# **1 Introduction**

Technology is central to some of the most fundamental economic questions. Yet, our understanding of these issues often depends on indirect and limited measures. A long tradition, dating back to Ryan and Gross (1943) and Griliches (1957), has characterized technology in establishments by the presence of a few (typically one) advanced technologies. This approach faces several limitations. First, the number of technologies is very small compared to those used in an establishment. Additionally, the tasks where establishments use these technologies are neither comprehensive or representative of the business functions conducted in an establishment. Second, measures based on the presence of advanced technologies do not provide information on how establishments without them produce. In particular, we do not know how sophisticated the technologies used are relative to the frontier. This concern is particularly relevant in developing countries where advanced technologies are less widely diffused. Third, traditional measures do not capture how intensively a technology is used, which is crucial to explain income divergence across countries (Comin and Mestieri, 2018). This omission limits our understanding of whether establishments predominantly use the most sophisticated technologies they have adopted and the importance for productivity of these technologies relative to the most widely used technologies.<sup>1</sup> In this paper, we develop a new approach to directly and comprehensively measure the sophistication of technologies used in establishments. Our first step is to create a twodimensional grid structure, which we refer to as ‘the grid’. Following the task-based production function approach (Zeira, 1998; Grossman and Rossi-Hansberg, 2008; Acemoglu and Autor, 2011; Acemoglu and Restrepo, 2018), the horizontal dimension of the grid covers the key tasks an establishment conducts, grouped into broader categories that we call business functions (BF). To this, we add a vertical dimension that represents the range of technologies that can be used to perform the key tasks in each business function. The grid encompasses 1Since the classic work of Ryan and Gross (1943) and Griliches (1957) on hybrid corn, many have applied this approach to measuring technology in establishments in other sectors. For example, Davies (1979) studies the diffusion of 26 different manufacturing technologies, each typically relevant in only a single narrow sector, Trajtenberg (1990) measures the presence of CAT-scanners in hospitals, Brynjolfsson and Hitt (2000); Stiroh (2002); Bresnahan, Brynjolfsson and Hitt (2002); Akerman, Gaarder and Mogstad (2015) measure the presence of some ICTs such as computers or access to the internet. Other efforts include the Survey of Manufacturing Technology by the Census Bureau discontinued after 1993, which covers 17 specific technologies, including numerically-controlled machines, computer-aided design or engineering technologies, programmable controllers and local area networks (see Dunne (1994)); or the Canadian Survey of Advanced Technologies with 41 and 50 technologies, depending on the round (see for example Boothby, Dufour and Tang (2010)). More recently, the Advanced Business survey, Acemoglu et al. (2022), also administered by the US Census Bureau and that focused on five generic, frontier technologies: AI, robotics, dedicated equipment, specialized software and cloud computing. Unlike the previous studies, the Advanced Business Survey asks for the intensity with which the firm uses these advanced technologies.

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