cepr.org
Institutional innovation and the adoption of new technologies
A key barrier to economic development is that while new technologies can offer substantial productivity gains, firms in poorer countries often do not adopt them. This column uses firm-level data to track the adoption of the key technology of the 19th century – the steam engine – during Sweden’s rapid industrial take-off. Much like in many developing countries today, Swedish firms were generally too small to profitably adopt the new technology. The authors document the central role of an institutional innovation – the modern corporation – and demonstrate that when firms were given the opportunity to incorporate, they expanded and adopted steam technology.