Anatomy of Technology in the Firm

156 Pages Posted: 16 Nov 2020 Last revised: 24 Mar 2023

See all articles by X. Cirera

X. Cirera

Institute of Development Studies; World Bank

Diego Comin

Dartmouth College

Marcio Cruz

World Bank; Federal University of Parana (UFPR) - Departamento de Economia

Kyung Min Lee

World Bank; George Mason University - Schar School of Policy and Government

Multiple version iconThere are 2 versions of this paper

Date Written: November 2020

Abstract

We collect detailed data on the technologies used in a comprehensive set of business functions in a representative sample of firms in Vietnam, Senegal, and the Brazilian state of CearĂ¡, and construct measures of technology sophistication at the business function and firm levels. There is a large variance of sophistication across firms, but we find that the variance of technology sophistication across the business functions of a firm (within-firm variance) is 2.8 times larger. We develop a model of technology adoption with heterogeneity in adoption costs across business functions and with non-homothetic production that induces heterogeneity in the marginal value of technology sophistication across functions. The model predicts a stable cross-firm relationship between sophistication in the business function and firm-level technology that we call the technology curve. We find that the slopes of technology curves differ greatly across business functions and that curves account for one third of within-firm variance in sophistication. A development accounting exercise shows that cross-firm variation in sophistication measures accounts for thirty percent of cross-firm differences in productivity.

Suggested Citation

Cirera, Xavier and Comin, Diego and Cruz, Marcio and Lee, Kyung Min, Anatomy of Technology in the Firm (November 2020). NBER Working Paper No. w28080, Available at SSRN: https://ssrn.com/abstract=3731249

Xavier Cirera (Contact Author)

Institute of Development Studies ( email )

University of Sussex
Falmer, Brighton, East Sussex BN1 9RE
United Kingdom

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Diego Comin

Dartmouth College ( email )

Department of Sociology
Hanover, NH 03755
United States

Marcio Cruz

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Federal University of Parana (UFPR) - Departamento de Economia ( email )

Av. Pref. Lothario Meissner, 632
Centro
Curitiba - PR, 80060-000
Brazil

Kyung Min Lee

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

George Mason University - Schar School of Policy and Government ( email )

Founders Hall, Fifth Floor
3351 Fairfax Drive, MS 3B1
Arlington, VA 22201
United States

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