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Positioning firms along the capabilities ladder
We develop and apply a novel methodology for quantifying the capability development of firms, and putting these capabilities (and hence also the firms) in a hierarchy, that we refer to as their position on the capabilities ladder. Our nestedness algorithm, inspired by biology and network science, defines a capability as complex if it is performed by only a few firms at the upper rungs of the ladder. We analyze balance sheet and innovation data of almost 40,000 Indian firms for the time period 1988-2015, and observe significant nestedness. Lower rungs of the capabilities ladder correspond to basic managerial and production capabilities. Mid-level rungs correspond to internationalization and acquiring absorptive capacity. Higher level rungs are more related to M&A and innovation. ICT capabilities have become more fundamental lower-level rungs on the capabilities ladder in recent years. We find that capability ranking can explain future growth patterns and survival probability of firms, summing up in one number their future potential trajectories.
Date:
22 February 2023, 14:30
Venue:
Manor Road Building, Manor Road OX1 3UQ
Venue Details:
Seminar Room G and online via Zoom
Speaker:
Nanditha Mathew (United Nations University)
Organising department:
Institute for New Economic Thinking
Organiser:
Dorothy Nicholas (INET Oxford)
Organiser contact email address:
complexity@inet.ox.ac.uk
Host:
Prof. Doyne Farmer
Part of:
INET Complexity Economics Seminars
Booking required?:
Required
Booking url:
https://www.inet.ox.ac.uk/events/positioning-firms-along-capabilities-ladder/
Audience:
Public
Editors:
Susan Mousley,
Dorothy Nicholas
