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Are There High-tech Industries or Only High-tech Firms? Evidence from New Technology-based Firms


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  • Baldwin, John R.
  • Gellatly, Guy


Considerable attention has been directed at understanding the structural changes that are generating an increased need for skilled workers. These changes are perceived to be the result of developments associated with the emergence of the new knowledge economy, whose potential is often linked to the growth of new technology-based firms (NTBFs). Where are these firms to be found? Related work on changes in technology and innovativeness has been accompanied by the creation of taxonomies that classify industries as high-tech or high-knowledge, based primarily on the characteristics of large firms. There is a temptation to use these taxonomies to identify new technology-based firms only within certain sectors. This paper uses a special survey that collected data on new firms to argue that this would be unwise. The paper investigates the limitations of existing classification schemes that might be used to classify industries as high- or low-tech, as advanced or otherwise. Characteristically unidimensional in scope, many of these taxonomies employ conceptual and operational measures that are narrow and incomplete. Consequently, previous rankings that identify sectors as high- or low-tech using these measures obscure the degree of innovativeness and human capital formation exhibited by certain industries. In a policy environment wherein emotive 'scoreboard' classifications have direct effects on resource allocation, the social costs of misclassification are potentially significant. Using a comparative methodology, this study investigates the role that conceptualization plays in devising taxonomies of high- and low-tech industries. Far from producing definitive classifications, existing measures of technological advancement are found to be wanting when their underpinnings are examined closely. Our objective in the current analysis is to examine the limitations of standard classification schemes, particularly when applied to new small firms, and to suggest an alternative framework based on a competency-model of the firm. This framework differs from previous attempts in several important respects. First, it constitutes a multidimensional approach to industry classification. As different concepts - such as innovation, technology use, and worker skills - can be used to define high- and low-tech industries, we integrate each of these measures into a unified framework that captures the different dimensions of technological prowess. This, in turn, lessens the degree of bias that may arise due to narrow or incomplete conceptualization. Second, our competency-based approach focuses directly on the population of interest - new small firms. Often at the forefront of product development and advanced technology use, it is these firms that are seen as critical in the transition to knowledge-based production. Basing industry classification on new small firms thus alleviates the bias in favour of large firm characteristics that arises with the use of indus

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Bibliographic Info

Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 1998120e.

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Date of creation: 08 Dec 1998
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Handle: RePEc:stc:stcp3e:1998120e

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Keywords: Adult education and training; Education; training and learning; Information and communications technology; Information and communications technology sector; Innovation; Job training and educational attainment; Labour; Research and development; Science and technology;


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  1. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
  2. Baldwin, John R., 1999. "A Portrait of Entrants and Exits," Analytical Studies Branch Research Paper Series 1999121e, Statistics Canada, Analytical Studies Branch.
  3. Klepper, Steven & Miller, John H., 1995. "Entry, exit, and shakeouts in the United States in new manufactured products," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 567-591, December.
  4. Samuel Hollander, 1965. "The Sources of Increased Efficiency: A Study of DuPont Rayon Plants," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258235x, December.
  5. Baldwin,John R. & Gorecki,Paul With contributions by-Name:Caves,Richard E., 1995. "The Dynamics of Industrial Competition," Cambridge Books, Cambridge University Press, number 9780521465618, April.
  6. Steve J. Davis & John Haltiwanger, 1991. "Gross Job Creation, Gross Job Destruction and Employment Reallocation," NBER Working Papers 3728, National Bureau of Economic Research, Inc.
  7. Baldwin, John R., 1997. "The Importance of Research and Development for Innovation in Small and Large Canadian Manufacturing Firms," Analytical Studies Branch Research Paper Series 1997107e, Statistics Canada, Analytical Studies Branch.
  8. Picot, Garnett & Baldwin, John R. & Dupuy, Richard, 1994. "Have Small Firms Created a Disproportionate Share of New Jobs in Canada? A Reassessment of the Facts," Analytical Studies Branch Research Paper Series 1994071e, Statistics Canada, Analytical Studies Branch.
  9. Klepper, Steven, 1996. "Entry, Exit, Growth, and Innovation over the Product Life Cycle," American Economic Review, American Economic Association, vol. 86(3), pages 562-83, June.
  10. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
  11. Baldwin, John R. & Raffiquzzaman, Mohammed, 1998. "The Effect of Technology and Trade on Wage Differentials Between Nonproduction and Production Workers in Canadian Manufacturing," Analytical Studies Branch Research Paper Series 1998098e, Statistics Canada, Analytical Studies Branch.
  12. David B. Audretsch & A. Roy Thurik, 1999. "Innovation, Industry Evoluation and Employment," Tinbergen Institute Discussion Papers 99-068/3, Tinbergen Institute.
  13. Sabourin, David & Baldwin, John R. & Diverty, Brent, 1995. "Technology Use and Industrial Transformation: Empirical Perspectives," Analytical Studies Branch Research Paper Series 1995075e, Statistics Canada, Analytical Studies Branch.
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Cited by:
  1. Crick, Dave & Spence, Martine, 2005. "The internationalisation of 'high performing' UK high-tech SMEs: a study of planned and unplanned strategies," International Business Review, Elsevier, vol. 14(2), pages 167-185, April.
  2. Godin, Benoit, 2004. "The obsession for competitiveness and its impact on statistics: the construction of high-technology indicators," Research Policy, Elsevier, vol. 33(8), pages 1217-1229, October.
  3. Gellatly, Guy & Peters, Valerie, 2000. "Understanding the Innovation Process: Innovation in Dynamic Service Industries," Analytical Studies Branch Research Paper Series 2000127e, Statistics Canada, Analytical Studies Branch.
  4. Erik Stam & Karl Wennberg, 2009. "The role of R&D in new firm growth," Jena Economic Research Papers 2009-004, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  5. Beckstead, Desmond & Baldwin, John R., 2003. "Knowledge Workers in Canada's Economy, 1971 to 2001," Insights on the Canadian Economy 2003004e, Statistics Canada, Economic Analysis.
  6. Chowhan, James, 2005. "Who Trains? High-tech Industries or High-tech Workplaces?," The Canadian Economy in Transition 2005006e, Statistics Canada, Economic Analysis.
  7. Beckstead, Desmond & Gellatly, Guy, 2004. "Are Knowledge Workers Found Only in High-technology Industries?," The Canadian Economy in Transition 2004005e, Statistics Canada, Economic Analysis.
  8. Baldwin, John R., 1999. "A Portrait of Entrants and Exits," Analytical Studies Branch Research Paper Series 1999121e, Statistics Canada, Analytical Studies Branch.
  9. Baldwin, John R. & Yates, Janice, 1999. "Innovation, Training and Success," Analytical Studies Branch Research Paper Series 1999137e, Statistics Canada, Analytical Studies Branch.
  10. Gellatly, Guy, 2000. "Differences in Innovator and Non-innovator Profiles: Small Establishments in Business Services," Analytical Studies Branch Research Paper Series 2000143e, Statistics Canada, Analytical Studies Branch.
  11. Beckstead, Desmond & Vinodrai, Tara, 2003. "Dimensions of Occupational Changes in Canada's Knowledge Economy, 1971-1996," The Canadian Economy in Transition 2003004e, Statistics Canada, Economic Analysis.


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