Since the pioneering work of Joseph Schumpeter, technology has been recognized as the center of economic growth and development. The technologies used by firms play a central role in the process of creative destruction. But despite this central role, there is no comprehensive country and sectoral dataset that can tell where the frontier is, how far away firms in developing countries are from it, and what technologies firms use in their day-to-day operations.
AT “Bridging the Technological Gap”. seventh volume of the book World Bank Productivity Project, we analyze data from the first round of the Company-Level Technology Adoption Survey (FAT). This is a new survey instrument designed to measure the technologies used by firms. New methods and data collected through our survey tool allow practitioners and policymakers to look inside the black box of technology adoption by companies and identify the main barriers to digital transformation. Specifically, the book analyzes data from more than 13,000 firms in 11 countries*. across regions and income levels, and measures more than 300 technologies across general and industry-specific business functions. FAT data opens up new avenues for technology research, such as the relationship between task outsourcing and technology adoption. This study empirically confirms some already known facts, such as the positive relationship between technology and productivity at the firm and country level. Importantly, our data also dispels some myths about technology adoption and use.
One such myth has to do with the higher frequency of jumps in new technologies. However, in reality, technological progress is a continuous and cumulative process. It is a process that requires firms to gradually acquire the capacity to implement more sophisticated technologies.
Better metrics for technology adoption can help policy makers develop better policies and dispel myths, such as the frequency of spikes.
The spread of mobile phones is a prime example, often cited to illustrate the process of exploding growth. The first cell phone call was made in the early 1970s, but it wasn’t until the 2000s that the technology began to spread rapidly in middle- and lower-middle-income countries, disrupting the spread of landlines. Low-income countries have immediately moved to new technologies. An analysis of the FAT data, using large firms as an indicator of early adopters of the technology, shows that the pattern observed in firms’ use of mobile phones versus landlines is consistent with the jump (see Figure 1). Small firms (late adopters) use mobile phones in much the same way as large firms (early adopters) in their business transactions.
Figure 1. proof of that lsycophancy is observable when comparing Gdistribution of fixed telephones compared to mobile phones
Source: “Bridging the Technological Gap”. 2022
However, this pattern does not hold for other technologies. In fact, leapfrog is not common observable through most new technology used by firms. For example, when considering technologies such as: a) Gdesignper wear clothes or b) msale, retail (figure 2)find another pattern from above. Figure shows that in likelihood of adopting more sophisticated technologies (orange, saveand yellow linesrespectively) increases with firm size (proxy at time of adoption) and follows the order of technology complexity accessible–as identified by sector experts over FAT survey design ex ante. More sophisticated technologies are much less commonly used by small firms..
Figure 2. Technology youtraining IWith mmostly Withcontinuous Pprocess
Source: “Bridging the Technological Gap”. 2022
In general, the leads from the FAT survey support the hypothesis that technological upgrading is basically a continuous process. This template shared through new technology in business functions in another sectorWith –agriculture, manufacturing or services. Template also keeps for technologies used in tasks common to all firms such as business administration, planning, sales and quality control. An important political consequence is that governments must continue to prioritize actions aimed at creating opportunities that promote technology upgrade, in terms of a continuous and gradual process. Opportunities to Leap Forward May still exists but They tend happen under very specific terms and are unlikely to generalize most technologies or significantly reduce the technology gap.
*Note: Bangladesh; Brazil (only state of Ceara); Burkina Faso; Ghana; India (only the states of Tamil Nadu and Uttar Pradesh); Kenya; The Republic of Korea; Malawi; Poland; Senegal; and Vietnam.