Technological Innovation, Entrepreneurship, and Development

Abstract

This chapter describes the impact of innovation on developing countries as an outcome of entrepreneurial choices in advanced countries. The chapter presents a model based on the allocation of entrepreneurial talent in the North over three alternatives: product innovation, process innovation, and outsourcing/off-shoring to the South. The model distinguishes between three stages in the product life cycle. In the third stage, entrepreneurial decision-making focuses on outsourcing low-cost production to developing countries, through foreign direct investment. Hence globalization and technological innovation drive the structural shift towards production in the North that focuses on innovative, high value-added activities. There is relative deindustrialization. Here, the shift in labour demand toward skilled non-production workers and off-shoring by Northern entrepreneurs fuels Southern industrialization based on low-cost labour.

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