Finance, Competitiveness and Innovation Global Practice
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Innovation and Entrepreneurship
Finance, Competitiveness and Innovation Global Practice
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Last updated August 7, 2023
Xavier Cirera is a senior economist in the Finance, Competitiveness, and Innovation (FCI) Global Practice of the World Bank. His work focuses on innovation and entrepreneurship. He has led the evaluation of innovation policies, including through the development of public expenditure reviews in science, technology, and innovation implemented in Brazil, Colombia, Chile, Ukraine, and Vietnam. He is the coauthor of The Innovation Paradox: Developing-Country Capabilities and the Unrealized Promise of Technological Catch-Up and A Practitioner’s Guide to Innovation Policy: Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries. His most recent work focuses on the measurement and impact of technology adoption and diffusion. Before joining the World Bank, he served as a research fellow at the Institute of Development Studies at the University of Sussex. He holds a doctorate in economics from the University of Sussex.
Publication Search Results
Now showing 1 - 10 of 18
Publication(World Bank, Washington, DC, 2022-11) Abreha, Kaleb Girma ; Cirera, Xavier ; Fattal Jaef, Roberto N. ; Maemir, Hibret Belete ; Davies, Elwyn ; Maemir, Hibret BeleteThis paper characterizes the firm size distribution by exploiting establishment-level censuses covering both formal and informal firms in Sub-Saharan Africa. The paper finds a "missing middle" in the employment-based size distribution of firms in four Sub-Saharan African countries. This "missing middle" hinges on the inclusion of informal firms, and it is not explained by state- or foreign-owned firms at the top of the size distribution, nor does it emerge from the size distribution of entrants. The paper reconciles these empirical results with a model of firm dynamics with endogenous informality and shows that calibrated values of entry barriers and productivity-dependent idiosyncratic distortions generate a "missing middle" that is consistent with its underlying drivers in the data.
Publication(World Bank, Washington, DC, 2020-11) Cirera, Xavier ; Comin, Diego ; Cruz, Marcio ; Lee, Kyung MinThis study collects data on the sophistication of technologies used at the business function level for a representative sample of firms in Vietnam, Senegal, and the Brazilian state of Ceara. The analysis finds a large variance in technology sophistication across the business functions of a firm. The within-firm variance in technology sophistication is greater than the variance in sophistication across firms, which in turn is greater than the variance in sophistication across regions or countries. The paper documents a stable cross-firm relationship between technology at the business function and firm levels, which it calls the technology curve. Significant heterogeneity is uncovered in the slopes of the technology curves across business functions, a finding that is consistent with non-homotheticities in firm-level technology aggregators. Firm productivity is positively associated with the within-firm variance and the average level of technology sophistication. Development accounting exercises show that cross-firm variation in technology accounts for one-third of cross-firm differences in productivity and one-fifth of the agricultural versus non-agricultural gap in cross-country differences in firm productivity.
Publication(World Bank, Washington, DC, 2021-01) Cirera, Xavier ; Cruz, Marcio ; Davies, Elwyn ; Grover, Arti ; Iacovone, Leonardo ; Lopez Cordova, Jose Ernesto ; Medvedev, Denis ; Okechukwu Maduko, Franklin ; Nayyar, Gaurav ; Reyes Ortega, Santiago ; Torres, JesicaRelying on a novel dataset covering more than 120,000 firms in 60 countries, this paper con-tributes to the debate about D policies to support businesses through the COVID-19 pandemic. While governments around the world have implemented a wide range of policy support measures, evidence on the reach of these policies, the alignment of measures with firm needs, and their targeting and effectiveness remains scarce. This paper provides the most comprehensive assessment to date of these issues, focusing primarily on the developing economies. It shows that policy reach has been limited, especially for the more vulnerable firms and countries, and identifies mismatches between policies provided and policies most sought. It also provides some indicative evidence regarding mistargeting of policies and their effectiveness in addressing liquidity constraints and preventing layoffs. This assessment provides some early guidance to policymakers on tailoring their COVID-19 business support packages and points to new directions in data and research efforts needed to guide policy responses to the current pandemic and future crises.
Publication(World Bank, Washington, DC, 2020-10) Apedo-Amah, Marie Christine ; Avdiu, Besart ; Cirera, Xavier ; Cruz, Marcio ; Davies, Elwyn ; Grover, Arti ; Iacovone, Leonardo ; Kilinc, Umut ; Medvedev, Denis ; Maduko, Franklin Okechukwu ; Poupakis, Stavros ; Torres, Jesica ; Tran, Trang ThuThis paper provides a comprehensive assessment of the short-term impact of the COVID-19 pandemic on businesses worldwide with a focus on developing countries. The results are based on a novel data set collected by the World Bank Group and several partner institutions in 51 countries covering more than 100,000 businesses. The paper provides several stylized facts. First, the COVID-19 shock has been severe and widespread across firms, with persistent negative impact on sales. Second, the employment adjustment has operated mostly along the intensive margin (that is leave of absence and reduction in hours), with a small share of firms laying off workers. Third, smaller firms are disproportionately facing greater financial constraints. Fourth, firms are increasingly relying on digital solutions as a response to the shock. Fifth, there is great uncertainty about the future, especially among firms that have experienced a larger drop in sales, which is associated with job losses. These findings provide a better understanding of the magnitude and distribution of the shock, the main channels affecting businesses, and how firms are adjusting. The paper concludes by discussing some avenues for future research.
Publication(Washington, DC: World Bank, 2022-03-01) Cirera, Xavier ; Comin, Diego Adolfo ; Cruz, Marcio ; Lee, Kyungmin ; Torres Coronado, JesicaThis paper estimates the impact of technology sophistication pre-COVID-19 on the performance of firms during the early stages of the pandemic. It exploits a unique data set covering firms from Brazil, Senegal, and Vietnam, using a treatment effect mediation framework to decompose the results into direct and indirect effects. Increasing pre-pandemic technology sophistication by one standard deviation is associated with 3.8 percentage points higher sales. Both effects are positive, but the direct effect is about five times larger than the indirect effect. The total effect on sales is markedly nonlinear with significantly smaller estimates of the reduction in sales for firms with more sophisticated pre-pandemic technology. The results are robust to different measures of digital responses and matching estimators.
Publication(World Bank, Washington, DC, 2020-10) Cirera, Xavier ; Soares Martins-Neto, AntonioSeveral studies have documented a positive and causal relationship product or process innovation -- and labor productivity. Given the links between labor productivity and wages, a likely implication of this positive relationship is that innovation is associated with higher wages of more productive firms. This paper explores the relationship between innovation and wages using Brazil's employer-employee census and a novel measure of innovation derived from the share of technical and scientific occupations of workers in the firm. The results show a robust and positive wage premium associated with innovative firms. The decomposition of this innovation-related wage premium suggests a series of important stylized facts: (i) the innovation wage premium is larger for manufacturing but also positive and significant for agriculture and services; (ii) it is larger for large firms, but also positive and significant for all firm size categories including micro firms; and (iii) it is larger for medium- and low-skill occupations, although this depends on the use of firm fixed effects. More importantly, the paper explores the causality between innovation and wages and finds empirical support for the ideas that “self-selection”—firms that innovate already pay higher wages before becoming innovators -- and increases in wages associated with starting innovation activity, which are persistent for three years after firms start innovating.
Publication(World Bank, Washington, DC, 2021-05) Cirera, Xavier ; Comin, Diego ; Cruz, Marcio ; Lee, Kyung MinTechnology is key to boost productivity and generate more and better quality jobs in Senegal. This paper uses a novel approach to measure technology adoption at the firm level and applies it to a representative sample of firms in Senegal. It provides new measures of technology adoption at the firm level, which identify the purposes for which technologies are used and analyzes some of the key barriers to improving technology adoption at the firm level in Senegal. First, the adoption of general-purpose information and communications technologies, such as computers, the internet, and cloud computing for business purpose, is low but very heterogeneous and positively associated with size and formal status. Second, most firms still rely on pre-digital technologies to perform general business functions, such as business administration, production planning, supply chain management, marketing, sales, and payment. Third, most firms, including large and formal firms, still rely on manual methods or manually operated machines to perform critical pro duction tasks that are sector specific, such as harvesting in agriculture or packaging in food processing. The paper presents evidence of three main challenges to improve technology adoption: access to finance, information, and knowledge (firm capabilities), and access to markets and competition.
Publication(Washington, DC: World Bank, 2021-02-23) Cirera, Xavier ; Mason, Andrew D. ; de Nicola, Francesca ; Kuriakose, Smita ; Mare, Davide S. ; Tran, Trang ThuAfter a half century of transformative economic progress that moved hundreds of millions of people out of poverty, countries in developing East Asia are facing an array of challenges to their future development. Slowed productivity growth, increased fragility of the global trading system, and rapid changes in technology are all threatening export-oriented, labor-intensive manufacturing—the region’s engine of growth. Significant global challenges—such as climate change and the COVID-19 pandemic—are exacerbating economic vulnerability. These developments raise questions about whether the region’s past model of development can continue to deliver rapid growth and poverty reduction. Against this background, The Innovation Imperative in Developing East Asia aims to deepen understanding of the role of innovation in future development. The report examines the state of innovation in the region and analyzes the main constraints that firms and countries face to innovating. It assesses current policies and institutions, and lays out an agenda for action to spur more innovation-led growth. A key finding of the report is that countries’ current innovation policies are not aligned with their capabilities and needs. Policies need to strengthen the capacity of firms to innovate and support technological diffusion rather than just invention. Policy makers also need to eliminate policy biases against innovation in services, a sector that is growing in economic importance. Moreover, countries need to strengthen key complementary factors for innovation, including firms’ managerial quality, workers’ skills, and finance for innovation. Countries in developing East Asia would also do well to deepen their tradition of international openness, which could foster openness in other parts of the world. Doing so would help sustain the flows of ideas, trade, investment, and people that facilitate the creation and diffusion of knowledge for innovation.
Publication(World Bank, Washington, DC, 2021-10) Cirera, Xavier ; Cruz, Marcio ; Grover, Arti ; Iacovone, Leonardo ; Medvedev, Denis ; Pereira-Lopez, Mariana ; Reyes, SantiagoBuilding on prior work that documented the impact of COVID-19 on firms in developing countries using the first wave of Business Pulse Surveys, this paper presents a new set of stylized facts on firm recovery, covering 65,000 observations in 38 countries. This paper suggests that: One, since the outset of the pandemic, some aspects of business performance such as sales show signs of partial recovery. Two, other aspects remain challenging, including persistently high uncertainty and financial fragility. Three, recovery is heterogeneous across firms and more sensitive to firm-level attributes such as size, sector, and initial productivity than to country-level differences in the severity of the initial shock. In particular, larger and more productive firms are recovering faster, with implications for competition policy and allocative efficiency. Four, the decline in jobs has been steeper during the initial shock than the expansion in employment during recovery, raising the risk of a "jobless" recovery pattern. Five, the diffusion of digital technology and product innovation accelerated during the pandemic but did so unevenly, further widening gaps between small and large firms. Six, businesses now have more access to policy support, but poorer countries continue to lag behind and appropriate targeting of firms remains a challenge.
A Practitioner's Guide to Innovation Policy: Instruments to Build Firm Capabilities and Accelerate Technological Catch-Up in Developing Countries(World Bank, Washington, DC, 2020-02-11) Cirera, Xavier ; Frias, Jaime ; Hill, Justin ; Li, YanchaoThis practitioner’s guide, a companion volume to The Innovation Paradox picks up where the previous report left off. It aims to help policy makers in developing countries better formulate innovation policies. It does so by providing a rigorous typology of innovation policy instruments, including evidence of impact—and more importantly, the critical conditions in terms of institutional capabilities to successfully implement these policy instruments in developing countries. The guide aims to help fill a knowledge gap by presenting not only leading-edge empirical evidence about and practical experience with innovation policy, but also systematically discussing the market and system failures that hold back innovation in developing countries.