Download The Issue of Economic Growth

And the role of Innovation
And Technical Change
EEE Spring 2017
 Technology
and innovation explains the
unexplained part of differences in national
economic growth
 Long
term economic growth is the result of
technological change
 Arise
from basic differences in historical
experience, language and culture
 Are









reflected in national idiosyncrasies in:
Internal organization of firms
Inter-firm relationships
Role of the public sector
Institutional set-up of the financial sector
R&D intensity and R&D organization
Legal system
Educational system
Infrastructure Development
Culture

Ideas-driven growth theory ( Romer)

Porter framework for microenvironment

National innovation systems
 Growth
stimulated from within the system
(endogenous).
 Share of the economy devoted to the ideas
sector is a function of the R&D labor
market; allocation of resources to the ideas
sector depends on R&D productivity and the
private economic return to new ideas.
 Productivity of new ideas generation is
sensitive to the stock of ideas discovered in
the past.
The Model
• Common Innovation Infrastructure
– Cumulative technological sophistication
– Human capital and financial resources available for
R&D activity
– Resource commitments/policy choices: investment in
education and training, intellectual property
protection, openness to international trade, R&D tax
policies
• Quality of linkages
• Cluster Specific environment for innovation

Availability of high-quality, specialized innovation
inputs


Extent to which the local competitive context is
both intense and rewards successful innovators


IP protection, regulations, rivalry, openness to
int’national competition in the cluster
Nature of domestic demand for cluster products
and services


R&D personnel who are specialized in cluster-related
disciplines
Demanding customers encourage domestic firms to
offer best in the world technologies
Availability, density and interconnectedness of
vertically and horizontally related industries

Positive externalities from spillovers, transaction
efficiencies and cluster-level scale economies
 Quality
of common innovation
infrastructure

GDP, GDP per capita, POP, FTE S&E, R&D, Ed
Share, IP, Openness, Antitrust
 Cluster-specific


Private R&D funding
Specialization
 Quality


innovation environment
of linkages
University R&D performance
Venture Capital
Results & Significance of FP&Stern
Quantitatively demonstrate that
 A great deal of variation across countries is due to differences in the
level of inputs devoted to innovation
Scale based
differences
(level of
inputs
invested in
innov’t’n)
• R&D,
• manpower and
• Spending
 Extremely important role played by other factors (policy choices)
which shape the innovation environment
Productivity
• human capital investment,
based
• innovation incentives,
• cluster circumstances,
differences
• quality of linkages and interconnections(innovative
output per
unit of effort
expended on
innov’t’n
 Points: It is not just inputs or scale. It is also structure. Demonstrates
process)
capacity can be measured. Innovative capacity convergence
demonstrated among OECD nations but not emerging economies.
 Outcome
variable ( dependent
variable) as indication of innovative
capacity ~ international patents
 Benchmarking
vs dynamics
 Evolutionary
 Policy
 The
framework: dynamics important
and institutional environment
development of uniqueness/path
dependencies/history matters/how the
specialization came about – relational limits
 Sets
of habits, routines, rules, norms and
laws which regulate the relations between
people and shape human interactions
 The
communication infrastructure, social
norms about conflict, consensus and
cooperation and the labor market
 What
types of institutions matter?
 How do they matter?
 How do they vary?










Funding sources for R&D
Who Performs R&D
Character of R&D
Federal Obligations by Mission
(Agency)
Defense versus non-defense
research funding
Role of Federal Labs
Role of Industry/Industrial
Research
Role of Academia/Universities
Role of Independent Research
Institutions
Standards and regulatory
processes







Patents granted
Publications
Relative Specialization:
patens/publications
Share of global high tech
market
Plant/Operations
investment in technology
Historical participation
in technology
development
Existence of unique
technology/science
oriented organizations
 Size,
degree of affluence
 Richness of natural resources
 Degree to which farming is entrenched
 Ratio of large R&D intensive firms to
small “high tech” firms
 Ownership characteristics of firms (state,
foreign, private)
 Character of labor pool (level and type of
education, work ethic etc.)
 Breadth
and character of technology
focus
generation
 development
 technology diffusion
 technology transfer
 degree of focus on capital intensive
innovation/large technologically complex
systems

 Character
of economic focus (domestic,
import substitution, export led)
 Sameness
and continuity government support
for education and basic research
 Differences in views about government’s role
in innovation
 Reflections of conscious decisions in
government policies
 Degree of relationship between industry and
state
 Strong
rivals in the domestic environment
 Interactive
firms
 Big
linkages with domestic upstream
home market demand
 Democratic
institutions versus
government/political continuity?

Innovation is a multifaceted complex phenomenon that
can be shaped by national context

Emerging technologies can play a role in many aspects
of innovation, they do not always lead to disruptive
innovation

Empirical evidence shows that national context still
shapes the character focus of innovation activity.
Therefore the particular policy and strategies to take
advantage of emerging technologies should vary
according to a company’s or subsidiary's national
context.

Global integration is a feature of the current economic
scene and compels us to reconsider the basis on which
national competitive advantage is built and sustained.
Thus our focus must be on our capacity to manage the
balance of the socio-cultural system as well as the
capacity for development of technological advantage.
Institutions and historical legacy matters.
 Certain
technologies and hence industries
exhibit different patterns of development
 Likewise different nations with different
resources and institutions have different
focuses on technologies and hence exhibit
differences in patterns of development
 Both point have implications for managerial
actions and policy development