Laggard firms, technology diffusion and its structural and policy determinants

Abstract

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Declining business dynamism

“…The main focus of this analysis is on two key business dynamism variables, entry rates and job reallocation rates, that exhibit clear declining trends within country-sectors ( Figure 2). This analysis is complementary to other OECD contributions focused on different aspects of business dynamism, including mark-ups (Calligaris et al, 2018), industry concentration (Bajgar et al, 2019) and the catch-up of laggards (Berlingieri et al, 2020).…”

“…The digital transformation and the rising importance of intangibles are further associated with changes in market structures and firm heterogeneity, which may directly affect measures of business dynamism. Recent evidence shows that higher digital and intangible intensities may contribute to a slowdown in the diffusion of knowledge, a rise in firm heterogeneity and increases in the market shares and market power of the best performing firms, due to possible barriers to diffusion and heterogeneous returns to adoption (Calligaris et al, 2018;Gal et al, 2019;Berlingieri et al, 2020). This may in turn affect firm entry and job reallocation.…”

“…This is in line with the idea that forward integration in GVCs, while potentially driven by some industries and firms, can benefit the whole economy through positive spillovers. The extent to which countries benefit from GVC integration may in turn depend on firms' absorptive capacity, a key determinant of the ability of small and young firms to learn from the domestic frontier (Berlingieri et al, 2020).…”

“…This is also consistent with previous OECD work, including Calvino and Criscuolo, 2019 who further discuss the role of the industry life cycle and the associated change in market structure as a potential explanation for the more pronounced decline in business dynamism in digital intensive industries. In addition, recent findings from Gal et al (2019) and Berlingieri et al (2020) suggest that digital technologies and intangible assets, while beneficial for productivity, may be associated with additional barriers to adoption.…”

“…Framework conditions and institutional factors are likely to significantly affect the speed and magnitude of the decline in business dynamism across countries (see also previous OECD work including Bravo-Biosca et al, 2016;Calvino et al, 2016;Calvino and Criscuolo, 2019;Berlingieri et al, 2020).…”