Introduction

1. A New Approach to Measure Technology Adoption by Firms

Introduction

When firms adopt more sophisticated technology, it can boost productivity and enhance opportunities for good-quality jobs. But technology is not a unique and narrow set of equipment or processes. Firms use various technologies to perform a variety of productive tasks, from administration to production, to delivery of their products or services. The effects and limitations of different types of technologies utilized by firms are still unknown. Thus, understanding firms’ process of deciding why to apply a technology, what given technology they apply to perform specific tasks, and how they apply it is fundamental to comprehending firms’ performance and improving evidence-based policies that aim to boost technological progress.

Measuring “what” and “how” technologies are used by firms across a range of sectors and levels of development is a challenge. Going back to the seminal works by Ryan and Gross (1943) and Griliches (1957) on the diffusion of hybrid varieties of corn, the dominant approach to measuring technology has focused on whether a potential adopter uses an advanced technology. In addition to studying technology diffusion and the drivers of adoption, this approach has facilitated the study of the effect of technology on productivity or wages.1 Most of these studies, however, have looked at the impact of one specific technology, typically an advanced one. Although these measures have significantly contributed to our understanding of “why” firms adopt a given technology, they do not provide a comprehensive perspective for understanding “what” different kinds of technologies firms are using and “how” they are using them for different tasks that could complement one another.

This chapter reviews some of the existing approaches to measuring technology at the firm level and proposes a new method to capture the multiple dimensions of the use of technology from the perspective of the firm. The chapter addresses the following questions:

■ What are the main limitations of the current approaches measuring “what” and

“how” technologies are used by firms? ■ What more granular measures can be devised to better ascertain “what” and

“how” technologies are being adopted and used by firms? ■ How can more granular measures of the use of technology within the firm help us understand the importance of complementary factors—beyond