DP15427 Technology Within and Across Firms

Author(s): Xavier Cirera, Diego Comin, Marcio Cruz, Kyungmin Lee
Publication Date: November 2020
Programme Areas: Industrial Organization, Development Economics, International Macroeconomics and Finance, Monetary Economics and Fluctuations, Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15427

We collect data on the sophistication of technologies used at the business function level for a representative sample of firms from Vietnam, Senegal and the Brazilian state of Cear√°. Our analysis finds a large variance in technology sophistication across the business functions of a firm. Specifically, the within-firm variance in technology sophistication is greater than the variance in sophistication across firms, which in turn is greater than the variance in sophistication across regions or countries. We document a stable cross-firm relationship between technology at the business function and at the firm level that we name the technology curve. We uncover significant heterogeneity in the slope of technology curves across business functions, a finding consistent with non-homotheticities in firm-level technology aggregators. Firm-productivity is positively associated to both the within-firm variance and average level of technology sophistication. Development accounting exercises show that cross-firm variation in technology accounts for one third of cross-firm differences in productivity, and one fifth of the agricultural vs. non-agricultural gap in cross-country differences in firm productivity.