Technology, Policy, Growth - Theory, Evidence and Interpretation

In recent years the research on the relation between technology and economic growth has flourished. This paper presents a brief overview of different theoretical perspectives in this area; the old orthodox theory (that of Robert Solow and others), more heterodox approaches, and the new orthodox theory (commonly labelled new growth theory). Furthermore, we assess the relationship between these theoretical approaches and applied work on growth and policy.

Competitiveness, Scale and R&D

The purpose of this study is to explore the relationship between competitiveness, scale and R&D with the held of OECD databases and the ongoing work in the OECD on embodied technology flows. The analysis is based on data for ten OECD counteies and 22 industries in 1985. The results suggest that both direct R&D and R&D acquired indirectly through purchase of capital goods and intermediates have a significant, positive impact on competitiveness. Indirrect R&D from domestic sources appears to be more conducive to competitiveness than indirect R&D from aboard. On average the total (direct and indirect) impact of a given investment in R&D on exports is about twice as large as the impact of an investment of similar size in physical capital. The impact of R&D investment appears to be especially high in large countries and R&D intensive industries.

Innovation: A Guide to the Literature

Innovation is not a new phenomenon. Arguably, it is as old as mankind itself. However, in spite of its obvious importance, innovation has not always got the scholarly attention it deserves. This is now rapidly changing, however. As shown in the paper, research on the role of innovation economic and social change has proliferated in recent years, particularly within the social sciences, and often with a bent towards cross-disciplinarity. It is argued that this reflects the fact that no single discipline deals with all aspects of innovation, and that in order to get a comprehensive overview of the role played by innovation in social and economic change, a cross-disciplinary perspective is a must. The purpose of the paper is to provide the reader with a guide to this rapidly expanding literature. In doing so it draws on larger collective effort financed by the European Commission (the TEARI project), one of the outputs of which will emerge as Oxford Handbook of Innovation, edited by Jan Fagerberg, David Mowery and Richard R. Nelson.

Technology, Trade Structure and Economic Integration - An examination of Intra-Nordic, Nordic-EC and Intra-EC trade 1961-1987

This paper discusses the impact of economic integration on production and trade in high-tech goods. The theoretical evidence is considered in section 2. The remaining part of the paper presents an empirical analysis of this relationship for two groups of countries, the Nordic countries and the EC, between 1961 and 1987. A positive impact of integration on trade in high-tech goods may be found for the Nordic countries in 1960s and early 1970s. There is no evidence of a similar relationship for the EC. This supports the view that countries with small differences in culture and language are more likely than others to experience a positive impact of integration on trade and production in high-tech goods.

Is there a large-country advantage in high-tech?

High-tech is a commonly used catch-word for industries that use a relatively large share of their resources on R&D and develop many new products and processes. It is a widely held view that high- tech is good for growth, and that countries that succeed in high- tech industry perform well. Schumpeterian theory, as well as the more recent “new growth” theories, are often quoted in support of this view. However, the “new growth” theories also suggest that large countries are more likely than small ones to succeed in high-tech. This paper explores empirically the factors behind success or failure in high-tech industry for a sample of OECD countries from the 1960s to the 1980s. It is concluded that although there exists a group of high-tech industries for which the scale of the country seems to matter a lot, this does not extend to all industries where R&D and innovation are important. However, cost competition tends to be more severe in those industries where small countries can compete on equal terms. Thus, small countries do to some extent face a greater challenge in high-tech than large countries

Europe at the Crossroads: The Challenge from Innovation-based Growth

Europe’s performance relative to the US and countries in Asia is a topic that greatly preoccupies policy-makers who are concerned that the EU is losing ground compared to other, more dynamic parts of the world. Although the recent crises in Asia gave a timely reminder that the grass often looks greener on the other side of the fence, this paper points to trends in EU performance that European policy-makers will find disconcerting. Productivity growth has slowed down relative to competitors. Export competitiveness has deteriorated in all areas except agriculture and raw materials. The losses have been most manifest in the technologically most sophisticated industries, particularly ICT. Europe has also failed to create employment on a scale at all comparable with the US or Japan, with obvious repercussions for unemployment. While until recently there was a tendency towards convergence in productivity and income between European regions, there are now signs of a reversal of this trend. Redressing this relatively disappointing performance will be neither easy nor quick, but if enduring answers to Europe’s problems are to be found, it is essential that the scale and nature of these problems are carefully diagnosed and solutions found. This paper argues that the problems that Europe faces in key areas such as growth, equality and employment are all related to its failure to take sufficient advantage of technological advances, particularly the ICT revolution. Consequently, a coherent European strategy for upgrading technological capability and quality competitiveness is long overdue. This cannot be limited to providing support to selected industries (or companies) in order to make them more competitive in global markets. Rather, what Europe has to do is to take steps to embed new technologies in society. This should bring together macro-economic policy, regulation, science and technology policy, and employment initiatives. The complementarities between policy areas, in particular, should be stressed.

Domestic Demand, Learning and Comparative Advantage

There has always been a strand of thought that has emphasized learning as a potential source of comparative advantage. This tradition points to the learning creating effects that relations between firms or sectors within the domestic economy may have, and the impact of this on the development of the international competitiveness of the country and its specialization pattern in international trade. Burenstam Linder (1961) was the first to discuss the implications of these ideas for trade theory. A recent attempt to construct an evolutionary scheme of economic development based on these ideas is the one by Porter (1990). Building on earlier work by Andersen et al. (1981), this paper presents an empirical analysis of the impact of vertical integration between customers and suppliers (or users and producers) within country boarders on comparative advantage for 16 OECD countries and 23 industries/product groups in 1965 and 1987.

Structural Changes in International Trade - Cause, Impact and Response

The character of the structural changes in international trade, and the possibility that these might impact countries differently, has been a matter of great concern for many observers from the 1950s onwards. The view that all sectors do not offer the same prospects for growth, and that the specialisation pattern of a country in international trade therefore matters for its economic performance, has also been widespread. This paper analyses the structural changes in international trade between 1965 and 1990, the impact of this on the OECD countries and the ability of these countries to adapt to these changes. It is shown that trade in commodities from industries characterised by high R&D outlays grew much faster than other trade. But also some goods from industries that do little R&D displayed high growth (for example clothing). In general, these changes were most favourable for the large and medium-sized countries of the OECD area (high income). Small countries, and low-income countries, benefited much less. There were striking differences across countries in the ability to adapt to these changes. The large rich countries (USA, Japan) and some of the low-income countries showed good adaptability, while many others failed. This holds, for instance, for all the small, high-income countries. It is shown that this to a large extent may be explained by the failure of these countries to carve out sustainable niches for themselves in electronics, the most fast-growing part of world trade during this period.

User-Producer Interaction, Learning and Comparative Advantage

Michael Porter's book "The Competitive Advantage of Nations" (1990) has led to increasing attention on the favourable impact that "advanced domestic users" may have on competitiveness. This paper presents a critical appraisal of the theoretical and empirical evidence on this relationship. An econometric test of the hypothesis - of a positive impact of advanced domestic users on competitiveness - on data for 16 OECD countries between 1965 and 1987 is presented. In general, the results give strong support to the hypothesis under test. The relationship appears to be stronger in cases where the home-market is exposed to international competition.