A recent study conducted by researchers from Penn State University and supported by the U.S. National Science Foundation has revealed that American companies utilising cloud computing services are more likely to engage in exporting their products and services. This correlation is notably stronger for companies outside major urban centres, highlighting the necessity for increased access to high-speed internet, which facilitates cloud computing and supports economic development.

The research findings, detailed in the upcoming September issue of Telecommunications Policy, underscore the significant edge cloud-enabled firms have over non-cloud users in terms of export volumes. By providing online access to essential computing resources via platforms like web browsers or smartphone applications, cloud computing enables businesses to manage data storage, access various software applications, and more efficiently substitute traditional in-house IT infrastructure with more scalable, flexible, and cost-effective solutions.

Luyi Han, a postdoctoral researcher at the Northeast Regional Center for Rural Development (NERCRD) based in Penn State’s College of Agricultural Sciences and the study’s lead, pointed out that this is the first research of its kind to leverage U.S. firm-level data to explore the impact of cloud service adoption on a firm’s performance in the global market. According to Han, although cloud computing is recognised for driving digital transformation across various industries, little has been understood about its direct influence on the global competitiveness of the firms that deploy it.

Han and his team utilised two significant datasets available through the Penn State Census Research Data Center to conduct their study. The first dataset, the 2018 Annual Business Survey—administered jointly by the National Center for Science and Engineering Statistics and the U.S. Census Bureau—provided detailed information on firm characteristics, including their subscription to different cloud services. The second, the Longitudinal Firm Trade Transactions Database, contained detailed import-export transaction records linked to individual firms. Analysing trade data from 2017 to 2020, the team identified approximately 30,000 U.S. exporting firms and compared them to 430,000 non-exporting firms, performing statistical analyses to uncover distinct differences in cloud computing usage.

The findings revealed that firms subscribed to any form of cloud computing services, such as billing and accounting, security and firewall management, server usage, data storage and analysis, collaboration, file synchronisation, and customer relationship management, were significantly more likely to export their goods or services internationally than those who did not use cloud services. This trend was even more pronounced among firms located outside large metropolitan areas.

Timothy Wojan, co-author of the study and an Oak Ridge Institute for Science and Education Established Scientist Fellow at the NSF’s National Center for Science and Engineering Statistics, noted that the survey mainly focused on small and medium-sized enterprises (SMEs) in non-urban areas. According to Wojan, these firms often face disadvantages in terms of resources compared to larger, urban-based companies, which may limit their capacity to engage in international transactions. The accessibility to cloud services, therefore, could be a game changer, levelling the playing field for these non-urban firms and potentially facilitating their expansion into global markets.

Stephan Goetz, a professor of agricultural and regional economics at Penn State and director of the NERCRD, highlighted the study’s broader implications for the U.S. manufacturing sector. With manufacturing increasingly moving towards rural areas and a decline in urban manufacturing, Goetz suggested that wider adoption of cloud computing services could help maintain competitiveness in the international marketplace, particularly for U.S. manufacturers in rural and non-urban areas.

Despite these compelling findings, Goetz noted that thinsnoting needed to establish causality between cloud computing use and increased exports. However, he remained optimistic about the potential for future research, particularly as the U.S. government continues its significant federal investments to bridge the digital divide, which may allow for more comprehensive longitudinal studies to definitively ascertain whether a causal relationship exists between cloud computing adoption and enhanced export performance.

More information: Luyi Han et al, Cloud computing and rural globalization: Evidence for the U.S. nonfarm economy, Telecommunications Policy. DOI: 10.1016/j.telpol.2024.102814

Journal information: Telecommunications Policy Provided by Penn State