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Technological know-how diffusion in the digital era

Productivity progress makes it possible for economies to improve output without expanding inputs and is a key driver of economic development and of income for every capita. Even so, efficiency development has been slowing in modern many years, depressing financial expansion. This might look paradoxical offered the rapidly advancement in technological development and the distribute of digital technologies.

Firms’ various performances throughout this interval of digital transformation assist make clear this puzzling paradox. Though corporations at the world wide frontier of productivity have continued to boost their productiveness steadily, the relaxation of the enterprise population has not retained rate.

The productiveness gap in between frontier companies and the relaxation has enhanced (Figure 1). The hole has widened far more in sectors that depend far more intensely on the use of expertise and digital systems. These traits raise issues for the inclusiveness of financial growth in the electronic era.

A widening labor productivity gap between frontier firms and other firms

Engineering DIFFUSION IS Vital FOR Financial Expansion AND INCLUSIVENESS

As we explore in our chapter in “Shifting Paradigms,” examining the dynamics of technological know-how diffusion in the context of alterations introduced by electronic transformation is critical to outlining these efficiency traits.

Technological innovation diffusion can be a gradual and gradual system, uneven across countries, regions, sectors, and firms—and even in just narrowly outlined sectors in the same place.

Whilst firms at the global frontier of productiveness have continued to enhance their productivity steadily, the rest of the business enterprise populace has not held tempo.

Recent OECD analyses clearly show that the expanding efficiency gap in between the most productive firms and the rest could be a reflection of a slowdown in technology diffusion. This is particularly the scenario in the most electronic- and information-intensive sectors. Laggard corporations in these sectors confront increased obstacles and capture up at a slower tempo.

Shifts to a digital and know-how financial state pose a few new troubles for firms. Initial is a soaring significance of intangible property, this kind of as research and development (R&D), software, and other intellectual home, in the output processes. Second is an raising job of tacit knowledge. Third is soaring technological complexity necessitating progressively refined complementary investments in regions this sort of as worker techniques and organizational innovation.

The require for complementary investments in intangibles, the non-rivalry and very low-price tag scalability of electronic technologies, and the related scale economies and network externalities make and boost winner-usually takes-most dynamics, primarily in electronic-intense sectors. These elements may well make it possible for superstar companies to thrive and acquire significant market shares when performing as obstacles for other companies to adopt new systems and for new gamers to enter the sector.

Weakening technological know-how diffusion is not only affiliated with expanding productiveness divergence, but it also impacts other socioeconomic results. It performs a position in outlining the modern declines in enterprise dynamism, the rise in concentration and markups in numerous industries and nations around the world, and traits in labor profits shares and wage inequality.

The polarization among main corporations and laggards has been amplified even further more by the COVID-19 pandemic. Although there has been an acceleration of digital adoption through the pandemic, the price of adoption of electronic systems and their sophistication have been pretty heterogeneous: Tech-savvy companies, normally presently much more successful and larger, have adopted far more and a lot more advanced digital systems than more compact, a lot less tech-savvy corporations. Similarly, when teleworking has been very important to sustaining production in the course of the disaster, not all companies have been in a position to (re)organize their routines remotely. The pandemic could, in this way, add to the advantages of ex-ante digitally advanced companies. These dynamics, collectively with shocks to company registrations, may well amplify declines in enterprise dynamism, increase marketplace focus, and weaken levels of competition.

As a result, the outcomes of the pandemic have bolstered the want for guidelines to increase technological innovation diffusion and foster disorders for wide-based mostly expansion of corporations.

General public Plan IS Crucial TO BOOSTING Technological innovation DIFFUSION

Governments can play an vital function in fostering technological innovation diffusion. General public coverage can enable take out barriers to diffusion and improve firms’ absorptive capacity by addressing ability and monetary constraints to technological know-how adoption, implementing efficient investigation and innovation insurance policies, regulating data accessibility and possession, and ensuring a level playing field and a competitive atmosphere.

No solitary plan can foster know-how diffusion on your own. A in depth plan mix, thinking of both of those demand from customers-side and offer-aspect actions, that bolsters firms’ incentives and capabilities is needed.

Demand from customers-side actions would increase awareness about new technologies, create absorptive potential, and lessen dangers. Offer-facet actions would foster competitors, broaden obtain to innovation financing, deal with the new regulatory difficulties of the digital economy, increase know-how output and sharing (which includes via sensible intellectual residence policies), and bolster the foundation of electronic infrastructure and expertise.

Supporting wider technological know-how diffusion, in unique for modest and young corporations, alongside one another with actions to strengthen company dynamism, equip workers with new techniques, and foster good labor markets would allow the accomplishment of economic expansion that is much better as well as extra inclusive and sustainable.

Artificial INTELLIGENCE: THE Subsequent Period

On the lookout forward, awareness is now focusing additional and much more on the following phase of the electronic revolution, led by synthetic intelligence (AI), and how it could impression productiveness. There is significantly dialogue about the prospective of AI to be the next major normal-intent technologies, spawning complementary innovations in a variety of applications across sectors. These may well be connected to specific program or hardware, massive knowledge analytics, equipment finding out, cyber-actual physical methods, or programs embodied in robots or other artifacts, with distinct systems getting various properties and skill prerequisites.

Lately, there has been a robust acceleration in the range of AI-related publications—the awareness base of AI—combined with a significant raise in the share of AI-connected innovations. This implies an rising distribute of AI throughout nations, although info and analyses about its diffusion across firms and sectors are nevertheless scant, especially over and above the United States.

Ongoing research at the OECD aims to fill this gap by analyzing the motorists and implications of AI adoption and diffusion. It ranges from measurement of AI developments, which include patents and logos, to the expertise necessary in AI-connected work opportunities. This was reviewed at a virtual conference held last yr, and the hottest research will be introduced in a forthcoming convention future month where by a target will be the implications of AI adoption and diffusion for productiveness and business enterprise dynamics.

Authors’ notice: the sights expressed below are those of the authors and should not be attributed to the OECD or its member countries.