Innovations, High-tech Trade and Industrial Development: Theory, Evidence and Policy

Abstract

The knowledge base in the major economies has been growing at a fast pace. Investment in knowledge accounts for about 4.7 per cent of OECD-wide GDP and the high-knowledge-based economies invest between 5.2 and 6.5 per cent of GDP in knowledge development (OECD 2001). Developed and newly industrializing countries internationally trade goods and services that are knowledge-intensive. The industrial growth patterns and competitiveness of industries across countries and over time are closely related in the globalizing world. Two distinct patterns of industrial development are clearly noticeable: developed and newly industrializing countries moved faster towards producing and exporting goods and services that are knowledge intensive; a large number of countries could not catch up and their position in the fast globalizing world is being marginalized (Lall 2004). This pattern of industrial growth can be traced from the changing roles of innovative investment patterns in industry across countries and over time. The processes of globalization have affected different innovative activities differently and thus the rise/fall of innovative investment in some industries in some of the countries. Outsourcing of industrial R&D has shifted some of the innovative activities from developed to a few developing countries. The increasing role of foreign direct investment (FDI) and direct operation of multinational corporations in production of goods and services in the developing countries has significantly influenced development/underdevelopment of innovative capabilities.

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