To stay in business and thrive in an ever-changing environment, firms must perpetually update their production techniques, product offerings, and management practices. That is, firms must continuously decide when and how to adopt new technologies. At first glance, measuring how firms embrace new technologies might seem straightforward; they either do it or they don't. But a more-nuanced analysis suggests that the adoption cycle — especially in its early stages — is not easy to identify. There are no unambiguous indications that an emerging technology is making its way into mainstream usage; the process plays out gradually and subtly.
It's hard to study technology adoption, largely because there are few easily accessible, comprehensive, economywide, firm-level measurements. This has led researchers to ask, are there as-yet-untapped ways to assess how firms embrace new technologies? More broadly, does technology adoption meaningfully influence a firm’s future performance? In their paper, “Firm Technology Upgrading Through Emerging Work,” Enghin Atalay and Sarada propose a new way to measure how firms embrace emerging technologies. Specifically, they argue that, since technology adoption is embedded in the types of jobs that firms recruit for, job openings provide a window into a firm’s intent to pursue innovative, technologically advanced work. In other words, job openings — when examined closely — yield information about firms’ attitudes toward future growth and development.
To measure the types of jobs that firms seek to fill, the authors analyze job ads posted in the Boston Globe, the New York Times, and the Wall Street Journal between 1940 and 2000. After extracting the complete text of the ads from these newspapers and transforming it into a structured database, Atalay and Sarada look closely at job titles, allowing them to characterize how new or old each job is relative to the date it was advertised. According to their approach, ads with job titles appearing primarily in the beginning of the sample period are classified as old. Examples of such job titles include millinery designer, comptometer operator, and long-distance telephone operator. In contrast, new jobs have titles appearing later in the sample period. Examples here include telemarketer, web developer, and medical biller. Although most job titles lie somewhere in between, the authors are able to assign a vintage to each of the 5.2 million ads in their database.
They hypothesize that ads with newer job titles reflect innovative technologies and production methods. To validate this hypothesis, the authors compare the newness of advertised jobs to other job characteristics. Ads for emerging (new) work tend to offer higher salaries, require more education, and require familiarity with emerging information technologies. Based on these characteristics, the authors assert that ads for newer types of jobs reflect an organization’s tilt toward innovative activities that require skilled employees.
Having demonstrated that certain job ads’ newness correlates with characteristics of innovative activity, the paper then explores the relationship between firms’ job ads and subsequent business performance. Atalay and Sarada reveal that future performance correlates with ads for jobs that involve emerging, technology-intensive work. For example, firms that post ads for newer-vintage jobs tend to have faster sales and labor productivity growth than their peers. They tend to secure more patents and are more R&D intensive. Overall, the findings suggest that hiring for newer types of jobs relates positively to firm outcomes.
A final set of findings identifies the portion of technology adoption attributable to existing (incumbent) firms and the portion attributable to new entrants. To this end, the authors develop a model in which firms decide how much to spend to update their technologies. This model, once it compares data on the relationships among firms’ ages, sales, and propensities to place ads for new work, indicates that incumbents and entrants contribute nearly equally to aggregate technology adoption.
By measuring technology adoption, researchers can better understand the life cycle of innovation at various levels within the economy. In “Firm Technology Upgrading Through Emerging Work,” Atalay and Sarada present a new way to quantify the very early stages of a technology’s life cycle. They also show that emerging technologies are embraced by incumbent firms as well as new entrants, and that both types of firms tend to experience long-term performance improvements versus firms that do not adopt new technologies. Indeed, the study reveals that job postings provide a window into firms’ aspirations and ambitions. The study covers a wide swath of technologies and industries, using job ads to learn about the forces that drive technological progress.