September 27, 2022

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Business&Finance Specialists

Technological know-how diffusion in the digital era

5 min read

Productiveness expansion enables economies to maximize output without raising inputs and is a critical driver of economic advancement and of earnings for each capita. Nevertheless, efficiency advancement has been slowing in recent decades, depressing financial development. This may well look paradoxical specified the quick advancement in technological progress and the spread of digital technologies.

Firms’ diverse performances for the duration of this time period of digital transformation assistance reveal this puzzling paradox. Though firms at the world wide frontier of efficiency have ongoing to maximize their efficiency steadily, the relaxation of the business enterprise inhabitants has not stored rate.

The productivity hole between frontier corporations and the rest has elevated (Determine 1). The gap has widened extra in sectors that depend much more greatly on the use of awareness and digital technologies. These developments increase issues for the inclusiveness of financial progress in the digital era.

Technological innovation DIFFUSION IS Critical FOR Economic Expansion AND INCLUSIVENESS

As we talk about in our chapter in “Shifting Paradigms,” examining the dynamics of technology diffusion in the context of changes introduced by electronic transformation is crucial to detailing these efficiency traits.

Technology diffusion can be a gradual and gradual system, uneven across international locations, regions, sectors, and firms—and even inside of narrowly described sectors in the identical country.

When firms at the international frontier of efficiency have ongoing to increase their efficiency steadily, the rest of the organization inhabitants has not retained tempo.

Modern OECD analyses exhibit that the expanding efficiency gap involving the most productive corporations and the relaxation could be a reflection of a slowdown in engineering diffusion. This is particularly the scenario in the most electronic- and information-intensive sectors. Laggard corporations in these sectors confront higher obstacles and capture up at a slower speed.

Shifts to a electronic and expertise financial state pose three new troubles for firms. To start with is a soaring importance of intangible property, such as exploration and improvement (R&D), computer software, and other mental home, in the generation procedures. Second is an growing job of tacit understanding. 3rd is increasing technological complexity demanding more and more complex complementary investments in spots this kind of as worker expertise and organizational innovation.

The have to have for complementary investments in intangibles, the non-rivalry and small-price tag scalability of electronic systems, and the associated scale economies and network externalities build and boost winner-takes-most dynamics, particularly in electronic-intensive sectors. These factors may possibly make it possible for superstar corporations to prosper and obtain substantial current market shares whilst acting as boundaries for other firms to undertake new technologies and for new gamers to enter the industry.

Weakening technological know-how diffusion is not only related with increasing productivity divergence, but it also influences other socioeconomic results. It performs a role in conveying the new declines in company dynamism, the increase in focus and markups in quite a few industries and international locations, and developments in labor income shares and wage inequality.

The polarization among main companies and laggards has been amplified even even more by the COVID-19 pandemic. While there has been an acceleration of electronic adoption in the course of the pandemic, the rate of adoption of electronic technologies and their sophistication have been very heterogeneous: Tech-savvy firms, frequently currently additional productive and more substantial, have adopted much more and far more refined digital systems than scaled-down, less tech-savvy companies. Likewise, while teleworking has been crucial to sustaining generation all through the disaster, not all corporations have been capable to (re)manage their actions remotely. The pandemic may well, in this way, insert to the rewards of ex-ante digitally state-of-the-art firms. These dynamics, with each other with shocks to company registrations, could amplify declines in organization dynamism, enhance marketplace concentration, and weaken competitiveness.

As a result, the effects of the pandemic have reinforced the need for procedures to boost technological know-how diffusion and foster disorders for broad-dependent advancement of corporations.

Community Policy IS Essential TO BOOSTING Technology DIFFUSION

Governments can enjoy an vital purpose in fostering technologies diffusion. Community coverage can enable clear away barriers to diffusion and raise firms’ absorptive potential by addressing talent and money constraints to technologies adoption, applying effective investigation and innovation guidelines, regulating info entry and ownership, and making sure a level taking part in subject and a competitive atmosphere.

No one coverage can foster technological know-how diffusion by itself. A comprehensive coverage mix, contemplating both of those need-aspect and offer-side steps, that bolsters firms’ incentives and capabilities is required.

Demand-facet steps would elevate recognition about new technologies, develop absorptive capability, and reduce pitfalls. Supply-side steps would foster competitors, broaden access to innovation funding, tackle the new regulatory troubles of the electronic overall economy, make improvements to awareness output and sharing (including by way of reasonable intellectual residence policies), and strengthen the basis of electronic infrastructure and competencies.

Supporting wider technological know-how diffusion, in specific for smaller and youthful corporations, alongside one another with measures to enhance company dynamism, equip personnel with new capabilities, and foster reasonable labor markets would permit the accomplishment of economic growth that is more powerful as well as far more inclusive and sustainable.

Synthetic INTELLIGENCE: THE Subsequent Stage

On the lookout in advance, notice is now concentrating far more and extra on the up coming section of the electronic revolution, led by synthetic intelligence (AI), and how it may perhaps effect productivity. There is considerably dialogue about the prospective of AI to be the subsequent important typical-intent technological innovation, spawning complementary improvements in a variety of programs throughout sectors. These may possibly be similar to specific program or components, huge info analytics, machine understanding, cyber-physical systems, or applications embodied in robots or other artifacts, with distinct systems acquiring distinctive qualities and ability demands.

A short while ago, there has been a sturdy acceleration in the range of AI-related publications—the information base of AI—combined with a substantial enhance in the share of AI-connected innovations. This implies an rising unfold of AI across countries, even though knowledge and analyses about its diffusion throughout corporations and sectors are nevertheless scant, specially beyond the United States.

Ongoing study at the OECD aims to fill this hole by examining the drivers and implications of AI adoption and diffusion. It ranges from measurement of AI developments, which include patents and emblems, to the techniques desired in AI-connected careers. This was reviewed at a virtual convention held final calendar year, and the most current research will be presented in a forthcoming meeting up coming thirty day period in which a concentration will be the implications of AI adoption and diffusion for productiveness and business dynamics.


Authors’ notice: the sights expressed below are these of the authors and should really not be attributed to the OECD or its member international locations.

https://www.brookings.edu/site/up-front/2022/01/20/long gone-electronic-technological know-how-diffusion-in-the-electronic-era/