New Economic Theory

Diego Comin: Entrepreneurship, Technology and Economic Development

Editor’s Note: Diego Comin is an Associate Professor of Business Administration at HBS since 2007. He received his B.A. in Economics in 1995 from the University Pompeu Fabra, Barcelona, Spain and his PhD in Economics from Harvard University in 2000. Between 2000 and 2007, Comin has been Assistant Professor of Economics at New York University. He is also Research Fellow at the Center for Economic policy Research and Faculty Research Fellow in the National Bureau of Economic Research’s Economic Fluctuations and Growth Program. Comin has also been fellow for the INET and Gates foundations and consultant for the World Bank, IMF, Federal Reserve Bank of New York, Citibank, and the Economic and Social Research Institute (ESRI) of the government of Japan.

You can read his full bio from here. To learn more about his research, ideas and knowledge, check out this this this and this.

eTalk’s Niaz Uddin has interviewed Diego Comin recently to gain insights about entrepreneurship, technology and economic development which is given below.

Niaz: Dear Diego, thank you so much for joining us in the midst of your busy schedule. We are very thrilled and honored to have you at eTalks.

Comin: The pleasure is mine.

Niaz: You’ve received your bachelor degree in Economics in 1995 from Pompeu Fabra University, Barcelona, Spain and PhD degree also in Economics from Harvard University in 2000. Between 2000 and 2007, you were the Assistant Professor of Economics at New York University. And you have been Associate Professor of Business Administration at HBS since 2007. You’re also an honorable Research Fellow at the Center for Economic policy Research and Faculty Research Fellow in the National Bureau of Economic Research’s Economic Fluctuations and Growth Program. At the very beginning of our interview can you please tell us something about ‘Entrepreneurial Economics’?

Comin: Entrepreneurial economics is the area of economics that studies the causes and consequences of entrepreneurship.

Niaz: How would you define the connection and contribution of economists and entrepreneurs in the entrepreneurial economics to accelerate economic growth?

Comin: Often, when entrepreneurs found new companies they tend to utilize new technologies in production accelerating their diffusion. In other instances, new technologies are created to develop and commercialize new technologies. Hence, entrepreneurship may foster economic growth both by contributing to the creation and to the diffusion of new technologies.

Niaz: You’ve been working for so long with primitive technology dataset. What does actually the primitive technology dataset measures?

Comin: I should refer the reader to my paper with Erik Gong and Will Easterly “Was the Wealth of Nations Determined in 1000BC?” at the American Economic Journal: Macroeconomics (July, 2010). Basically, it measures whether certain significant technologies were present in the geographic areas that correspond to modern-day countries long time ago. For example, printing presses in 1500 AD.

Niaz: Can you please share your knowledge with us about Primitive Technology?

Comin: There are basically three key findings. First, cross-country differences in technology adoption were very large in the distant past (i.e., 1500 AD, 0 and 1000BC). Second, past levels of technology are highly correlated to current levels of technology. In particular, the levels of technology of our ancestors in 1500AD predict 50% of current cross-country differences in productivity or technology. Finally, the reason for this humongous persistence is that some technological knowledge associated with the adoption of historical technologies helps adopt current technologies.

Niaz: Can you please tell us about the diffusion of technology?

Comin: The moment technologies are invented, in principle they are ready for people around the world to use. However, most people and companies do not use them right away. Technology diffusion is the field that studies how and why technologies are adopted the way they are.

Niaz: What are the factors that affect the shape of the diffusion of technology?

Comin: There are several factors that may affect the shape of diffusion curves. How long ago a technology first arrived to a country, the level of income and its evolution, how intensively the technology is eventually used in the country, the rate of improvement of the technology and the productivity gains associated to these improvements, the potential complementarities of one technology with others, and the diffusion of technology in neighboring countries.

Niaz: Your research consists on studying the process of technological change and technology diffusion both across countries and over time. As you know, cutting edge technology, super innovation and evaluation of social media have been changing everything. We are in the golden era of Digitalization. Economy is also transforming to Digital Economy. Can you please tell us about Digital Economy? What has changed and what’s new in this digital economy?

Comin: The digital economy lowers the costs of transferring information. And by making information cheap it reduces the costs of bringing new technologies to all the corners of the world. However, it is important to be aware that the reduction in the costs of transferring information precedes (by a lot) the digital economy. One advantage of having direct measures of technology that span 200 years is that one can uncover long-term trends that are not obvious to the naked eye. When looking at my data, I observe that the acceleration in the speed of diffusion of technologies started with the industrial revolution and it has been unraveling smoothly since then.

Niaz: Things are not happening in the same ways all over the world. Digital Divide, Broadband Connection, Availability of Technology, Lacking of Knowledge and some other constraints have been putting under developed, developing and poor countries behind. How large is cross-country differences in technology adoption? How can underdeveloped, developing and poor countries take optimum advantage of digitalization?

Comin: That question raises an interesting point. Though technologies are more readily available in all countries than 100 or 200 years ago, the gap in the intensity or use (or penetration rates) that we observe between rich and poor countries has widened. (Marti Mestieri and I document that in a recent paper “If Technology Has Arrived Everywhere, Why has Income Diverged?” NBER wp#19010.) It is not easy to explain why this has been the case but it seems that the super low cost of transmitting information are not sufficient for a large number of potential users to know how to apply new technologies (in developing countries). Information is not the same as Knowledge.

Niaz: In near future, I hope we won’t have that much difference in our online and offline life. At the same time, we have started to live a life that is more likely science fiction. Living such an exciting era what do you think about the future of digital economy?

Comin: It seems safe to conjecture that in the future (and probably in the present too) the constraint will not be information but our ability to do something with it. I guess that the challenge for the digital economy will be to help on that front.

Niaz: What are you economic advice to young entrepreneurs, startups founders and CEOs? What are the things they should always keep in mind to grow and excel with their startups?

Comin: I think it is important to be always aware of what’s the core of the company; the area/activity where the company is really great. And always evaluate how actions or strategies affect/complement the core.

Niaz: Any last comment?

Comin: Both as a fundamental driver as well as a manifestation of other drivers, technology is key for the economy and society.

Niaz: Dear Diego, thank you so much for sharing us your invaluable ideas knowledge and insights. We are wishing you very good luck for all of your future endeavors.

Comin: Thanks very much. I also wish you good luck with eTalks.

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Further Reading:

1. Philip Kotler on  Marketing for Better World

2. F. M. Scherer on Industrial Economy, Digital Economy and Innovation

3. Stephen Walt on Global Development

4. Robert Stavins on Environmental Economics