“Either technological progress is slowing down, or it’s speeding up. Which view is right? At the OECD, we believe the research from our Future of Productivity project helps to resolve this paradox.”
- Our research shows that the slow productivity growth of the “average” firm masks the fact that a small cadre of firms are experiencing robust gains.
- Seen from this perspective, the productivity problem isn’t a lack of global innovation. It’s a failure by many firms to adopt new technologies and best practices. Indeed, the main source of the productivity slowdown is not a slowing in the rate of innovation by the most globally advanced firms, but rather a slowing of the pace at which innovations spread throughout the economy: a breakdown of the diffusion machine.
- First, global connections need to be extended and deepened, so that firms can learn from successful counterparts across the world
- Second, new firms need to be able to enter markets and experiment with new technologies and business models. The productivity slowdown coincided with a near-collapse of overall business investment and a slowdown in business dynamism, reflected in a decline in business startups.
- Third, better “matchmaking” is needed across the economy, to ensure that the most productive firms have the resources—labor, skills, and capital—to grow. The larger the frontier firms become, the greater the extent to which their good performance gets reflected in overall economic growth. Unfortunately, the most productive and dynamic firms do not always grow to optimal scale.
- Fourth, investment in innovation should extend beyond technology to include skills, software, organisational know-how (i.e. managerial quality).