Transcript File - Yoo Soo HONG

Economic Development <Lecture Note 7> 2013.05.24
ED: Technological Catch-up
* Some parts of this note are borrowed from some of the references for teaching
purpose only.
Semester: Spring 2013
Time: Friday 9:00~12:00 am
Class Room: No. 322
Professor: Yoo Soo Hong
Office Hour: By appointment
Mobile: 010-4001-8060
E-mail: [email protected]
Home P.: //yoosoohong.weebly.com
1
Technology and Development
 Definition of Technology
o Technology is the knowledge useful for production of
goods and services.
 Importance of Technology
o The history of human being is the history of knowledge
(science and technology).
o Technology and productivity are the main engines of
economic growth.
o Technology is the main determinant of competitiveness.
o Technology affects welfare of individuals and the society.
2
Stages of Industrial Development in the World
Agricultural
Economy
• Land
• Labor
• Natural
Resources
Industrial
Economy
Knowledge-based/
Innovative
Economy
• Capital
• Science & Technology
• Labor
• Innovation
• Management
• Entrepreneurship
3
Technology and Development
Social Infrastructure, Culture
And Institutions
Resources for education,
health, communication,
Employment
Knowledge,
creativity
Economic Growth
Resources for
technology
development
Productivity
gains
Advances in
medicine,
communications,
agriculture,
energy,
Manufacturing, etc.
Technology Development
Source: UNDP. 2001
4
Technology and Economic Development
 Two Patterns (Stages) of Economic Growth
o Extensive Growth
- Increasing production by increasing input of production
factors
o Intensive Growth
- Increasing production by productivity increase
(More production is possible with the same resources.)
 Technology, Productivity and Economic Growth
Technology → Productivity → Trade and Industry → Economic
Growth
5
Technology and Economic Growth
First Stage
Increase in Productivity
Investment in
Creation of
Technology
Technology
Innovation
Strengthening International
Competitiveness
Increasing Trade
Second
Stage
Economic Growth
Virtuous Circle
(Increase sin Income, Demand, Investment, etc.)
6
Innovation and Economic Performance
Relative Economic Performance
- Technological innovation plays a key role in productivity increase, long-term
economic growth and enhancing living standards. (Innovation is the engine of growth.)
120
100
◆ USA
◆ Japan
80
◆ England
France
Korea
◆
◆ ◆ ◆ German
Taiwan
◆ Canada
◆ Mexico
Italy ◆
60
40
20
◆ China
0
0
20
40
60
80
100
120
Innovation Capability
Note: As of 2000.
7
Two different Development Stages
Extensive Growth:
Input-driven growth
Intensive Growth:
Innovation (productivity)-driven Growth
- Increase in inputs
(e.g. employment, education level,
stock of physical capital: mobilization
of resources)
- Increase in the output per unit of input
(e.g. better management, better
economic policy, increase in
knowledge, technological progress)
- Diminishing returns
- Constant returns
- Limited Growth
- Sustained growth
- Based on perspiration
- Based on inspiration
8
Sources of Economic Growth in Asia
(%)
Growth Rate
Period
Factor Contribution
GDP
Labor
Capital
Techno
logy
Labor
Capital
TFP
Korea
1972~96
8.6
3.0
9.0
2.0
14
63
23
Taiwan
1972~96
8.0
2.6
10.1
0.9
13
75
11
Thailand
1972~96
7.6
2.7
9.0
1.2
14
70
15
Malaysia
1972~96
7.4
3.5
11.3
-0.8
19
92
-11
Indonesia
1978~96
6.8
2.9
8.7
0.4
n.a.
n.a.
n.a.
Philippines
1980~96
2.3
3.2
2.4
-0.4
54
62
-16
China
1980~96
10.1
2.8
10.8
2.4
11
65
24
Note: TFP= Total Factor Productivity
Source: Japan Economic Research Center(1999)
9
Technology Divide
-
A small number of industrialized countries provide practically all
the world’s technology innovation.
-
Some developing countries are able to adopt these technologies
in production and consumption.
-
The remaining part is technologically disconnected, neither
innovating nor adopting foreign technologies.
10
Barriers to Technology Transfer
-
Lack of access to information on new technologies and innovations.
Inadequate institutional infrastructure, management and marketing human
skills.
Organizational rigidities within the firms themselves.
Limited access to finances.
Regulatory constraints.
Inefficient R&D institutes and disconnection from needs of industry.
Inadequate human resources and mechanism for their upgrading.
Lack of resources, knowledge and capabilities within policy institutions.
Low efficacy of government support schemes.
11
Technological Change
– Development consists primarily in employing existing resources in a
different way, in doing new things with them, irrespective of whether those
resources increase or not. (Joseph Schumpeter)
– Technological change is a key element in increasing productivity and output.
There are seven elements or ingredients associated with contemporary
technological change.
•
•
•
•
•
•
•
Technical Efficiency
Factor Intensity
Elasticity of Factor Substitution
Scale of Production
New Products
Social Relations of Production
Speed of Change
12
–
Increases in technical change are recognized and usually accompanied by
changes in factor intensity, reductions in the elasticity of factor substitution,
increases in scale, shifts in products, changes in the social relations of
production, and increases in the speed of change itself.
–
Diffusion of technological change takes time and involves costs, because of
its complexity. The nature of technology appropriate to the development
process differs from that elaborated abroad because of the different costs
and prices present in rich and poor countries.
–
An appropriate or intermediate technology is likely to combine labor
intensity with other characteristics that differ form the most advanced
technologies of the affluent countries.
13
Knowledge Economy
 Why knowledge now?
- “Throughout history, relative economic performance has been closely
associated with the capacity of countries to participate in successive
technology/knowledge revolutions (agriculture, manufacturing, services,
knowledge societies)”;
- “Knowledge has played a critical role in differentiating the long run economic
performance of countries”;
- “In the last 50 years, economic growth has been closely associated with
urbanization, emergence of new organizational forms, and regional and
global trade—all these trends, in turn, are closely linked to agglomeration of
people and ideas”
 Concept of KBE or KE
- An economy where creation, circulation (dissemination) and utilization
of knowledge is the core (engine) of growth. (OECD)
14
Major Economies and Weights in the World
Percentage share of the global GDP (0-1998)
40
35
30
25
20
15
10
5
Western Europe
92
0
10
00
10
80
11
60
12
40
13
20
14
00
14
80
15
60
16
40
17
20
18
00
18
70
19
50
19
98
84
0
76
0
68
0
60
0
52
0
44
0
36
0
28
0
20
0
0
12
0
0
United States
Japan
China
15
Knowledge
makes
the Difference
Knowledge Gap
and Wealth
of Nations
between Poverty and Wealth...
14
Thousands of constant
1995 US dollars
Rep. of Korea
12
Difference
attributed to
knowledge
10
8
6
4
2
Ghana
0
1960
1965
1970
1975
1980
1985
1990
1995
Difference
due to
physical
and human
capital
2000
16
Emerging Knowledge Economy
 Facts about Knowledge Revolution:

Increased generation/codification of knowledge (e.g., patents granted in the US: from 49,971 in
1963 to 175,983 in 2000)

Closer links with science base/increased rate of innovation/shorter product life cycles

Increased importance of education, up-skilling of labor force, and life long learning

Growing investment in intangibles (R&D, education, brands…) – OECD countries spend more
than $520 billion per year in R&D

Value added increasingly associated with investment in intangibles such as branding, marketing,
logistics/information management

Innovation and productivity increase more important in competitiveness and GDP growth

Increased Globalization and Competition

Constant change and competition implies the need of constant restructuring and upgrading: the
ability to create, access and use knowledge is becoming the fundamental determinant of global
competitiveness.
17
18
Innovation
19
Strong Correlation: GDP/Capita and KEI
Regression KEI 2002 and GDP per capita 2002
40,000
35,000
GDP per capita 2002 (1995 constant US$2002)
R2 = 0.66
Ireland
Finland
USA
30,000
25,000
UK
20,000
Taiwan
15,000
Korea
Slovenia
10,000
Brazil
5,000
Turkey
Ethiopia
0
0.00
South Africa
India
Ghana
1.00
2.00
China
3.00
Poland
Jordan
4.00
5.00
Russia
6.00
7.00
8.00
9.00
10.00
Knowledge Economy Index 2002
Source: KAM
20
Africa GDP/capita = $2624
Importance of Knowledge-Based Economy (KBE)
 Global economy is changing the landscape of economies in the world
- Knowledge has increasingly become an important means for value
creation.
- The knowledge content of goods and services is increasing as
manufacturing is “dematerializing” and economies are becoming
“weightless”.
- Globalization and the ICT revolution are emerging in the modalities of
creating value.
 The Importance of KBE
- Knowledge-based economies is a global trend.
- Entering the intensive growth stage, innovation and knowledge
economy are the engine of growth and development.
21
 Especially, governments in Asia are facilitating and creating opportunities
toward a more knowledge-based economy and society.
 Four pillars of a KBE
- Education, including building a skilled workforce
- National innovation systems, including science and technology, R&D
- Building networks, including ICT infrastructure and social networks
- Policy and regulatory (business) environment
 New paradigms for managers and policy makers
- Distinction between knowledge and information
- Recognizing and managing intangibles
- Attention to tacit knowledge
- Stakeholder capital in a networked economy and society
- Value-driven development
22
The Four Pillars of the Knowledge Economy
Biz Environment and
Institutional Regime
Information
Infrastructure
Education
Innovation Systems
23
 Asian governments envision and plan for a mix of KBE
- Thailand’s IT2010: “good use of ICT”
- e-Korea Vision 2006: “quantitative expansion of the Internet”
- e-Japan strategy: “knowledge-emergent society”
24
Knowledge-Based Economy Indicators for the Asian Region
25
Knowledge-Based Development
26
The Four Pillars of a Knowledge-Based Economy
 Education and the skilled workforce
- Skills required in a KBE such as communication skill, critical thinking
and problem solving, sustainable use of resources, development of
self and a sense of community, expanding world vision
- New teaching and learning strategies
- Diaspora (migration of workforce) is critical issue and Asian countries
face the issue of retaining the skilled workers. “Brain drain” can be
“Brain gain” which raises the skill level of the home country.
27
 National innovation systems (NIS)
- “A subsystem of the national economy in which various
organizations and institutions interact and influence each other in
the carrying out of innovative activity.”
- Innovation and improvement in technical capacity are the result of a
complex set of relationships among actors creating, acquiring,
disseminating, and applying various kinds of knowledge.
- Actors are private enterprises, universities and public research
institutions, relevant financial institutions, and the government.
28
 Building Networks
- Capacity of ICT to support the development of networks and to establish and
maintain connections among individuals, groups, and organizations is
considered to be of great use of and value to others.
- Benefits of ICT and Networks (The ICT revolution has fast-tracked the
innovation process)
- Toward an ubiquitous network society (social computing of voicemail, e-mail,
online chats, and collaborative applications)
- Elements needed in building ICT are an appropriate regulatory framework,
readiness and availability of human resources, research and education of IT
skills.
 Setting the policy and regulatory environments
- Policy: legislation, organization/reorganization, and regulations
- Planning: formulation of vision, strategy, and road map
- Infrastructure and programs: establishing and implementing the needed
physical, institutional, and social infrastructure and programs
29
ICT and Opportunities for Development
Education
• Basic
• Higher
• Professional
Less isolation in remote
and poor areas
• Community communication
centers
• Wireless technologies
Government
• Electronic payments
systems
• Electronic government
(tax, customs)
• Land titling, registries
• Access to information,
democratization
ICT holds
major opportunities
for development
Environmental and natural
resource management
• Teledetection
• Computerized databases
• Ecologically-balanced
agricultural management
Health
• Preventive health care
• Curative health care
Financial sector
• International payment
systems
• Bulk and high value
transaction systems
Business connectivity
• Access to international
information for small
and large business
• Logistic support; e-com
30
31
R&D Spending as a Percentage of GDP, Late 1990s
Country
Year
Spending as a share
of GDP (%)
Sweden
1997
3.85
Japan
1998
3.00
Korea
1997
2.89
United States
1997
2.60
Netherlands
1996
2.09
Taiwan, China
1997
1.92
United Kingdom
1998
1.60
Singapore
1997
1.47
Chinaa
1997
0.65
Indonesia
1995
0.50
Thailandb
2001
0.16
Note: a) Includes non-defense R&D spending only
b) World Bank 2002e
Source: National Science Foundation (2000, 2002)
32
Gross Expenditures on R&D in PPP by Country and as
Percentage of Global Expenditures 2010
33
The R&D Input Landscape
34
Global Distribution of R&D Expenditures (1997)
Upper middle
income
4.1 %
Lower middle
income
2.4 %
Low income
0.8 %
High income
92.7 %
Source: World Bank SIMA Database, 2002
35
Global Distribution of Patenting
(registered in the U.S., 2001)
Upper middle
income
0.4 %
Lower middle
income
0.4 %
Low income
0.1 %
High income
99.2 %
Source: US Patent & Trademark Office (USPTO), 2001
36
Royalty and License Fees, Payments, and Receipts (BoP,
current US$, Millions)
80000
70862
70000
payments 1975
62311
60000
payments 2001
50000
receipts 2001
receipts 1975
40000
30000
20000
10000
0
3484
5861
High income
231
134
1997 253
Upper middle
income
1502
19
148
125
Lower middle
income
2
183
0.05
0
5
Low income
37
Source: World Bank SIMA Database
Network Readiness Index
(rankings of 82 countries, 02/03)
Finland
United States
Singapore
Sweden
Korea
Brazil
South Africa
India
Thailand
China
Mexico
Dominican Republic
Trinidad and Tobago
Colombia
Jamaica
Venezuela
Russia
Bolivia
Honduras
Haiti
Market, Regulatory and Individual, Business
Networked Readiness
Infrastructure
and Government
Index Rank
Environments
Usages
Individual, Business
and Government
Readiness
2
1
8
6
26
32
38
34
40
51
60
46
50
50
62
63
68
75
80
82
2
3
1
4
12
33
44
40
36
35
52
53
58
61
50
72
60
79
78
82
1
2
3
4
14
29
36
37
41
43
47
57
58
59
60
66
69
78
81
82
1
4
2
3
8
26
35
43
47
51
37
63
62
58
66
50
78
76
79
80
38
Source: World Economic Forum, The Global Information Technology Report 2002-2003
Public Spending on Education (% of GDP)
Public Spending on Education as a percentage of GDP
MEAN: 4.74
Sweden
Finland
Jamaica
South Africa
Haiti
United States
Bolivia
Venezuela
Thailand
Brazil
Mexico
Korea
Honduras
Russia
Colombia
Trinidad and Tobago
Singapore
India
China
Dominican Republic
0
1
2
3
4
5
6
7
8
9
39
Source: World Economic Forum, The Global Information Technology Report 2002-2003
Availability of Scientists and Engineers
1=non existent or rare; 7=widely available
MEAN: 4.88
India
Finland
United States
Sweden
Singapore
Korea
Russia
Brazil
Trinidad and Tobago
Colombia
Thailand
Venezuela
China
South Africa
Jamaica
Dominican Republic
Mexico
Honduras
Bolivia
Haiti
0
1
2
3
4
5
6
7
40
Source: World Economic Forum, The Global Information Technology Report 2002-2003
Brain Drain
1= normally leave to pursue opportunities in other countries, 7= almost always remain in the country
MEAN: 3.76
United States
Finland
Singapore
Brazil
Sweden
Thailand
Korea
Trinidad and Tobago
China
Russia
Dominican Republic
Mexico
India
Honduras
Venezuela
South Africa
Colombia
Jamaica
Bolivia
Haiti
0
1
2
3
4
5
6
7
41
Source: World Economic Forum, The Global Information Technology Report 2002-2003
Public Access to the Internet
1= very limited; 7= most people have frequent Internet access
MEAN: 3.82
MEAN:3.8
Finland
Sweden
Singapore
Korea
United States
Bolivia
India
Colombia
Thailand
Trinidad and Tobago
Haiti
Venezuela
Brazil
Mexico
South Africa
Dominican Republic
China
Jamaica
Russia
0
1
2
3
4
5
6
42
7
Source: World Economic Forum, The Global Information Technology Report 2002-2003
Number of Internet Users (per 100 people)
Number of Internet accounts per 100 people
MEAN: 38.44
Singapore
Korea
Sweden
Finland
United States
Trinidad and Tobago
Thailand
South Africa
Jamaica
Mexico
Venezuela
Brazil
Colombia
Dominican Republic
China
Honduras
Haiti
Russia
Bolivia
India
0.00
50.00
100.00
150.00
200.00
250.00
43
Source: World Economic Forum, The Global Information Technology Report 2002-2003
Lessons from Country Experiences
 Asian governments envision and plan for a mix of KBE
- Thailand’s IT2010: “good use of ICT”
- e-Korea Vision 2006: “quantitative expansion of the Internet”
- e-Japan strategy: “knowledge-emergent society”
 Lessons

Strong leadership and political will

Clear policy direction and adequate support for implementation

Strengthening linkages with the private sector

Exploring innovative ways of achieving desired outcomes

Use of ICT for marginalized groups
- Farmers, poor communities, underprivileged sectors have been provided online
support.
- Rural kiosks in India, Cybercare in Malaysia, Promotion local products in Thailand, IT
education in ROK
44
Policy Implications

Knowledge can make a critical difference in the development process.

The risks of a growing knowledge divide, require special attention from
policy-makers. In this context, one needs to focus on:
-
The importance of an effective institutional and economic regime that
fosters the creation, dissemination and use of knowledge;
-
Investments in education so that the population can use knowledge
effectively;
-
The operation of the innovation system (involving R&D centers,
universities, libraries, private firms, etc.);
- The implementation of a dynamic ICT infrastructure that fosters
information dissemination, transparency and digital literacy.
45

In the process of knowledge generation, dissemination and use in a
networked environment, special attention needs to be given to:
-
The balance between protection of intellectual property rights and the
preservation of fair use and access to resources in the “commons”;
-
The challenges of promoting digital literacy;
-
The potential of public-private partnerships;
-
The growing demand for transparency;
-
- The importance of context/localization; and
- The role of leadership.
46
There is No Choice
“The world is moving fast…with or without you!”
 Increasing globalization: reduction of transportation and communication
costs, increasing global information, increasingly mobile FDI.
 Rapid pace of technological change and innovation: Half life of technology
is getting shorter. Keep up or fall behind – these are the only options
 Increasing competition: driven by trade liberalization and increasingly larger
players (e.g., China, Korea, India) plus laggards that want to catch up –
Vietnam, Mozambique, Rwanda
 Networking and disintegration of production
47
Stages of Economic Development
Factor-driven
Economy
Investment
- driven Economy
Source: Porter, Michael E. Competitive Advantage of Nations, 1990.
Innovation
- driven Economy
48
Stages of Catching-up Industrialization
Pre-
Initial FDI
industrialization
absorption
Internalizing
Internalizing
parts and
skills and
components
technology
Agglomeration
Arrival of
FDI
STAGE ZERO
Monoculture, sub
-sistence agricult
ure, aid dependency
Poor countries
in Africa
Simple manufacturing under foreign guidance
Vietnam
Creativity
STAGE FOUR
absorption
Full capability in in
-novation and product design as glo
-bal leader
STAGE TWO
STAGE ONE
innovation
Technology
(acceleration of FDI)
manufacturing
Internalizing
Have supporting
industries, but st
-ill under foreign
guidance
STAGE THREE
Management & technology mastered, can produce hig
-h quality goods
Japan, US, EU
Korea, Taiwan,
China-2
Thailand, Malaysia
China-1
Border to Middle
Income Economies
Source: Kenichi Ohno. 2009
49
Catch-Up Oriented Industrial Technological Capabilities in
Developing Countries
Accelerate Enhancement
Firm-Level
Capability
Enhancement
Capability
Enhancement
Efforts
Independent
Development
Closing to
Advanced Level
Capability Enhancement
Core Technologies, Advanced Technologies…
Take Leaders as Reference
Internal
Industry-Level
Aim for Independent Innovation
External
Supports
National-Project-Level
Industry Planning, Policy, Effects
Coordinated Development of System
Source: Hong, Su, Lu
50
S&T Capacity Building-Actors
National Policy Making
• Fundacion Chile, MOST,
• Technology diffusion institutions
• Technology Foresight
S&T Capacities in Universities
and R&D Institutes
• R&D vs. ERC
• Centers of Excellence
Enterprises
• In-house research
• Supplier development
• Innovation capacity improvement
Labor Force
• Vocational training, secondary ed.
• Skills Development Centers
• Life-long learning
Education Sector
• Primary education
• Secondary education
• Higher education
51
S&T Capacity Building-Institutions
Scientific research
Supply
Demand
Technology adoption,
adaptation, and diffusion
• MSI Centers of Excellence
• Instrumentation Centers
• Higher Education
projects/ESW
• Engineering Research
Centers
• Technology Transfer and
Diffusion Institutes
• Tax incentives for in-house
research
• Industrial labs
• Grant programs for industrial
research
• Modernization of industrial
firms
• Agriculture technology
projects
• Industrial credit lines
52
Capacity Building Stages and Model
Creation
Improvement
Assimilation
Acquisition
S&T & R&D
Stages
Imitation
internalization
generating
Development
Stages
Developing
Newly-Industrializing
Advanced
Country
Country
Country
53
Royalties and License Fees (Annual, 2000-2008)
YEAR
2000
2001
2002
2003
2004
2005
2006
2007
2008
ECONOMY
China
0.26
0.33
0.33
0.23
0.38
0.21
0.22
0.28
0.39
China, Hong Kong SAR
0.26
0.48
0.51
0.73
0.4
0.38
0.36
0.42
0.41
3.5
3.75
3.76
3.65
3.78
4.36
3.65
3.64
4.06
1.84
2.04
0.12
0.25
0.18
Germany
Indonesia
Japan
_
_
_
..
14.77
16.22
15.86
15.81
16.09
16.02
17.13
17.99
17.28
Korea, Republic of
2.25
3.18
2.94
3.98
4.44
4.23
4.1
2.74
3.13
Philippines
0.21
0.03
0.03
0.12
0.3
0.13
0.09
Singapore
0.3
0.64
0.69
0.54
1.06
1.17
1
0.05 ..
1.02
1.01
Source : UNCTAD, UNCTADstat
54
Levels of Innovation
Frontier Innovation
Technology
Improvement
and Monitoring
Significant Adaptation
Basic Production–use technology
55
Levels of S&T Capacity Building
Science
Development
and Creation
R&D
Design &
Engineering
Technician & Craft
Skills & Capabilities
Science
Use, Operation
and Maintenance
Basic Operators
Skills and Capabilities
-These all need human capacity.
56
Disparities in STI
-African countries contributing ≥0.02% of world share of ISI-listed S&E
papers.
Africa你Country
Share of World (%)
1
South Africa
0.37
2
Egypt
0.26
3
Tunisia
0.11
4
Morocco
0.09
5
Nigeria
0.08
6
Algeria
0.08
7
Kenya
0.05
8
Cameroon
0.03
9
Tanzania
0.03
10
Ethiopia
0.03
11
Uganda
0.02
12
Ghana
0.02
13
Senegal
0.02
14
Zimbabwe
0.02
Rest of Africa (39 c.)
0.16
Total Africa
1.37
Source: Hassan, H.A., Mohamed from SCI, January 2007
57
Science Technology and Innovation
 Science is the process of generating knowledge based on evidence. While
it implicitly includes both natural sciences (biology, chemistry, physics,
mathematics and related disciplines) and social sciences (economics,
sociology, anthropology, politics, law), we will focus in this book largely on
natural science disciplines.
 Technology is the application of scientific knowledge, and frequently
involves invention, i.e, the creation of a novel object, process or technique.
 Innovation is the process by which inventions are produced, which may
involve the bringing together of new ideas and technology, or finding novel
applications of existing technologies. Generally, innovation means
developing new ways of doing things in a place or by people where they
have not been used before. Modern innovation is usually stimulated by
innovation systems and pathways.
 The phrase ‘Science and Innovation’ in this book implicitly includes
science, engineering, technology and the production systems which deliver
them.
58
ICT coverage in Africa and Other Regions (2000-2005)
Personal
computers (per
1,000 people)
World
Internet users
(thousands)
Telephone lines
(per 1,000 people)
Mobile phone
subscribers
(per 1,000 people)
Household with
TV (%)
130
781,755
180
342
79.2
579
355,830
503
835
96.8
Low & middle
income
40
425,925
135
247
48.4
Sub-Saharan
Africa
15
19,066
17
125
13.9
East Asia &
Pacific
38
156,422
214
282
36.4
Latin America
& Caribbean
88
85,317
177
438
87.0
High income
Source: Ansu, Yaw, 2007 from World Development Indicator 2005
59
Five Dimensions of STI Capacity
National (and local)
government capacity to
formulate and
implement coherent
S&T programs and policies
Production of new
knowledge via R&D
Import, adapt, and
adopt knowledge
produced outside the
country
Source: Ansu, Yaw, 2007
Enterprise capacity to
utilize knowledge to
innovate and produce
higher value added,
globally competitive
goods and services
Technologically and
scientifically skilled
workforce trained to
equipment and
production processes
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Observations and Lessons
-
Ability to produce new knowledge (R&D) is important, but the ability to absorb
and utilize existing knowledge may be even more important at early stages
of development – National systems of economic learning and technology
diffusion.
-
Absorptive capacity of enterprises and labor force must be developed –
spillovers (from FDI) are not automatic.
-
S&T capacity building policies should be devised within the context of an
overall industrial development strategy – not separately
-
Getting basics right-rule of law, business climate, etc. - is absolutely necessary
but not sufficient.
-
Goal of universal primary education should be complemented by expanded
access to vocational, secondary and tertiary education.
-
Political commitment is needed since it takes a long time for capacity building
to affect economic development and poverty.
61
-
A critical challenge is increasing the effective demand for R&D by
developing enterprise capacity to innovate and utilize knowledge.
-
Tension between expanding the supply of skilled workers and the private
sector’s demand for skilled workers-chicken and egg / brain drain vs. skill
shortage
-
How firms learn, from whom, and how they innovate is a key issue.
-
Freer trade and attracting FDI is necessary but not sufficient –
spillovers will not occur without accompanying capacity building efforts.
-
Increased spending on education and/or R&D will not improve economic
performance, if there are poor linkages between research institutes and
education sector on the one hand and enterprise sector on the other.
Linkages, quality and relevance are critical.
-
Need for focus and realism – don’t spread resources too thin; develop a
few niche areas; today’s comparative advantage vs. tomorrow’s needs;
existing strengths vs. new competencies – comparative advantage must be
created
62
GDP share of R&D expenditure in certain countries
Source: OECD, Main Science and Technology Indicators
(http://www.research.fi/en/resources/R_D_expenditure/GDP_share_of_RD_expenditure_in_certain_countries)
63
Technological Capability
 Evolution of TC as a path dependent process:
– Production Engineering: (learning by doing followed by learning by
adapting, aiming at augmenting productivity through efficient utilisation
and adaptation of technologies at the shop floor )
– Reverse Engineering (learning by design and learning by improved
design, aiming at replicating processes and designs for better
understanding and further improvement of given technologies)
– Basic (frontier) research
64
Technological Capability
-
Presence of MNC subsidiaries in LDCs may also contribute to the TC
acquisition by domestic firms through spillover gains.
 Extent of gains depends on
– vintage of technologies transferred to MNC subsidiaries
– Absorptive capacity of domestic firms (PE RE or BR)
65
□ Can poor countries catch up through technology?
-
There are significant gaps in technological development across countries.
-
Poor countries are not catching up.
-
Poor countries can catch up, if they generate economic conditions
conducive to investment and a climate of civil liberties.
-
They are likely to see inequality increase and the effect on economic growth
is likely to be delayed.
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Innovation system
Knowledge
Users
Social and Human Capital
Universities
S&T Training and
Education
Absorptive Capacity
‘Follower’ firms; Intermediate
and End Consumers and
Professional Users
Market for Goods and
Services
Knowledge
Creators
Research Capacity
Universities; Govt
Laboratories
Basic Scientific
Research
Public Sector
Source: Nauwelaers, 2003
Technology and Innovation
Performance
‘Creative’ Firms
Applied RTD and Product
/Process Development
Private Sector
67
Policies for enhancing the Innovation system
Source: The Impact of RTD on Competitiveness and Employment (IRCE). EC. 2003
68
Critical Lessons
-
Investing in S&T capacity is not a luxury for the rich; it is an absolute
necessity for poor countries that wish to become richer – there is no
choice.
-
The time to start investing and building capacity is when you are poor.
-
Countries at different stages of development, and employing different
learning strategies, need to invest in different aspects of S&T capacity –
plugging in, catching up, innovating: different tasks and challenges for
different stages of development.
69
High-technology exports (% of manufactured exports)
High Tech Is Not the Only (or Best) Route to Prosperity
and Competitiveness.
75
Philippines
60
Malaysia
45
Thailand
30
China
Mexico
Indonesia
15
Brazil
Argentina Colombia
Vietnam
Chile
India
Sri Lanka PakistanBangladesh
0
0.00
20.00
40.00
60.00
80.00
100.00
Manufactures exports (% of merchandise exports)
70
Technological Progress in the World
 Top 10 IT Performers are in the OECD.
 Bottom 10 IT Performers are in sub-Saharan Africa.
 Strong performers among LDCs: Hong Kong, Singapore and Mauritius.
 Highly correlated with per capita GDP.
71
Productivity Catch Up: East Asia
1950
% of USA
2003
% of USA
Growth
Rate
U.S.A
12.00
100.0%
33.97
100.0%
2.00%
Japan
2.30
19.2%
24.78
73.0%
4.57%
1973
% of USA
2003
% of USA
Hong Kong
7.49
35.0%
22.28
Korea
3.64
17.0%
14.25
42.0%
5.93%
Singapore
6.80
31.8%
19.63
57.8%
4.61%
Taiwan
4.37
20.4%
18.77
55.2%
6.33%
72
4.74%
Productivity Catch Up: Europe
1950
% of USA
2003
% of USA
Growth
Rate
U.S.A
12.00
100.0%
33.97
100.0%
2.00%
France
5.63
46.9%
37.75
111.1%
3.46%
Germany
4.36
36.3%
30.01
88.3%
3.95%
UK
7.49
62.4%
28.01
82.5%
2.91%
Spain
2.60
21.7%
22.21
65.4%
4.94%
Source: Groningen Growth & Development Center
73
Productivity Catch Up: Latin America
1950
% of USA
2003
% of USA
Growth
Rate
U.S.A
12.00
100.0%
33.97
100.0%
2.00%
Argentina
6.16
51.4%
10.57
31.1%
1.04%
Brazil
2.48
20.7%
7.81
23.0%
2.21%
Chili
4.66
38.9%
14.07
41.4%
2.12%
Mexico
3.56
29.7%
10.24
30.1%
2.03%
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References
Brad, Carlos A. P. 2003. “Leveraging the Knowledge Economy”, World Bank (PPT,
Google).
Crafts, Nick. Divergence Big Time: Economic Growth Since 1870, (PPT, Google).
Paic, Alan. 2011. Enhancing South East Europe Competitiveness through innovation and
human capital development, Bank of Greece-University of Oxford (SEESOX)
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capability: Implications of TRIPS for developing countries, Jawaharlal Nehru Univ.,
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