Fact of the Week: U.S. Firms That Invest in Cloud Services, Digitalization, and Other Business-Focused Technologies Have a Better Than One-In-Five Chance of Creating A New Innovation

Kevin Gawora February 1, 2021
February 1, 2021

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Source: Nikolas Zolas, et al. “Advanced Technologies Adoption and Use by U.S Firms: Evidence from the Annual Business Survey, ” Center for Economic Studies, U.S. Census Bureau, December 2020.

Commentary: Does new technology adoption lead to more innovate firms? U.S. Census Bureau economists examined this puzzle with firm-level data from the 2018 Annual Business Survey. With a dataset of more than 850,000 firms, covering every industry, geographic area, and firm size, Nikolas Zolas and colleagues discovered that, yes, greater adoption of new technologies leads to more innovative firms. For example, in a firm only invests in either digitization or cloud services, the likelihood it will produce a product or process innovation increases by less than 5 percent. But doing both increases its likelihood of producing either a new product or a new process by 8 percent. Moreover, adopting both while also investing in other business-focused technologies—such as machine learning, touch screens, or voice recognition—leads to a 22 percent likelihood of producing a new product and a 23 percent likelihood of producing a new process. This suggests that the benefits can compound as firms combine the separate advantages of different technologies.