Cultural Links and Technology Diffusion: Evidence from Industry in Late Imperial Russia

Abstract

What factors facilitate the adoption of advanced technologies in developing economies? This paper examines the role of ethnic connections in the diffusion of innovation in the context of industrialization. We combine machine learning and heuristic methods with a surnames dictionary to assign probable ethnicities to owners of nearly 16,000 industrial firms of the 1894 Manufacturing Census of the Russian Empire. We compare firms owned by entrepreneurs with cultural connections to Europe (Germans, Jews, Poles, etc.) with firms owned by Russians or indigenous minorities of the Empire. We find that “connected” firms exhibited higher productivity, utilized modern machinery, and implemented advanced management practices, such as sharing ownership with partners, employing women, and operating on a more regular basis. We argue that these advantages stemmed from superior knowledge of production techniques acquired from the leading industrial countries. We establish this mechanism by showing, among others, that even within a subset of positively selected firms that participated in the Chicago World’s Fair in 1893, “connected” firms were significantly more likely to trade with Europe. We also show that German entrepreneurs in the Russian Empire had the largest productivity advantage in chemicals – Germany’s leading industry in the late 19th century. Our findings highlight the importance of cultural links in the diffusion of Industrial Enlightenment from the European core to the periphery.