Technology Sophistication Across Establishments

Abstract We study technology sophistication using a novel approach that measures the sophistication of the most advanced (MAX) and the most widely used (MOST) technologies in each of the key business functions within establishments. Using data from over 21,000 establishments across 15 countries, we find that establishments generally underutilize the most sophisticated technologies available within a business function. These MAX-MOST gaps are persistent and strongly associated with productivity both across establishments and countries. At the establishment level, there is substantial variation in both MAX and MOST, with MOST showing a more skewed distribution. MAX and MOST follow different lifecycle patterns in low-income countries and among small establishments, and they exhibit different associations with several establishment characteristics and performance indicators. This evidence underscores the different nature of the technology upgrading processes that drive MAX and MOST.