November 17, 2021

Why banks differ in the pace of adoption of new technology

Why banks differ in the pace of adoption of new technology: The legacy of the past

Do all organisations in a sector adopt a new technology or business practice at a uniform rate? Or do we see different rates of adoption across organisation types in a sector, even if adoption seems generally worthwhile? What determines whether a certain organization adopts the new technology? 

Questions such as these are important because they shed light on economic growth. As Mundlak (1961) and, more recently, Hsieh and Klenow (2009) note, economies operate below potential because some firms are less productive than others, and the productivity gaps persist. What explains these gaps? Over the last decade, the failure to adopt modern business practices has been identified as a key culprit (Bloom and van Reenen 2010). 

It thus seems valuable to understand why some firms do…

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