Laggard firms, technology diffusion and its structural and policy determinants
This paper provides new evidence on the main characteristics of laggard firms - firms
in the bottom 40% of the productivity distribution - and their potential for productivity
growth. It finds that laggards are on average younger and smaller than more productive
firms, and matter for aggregate resource reallocation. Moreover, younger laggards
converge faster toward the productivity frontier, suggesting that the composition
of the laggard group matters for future productivity. Yet this report finds that laggards
converge at a slower rate in highly digital- and skill-intensive industries, suggesting
that there are barriers to technology and knowledge diffusion. This could help explain
the much-debated productivity slowdown and the increased productivity dispersion.
This report also finds that policies aimed at improving workers’ skills, alleviating
financial constraints to investments and increasing firms' absorptive capacity through
direct R&D support can accelerate the diffusion of knowledge and technology, and help
laggard firms to catch up.