Notes

Message 8. Technology upgrading policies should shift the focus from access to technology to use of technology. Many firms, particularly in developing countries, do not intensively use technologies for which they already have access to perform relevant business functions. While in some cases this might be explained by network effects, such as the use of digital payments that depends on other actors, in others cases the constraint seems to be more related to lack of complementary capabilities of the firm, such as the intensive use of handwritten processes for business administration and planning, when the firm already has access to computers and the internet. This is also related to other complementary factors that the firm may need to make the best productive use of available technologies. In terms of direct support, for example, significant imperfections in financial markets in developing countries limit firms’ access to finance for technology upgrading, especially for intangible assets. Working with the financial sector to address information asymmetries between lenders and potential borrowers is critical. Instruments such as grants and vouchers need to be linked to some measurable positive spillovers and externalities, accompanied by technical assistance, and monitored for their effects on the adoption and use of technologies, to avoid the risks of government failure.

Message 9. The COVID-19 shock has provided an opportunity for technology upgrading. The COVID-19 pandemic has led to an unprecedented demand for the use of digital technologies by businesses. Building on this renewed interest in technology upgrading, governments and business-support organizations are intensifying the use of policy instruments to assist digital adoption and upgrading. While the surge in demand for solutions opens several opportunities for technology upgrading for firms in developing countries, there are also signs that the technology gap is increasing across firms, such as a larger concentration of online sales by digitally connected companies at the expense of brick-and-mortar retail businesses. New evidence presented in this volume shows that firms that had a higher level of technologies before the pandemic, particularly digital technologies, were significantly more likely to accelerate adoption after the COVID-19 crisis struck. These results reinforce the finding that existing barriers may be persistent. Mitigating the risks of this growing technology gap requires removing existing barriers to adoption, especially in laggard firms.

Notes

1. There is a long tradition in management and economics documenting and measuring specific management practices. Pathbreaking studies by Bloom and Van Reenen (2007) and Bloom et al. (2019) have extended the scope of this literature by conducting firm-level surveys in a large number of firms across countries to measure the quality of management practices along several dimensions connected to operations, planning, monitoring, and human resources. These surveys include the World Management Survey (WMS) and the Management and Organizational

Practices Survey (MOPS). While the WMS is a telephone-based survey using double-blind methodologies, MOPS is an online and paper-based survey.