Instruments to Support Technology Upgrading at the Firm Level

BOX 7.2 The Firm-Level Technology Diagnostic Tool (continued)

Additional granular information is provided across these dimensions. Panel b illustrates the diagnostics for GBFs. First, it shows where the firm stands compared to other firms in the country. Then, it benchmarks the GBFs and SBFs for each business function using the intensive margin index against a median firm and the frontier firm—defined as firms in the top 10th percentile in the country—highlighting the index above and below the frontier. Finally, it shows whether the firm is already adopting a more sophisticated technology (adoption), but not using it intensively yet (use). A similar level of detail is provided for sector-specific technologies. The diagnostic also provides information on specific variables used to benchmark management practices, innovation capabilities, and performance. This information is used by business consultants who can support the firm using it as an input for a technology upgrading plan.

Source: Cruz et al., forthcoming.

of different types of technologies can lead to significant effects in terms of productivity, employment, and economic resilience. These are key microeconomic drivers of growth and can provide a broad picture of potential interventions.

Instruments to Support Technology Upgrading at the Firm Level

Once the diagnostic is in place and the policy priorities are defined, policy makers need to decide what instrument to use to support technology upgrading. Governments directly support technology adoption and technology generation by providing services, technical assistance, and finance.4 At one end of the spectrum, governments promote technology upgrading among SMEs, which starts with building firms’ absorptive capacity (Cohen and Levinthal 1990) and providing information and know-how on how to adopt new technologies. At the other end is the objective of transfer and commercialization of new technologies from universities and public research institutions. Figure 7.4 presents a typology of instruments.

Different policy instruments can support these technology objectives. Grants, vouchers, and loans can facilitate the purchase and adoption of technologies and digital solutions. Open innovation and other collaborative instruments can also promote the development of new technological solutions, while some research and development (R&D) projects are oriented toward generating new technologies. But the three generic instruments that focus more directly on equipping firms with the capabilities of using technologies, particularly through digitalization programs and Industry 4.0 strategies, are business advisory services (BAS), technology extension services (TES), and technology centers (TCs).5 These instruments can be implemented free of charge, with different degrees of payment and through the use of grants and vouchers. There is considerable heterogeneity in the models of implementation of these technology