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The purpose of this paper is to determine the impact of e-commerce (EC) on total factor productivity (TFP) of Iranian manufacturing SMEs. The model is based on both econometrics and growth accounting approach to fill the gaps of previous studies. This study model uses two years of panel data and has six EC measurements: number of employees using computer, number of employees using the internet, using the internet to gather and offer information, e-buying, and e-selling. Estimated results show that among EC measures, two are the best, most accurate and reliable measures, namely, e-selling and using the internet to offer information; and with the number of employees using the internet, have positive impacts on TFP indicated by highly significant coefficients of EC. Consequently, SMEs using the internet for selling electronically, using the internet to offer information and the number of employees using the internet have higher TFP on average, and with significant technological progress experienced by SMEs, EC can raise their TFP.
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