Technology Differences across and within Sectors

The survey covers firms and SBFs in agriculture, manufacturing, and services. Thus, it can analyze the relative technological gap in different sectors within those broad industries, and differences in the process of technology upgrading, including leapfrogging. Specifically, this chapter explores the following questions:

■ Where do firms in specific sectors stand with respect to the technology frontier for technologies they apply to general business functions (GBF technologies) and sector-specific business functions (SBF technologies)? ■ Is leapfrogging commonly observed for sector-specific technologies? ■ What is the relationship between technology adoption and outsourcing in sector-specific business functions?

Technology Differences across and within Sectors

Are the differences in technology sophistication observed across sectors driven by GBF technologies or SBF technologies? As the previous chapter discussed, with respect to GBFs, manufacturing is not the sector with the most sophisticated use of technology in most countries in the sample, particularly upper-middle-income countries, such as Brazil and Vietnam, and those with high per capita income levels, such as the Republic of Korea. With respect to SBFs, agricultural firms in the FAT sample tend to be closer to the technology frontier than manufacturing and services firms. The technology gap between agriculture, manufacturing, and services tends to be larger for SBFs. These differences can be partly attributed to the fact that while the GBF measure captures the same functions and technologies for each firm, the SBF measure provides a comparison that is relative to specific frontiers, and the technology domains can be different.

For sector-specific technologies, figure 3.1 shows the cross-country differences for four sectors: agriculture (crops and livestock); food processing; wearing apparel; and wholesale and retail services. The patterns across countries are similar in terms of rankings of technology sophistication. The patterns for food processing and apparel are very similar (panels b and c), and there is less of a difference across countries for wholesale and retail services (panel d). In general, sophistication of technologies in services appears to be more equal across countries on average than for other sectors.

Another important dimension of sector-specific technology is the variance of technologies across business functions within sectors. As shown in chapter 2, there is large variation in the use of GBF technologies. The discussion that follows provides a deep dive into differences within sectors and SBF technologies in agriculture, manufacturing— including two manufacturing activities of particular interest for developing countries, food processing and wearing apparel—and retail activities in the services sector.

Agriculture

Agricultural firms face larger technology gaps with respect to the frontier in some general and sector-specific business functions than manufacturing or services firms face.