Catching Up Through Technology Absorption

Essay from the year 2010 in the subject Economics - Industrial Economics, grade: 70/100, Stellenbosch Universitiy (Economics), course: Economics of Technological Change, language: English, abstract: A country ́s economic performance and wealth is clearly linked to the degree of the country ́s industrialization process. This process is in turn connected with the diffusion of technology within and into the country (Clark et al. 1993). In the special case of developing countries the next step of industrialization must not even be an innovative one because the technology already exists in developed countries (Henry/Kneller/Milner 2009). Additionally the absorption of newer technologies should even become easier the bigger the lag to the technical frontier becomes. Hence, it has to be questioned why many developing countries are not able to efficiently overtake and use technologies from developed countries to reduce their lack of development although those technologies seem to be so easily available. The expansion of information and communication technology should make the access to them even easier. Another important point is that reaching a certain level of industrialization enables a country ́s industry to be innovative itself by adjusting existing technologies or by creating new connections between different “old” technologies. In this way further development could be reached like the economic success stories of East Asian countries, e.g. South Korea, show. It has to be questioned which lessons today ́s developing countries mainly in Africa can learn from these countries while keeping in mind that they do have other specific preconditions. This essay is structured as follows. It starts with outlining some necessary definitions. It is followed by an observation which requirements developing countries need to successfully absorb technologies. Afterwards it provides a look at the special case of South Korea and its development that shows how technology absorption could look like in a developing country. Then the essay continues with a guideline for a government ́s trade and technology policy before it ends with some final conclusions.