Estimating the macroeconomic information technology investment effect of Korean small firms with system dynamic simulation

This study was motivated by a practical need for estimating the macroeconomic effect of government IT promotion investment, specifically for micro and small firms. Small firms have been in a disadvantageous position to adopt and utilize new IT compared with medium or large-sized firms. Small firms don't have enough resource to acquire IT in general, therefore private IT companies don't have much incentive to develop IT services and products for small firms. Lack of feasible IT solutions for small firms again restricted active IT adoption of small firms. Government recognized the vicious cycle, therefore decided to promote private IT companies to develop IT services and products for small firms. Our main concern was to identify a relevant government supporting policy, especially in the amount and the period. To do this, we first constructed a system dynamics simulation model to investigate important factors and causal relationships among them. Simulation results showed 2.19% of GDP contribution and 0.16% of employment contribution in max from small firms' IT adoption. Also we could find that investing proper amount for a short period would be far better than maintaining investing small amount for a long period.