June 30, 2022

Tricia Oak

Business & Finance Excellency

Technological innovation diffusion in the digital era

Productivity development lets economies to boost output without growing inputs and is a important driver of economic development and of earnings for each capita. Nonetheless, productivity progress has been slowing in the latest decades, depressing economic expansion. This could seem paradoxical given the quickly improvement in technological development and the unfold of electronic technologies.

Firms’ diversified performances throughout this interval of electronic transformation assistance explain this puzzling paradox. When corporations at the world wide frontier of efficiency have continued to boost their productiveness steadily, the relaxation of the company populace has not held tempo.

The efficiency gap in between frontier corporations and the rest has greater (Determine 1). The hole has widened far more in sectors that rely much more intensely on the use of awareness and electronic systems. These trends increase worries for the inclusiveness of financial expansion in the electronic era.

Technological innovation DIFFUSION IS Essential FOR Economic Progress AND INCLUSIVENESS

As we go over in our chapter in “Shifting Paradigms,” analyzing the dynamics of technologies diffusion in the context of adjustments introduced by electronic transformation is critical to explaining these productiveness developments.

Technologies diffusion can be a gradual and gradual method, uneven across nations, regions, sectors, and firms—and even inside narrowly described sectors in the identical place.

When companies at the international frontier of productivity have continued to boost their efficiency steadily, the rest of the business enterprise population has not saved tempo.

Latest OECD analyses show that the rising productiveness gap involving the most effective firms and the rest could be a reflection of a slowdown in engineering diffusion. This is primarily the case in the most electronic- and expertise-intense sectors. Laggard firms in these sectors confront increased obstacles and capture up at a slower pace.

Shifts to a electronic and understanding economic climate pose a few new issues for firms. Very first is a mounting worth of intangible belongings, these as investigation and improvement (R&D), software package, and other intellectual residence, in the manufacturing procedures. Second is an rising part of tacit understanding. 3rd is climbing technological complexity necessitating increasingly complex complementary investments in places these kinds of as employee competencies and organizational innovation.

The have to have for complementary investments in intangibles, the non-rivalry and minimal-cost scalability of electronic systems, and the related scale economies and network externalities produce and enhance winner-takes-most dynamics, primarily in digital-intense sectors. These factors may well make it possible for celebrity companies to thrive and acquire substantial current market shares while acting as boundaries for other corporations to adopt new technologies and for new gamers to enter the market.

Weakening technology diffusion is not only involved with escalating productiveness divergence, but it also impacts other socioeconomic results. It performs a job in explaining the modern declines in business enterprise dynamism, the increase in concentration and markups in many industries and international locations, and developments in labor revenue shares and wage inequality.

The polarization amongst leading firms and laggards has been amplified even even further by the COVID-19 pandemic. Although there has been an acceleration of electronic adoption all through the pandemic, the fee of adoption of electronic systems and their sophistication have been really heterogeneous: Tech-savvy firms, generally currently far more successful and more substantial, have adopted additional and much more refined electronic technologies than more compact, less tech-savvy firms. Similarly, although teleworking has been important to sustaining generation during the disaster, not all firms have been ready to (re)arrange their pursuits remotely. The pandemic may, in this way, include to the positive aspects of ex-ante digitally innovative companies. These dynamics, jointly with shocks to enterprise registrations, may possibly amplify declines in organization dynamism, increase field concentration, and weaken competition.

As a result, the consequences of the pandemic have strengthened the need for policies to raise engineering diffusion and foster conditions for broad-based growth of corporations.

General public Policy IS Critical TO BOOSTING Technological innovation DIFFUSION

Governments can play an important job in fostering technologies diffusion. Community coverage can enable eliminate boundaries to diffusion and boost firms’ absorptive potential by addressing ability and fiscal constraints to technologies adoption, applying productive investigate and innovation policies, regulating data access and possession, and guaranteeing a level participating in discipline and a competitive ecosystem.

No single plan can foster technologies diffusion alone. A complete plan mix, contemplating both equally desire-facet and source-aspect steps, that bolsters firms’ incentives and capabilities is necessary.

Demand-facet actions would elevate recognition about new systems, build absorptive capacity, and minimize risks. Offer-aspect steps would foster competitors, broaden obtain to innovation funding, address the new regulatory problems of the digital overall economy, improve information output and sharing (such as via sensible mental residence procedures), and improve the basis of electronic infrastructure and expertise.

Supporting broader know-how diffusion, in unique for tiny and young corporations, alongside one another with measures to improve enterprise dynamism, equip workers with new abilities, and foster honest labor markets would let the achievement of economic advancement that is more powerful as effectively as a lot more inclusive and sustainable.

Artificial INTELLIGENCE: THE Up coming Stage

On the lookout in advance, focus is now focusing much more and more on the upcoming stage of the electronic revolution, led by artificial intelligence (AI), and how it may perhaps effects productivity. There is considerably dialogue about the potential of AI to be the next key normal-function know-how, spawning complementary improvements in a array of programs throughout sectors. These may well be similar to unique program or hardware, significant data analytics, machine discovering, cyber-bodily methods, or applications embodied in robots or other artifacts, with different technologies owning various traits and skill specifications.

Just lately, there has been a solid acceleration in the range of AI-associated publications—the knowledge foundation of AI—combined with a significant raise in the share of AI-relevant inventions. This suggests an raising distribute of AI throughout nations, despite the fact that data and analyses about its diffusion throughout companies and sectors are nonetheless scant, in particular further than the United States.

Ongoing exploration at the OECD aims to fill this hole by examining the motorists and implications of AI adoption and diffusion. It ranges from measurement of AI developments, which include patents and trademarks, to the expertise desired in AI-connected positions. This was reviewed at a virtual meeting held final 12 months, and the hottest analysis will be offered in a forthcoming conference future thirty day period where by a emphasis will be the implications of AI adoption and diffusion for productiveness and enterprise dynamics.


Authors’ note: the views expressed in this article are those people of the authors and should not be attributed to the OECD or its member nations.