Recent work carried out by the ECB using micro data shows that the difference in productivity between the most productive and the least productive firms in each narrow, two-digit sector is considerable. The top 10% of firms, in terms of productivity, are on average three times more productive than the firms in the bottom 10% (Chart 3).
Similar differentials occur in the United States.6 This massive intra-industry productivity differential dwarfs inter-industry differentials. For comparison, firms active in the tradable sector are on average around 50% more productive than those producing mainly nontradables. How, then, can we improve the diffusion of innovation from the frontier to the laggard firms, especially within sectors?