffected by the Fukushima Daiichi nuclear disaster on 11 March 2011 [22]. Investigating the relationship between ICT capital and productivity change using a recent dataset on the energy sector can provide key information for strategy building for future energy systems and ICT investments.

Based on this background, this study investigates the effect of ICT capital stock share as a determining factor in market competitiveness using both production efficiency as a performance evaluation method and an econometric approach for the analysis of determinants. The objective of this study is to clarify the ICT capital effect on productivity in the energy sector, focusing on the characteristics of each type of ICT.
