Technological Advancements and Energy Efficiency in Indian Firms

Abstract

This study examines the impact of various technology sources on the energy intensity of firms. Utilizing data from the Center for Monitoring Indian Economy, we model the relationship between energy intensity and the use of different technologies. The primary objective is to identify which technological practices contribute to lower energy consumption within firms. Our analysis reveals several key findings. Firstly, firms that import disembodied technology are less energy-intensive. Disembodied technology, which refers to innovations and improvements that are not tied to physical equipment but rather to knowledge and processes, significantly reduces the energy consumption of firms that adopt it. This suggests that knowledge-based technological advancements play a crucial role in enhancing energy efficiency. Secondly, the study finds that firms engaging in research and development activities also exhibit lower energy intensity compared to firms without such activities. Research and development efforts lead to the development and implementation of new technologies and practices that optimize energy usage and improve overall efficiency. This highlights the importance of continuous innovation and investment in research and development for achieving sustainable energy consumption. Additionally, our study uncovers an inverted 'U' shaped relationship between energy intensity and the age of the firm. This relationship indicates that both younger and older firms tend to be more energy-efficient than those at the intermediate stages of their lifecycle. Younger firms might benefit from newer technologies and processes, while older firms may have accumulated experience and incremental innovations that enhance their energy efficiency. Firms in the middle age range, however, might face challenges in upgrading their technology or optimizing their operations, leading to higher energy intensity. The findings underscore the significant role of technological adoption and innovation in reducing energy intensity. Policymakers and business leaders can leverage these insights to promote practices that foster energy efficiency. Encouraging the import of disembodied technology, supporting research and development initiatives, and facilitating technological upgrades across the firm lifecycle can drive substantial improvements in energy consumption patterns.