Chapter Two of Overselling the Web? discusses the role of technology in growth. It begins by defining technology in economic terms. Technology is everything that isn't capital and labor. As such, it covers new inventions such as the steam engine or the transistor, but also includes ‘business technology’ (management techniques and systems) ‘political technology’ (forms of government and institutions) and ‘social technology’ (modes of human interaction).
Given such a broad definition, it is perhaps unsurprising that technology is the key to economic growth. But that, in turn, means that rich countries must have more technology than poor countries and that technology is hard to move around. One reason for this might be that the nature of institutions is key to determining technology adoption:
Jared Diamond, in Guns, Germs and Steel, points out that the history of invention suggests that the use, if any, to which a new technology is put does indeed depend very much on the nature of a society into which it emerges. Ancient native Mexicans never used the wheel for anything but toys because they had no suitable animals to draw carts, the Japanese continue to use the (cumbersome) kanji in addition to the (far simpler) kana alphabet because of prestige, QWERTY dominates global keyboards because everyone (bar this author) has already learned how to type on them. The ‘nature of a society’, in economic terms, is in fact a set of technologies itself. How great an impact an impact a technology has, then, might depend crucially on what technology is already there.
This suggests that the broader environment is likely to be a key determinant of the impact of the Internet on economic growth in developing countries, a conclusion strongly supported by later chapters.