Using Large-Scale Programs to Help Develop Technological Capabilities

China is a developing country but has made impressive progress in technological capability development. One strategy proved to be effective is the use of large-scale programs to help technological capability development. Examples include the subway equipment industry, the high-speed rail industry, the power generation equipment industry, the power transmission industry, the telecom equipment industry, etc. In all these sectors, China was lagging behind the technological innovation frontier before the related large-scale programs but is now among the world leaders. In this chapter we will try to understand the process of initiating and managing these large-scale programs.

Technology Upgrading and Economic Catch-Up

This chapter begins with a brief overview of the current literature on economic growth and innovation, and the process of technology upgrading. It defines the key concepts that will be used throughout the book and sets the stage for the challenges and issues around economic growth that will be addressed in later chapters. It then outlines the contribution of each chapter and the Schumpeterian or neo-Schumpeterian perspective in which they’re framed, and the four major themes that run throughout the book: the relationship between technology capability and economic growth from new methodological angles, including the middle-income trap; technology capability upgrading from structural, sectoral, and micro-level perspectives; the emerging paradigm of technology capability upgrading which is about sustainability, green growth, inclusiveness, and socio-economic and political determinants of technology capability building; and the several dimensions of innovation policy which reflect a state of transition or changing policy philosophies.

Upgrading Non-Technological Capabilities

In recent years, Korean firms have struggled with slowdowns of both these world-first developments and their export to overseas markets. Despite technological development process, however, important questions remain with respect to how non-technological capabilities such as organizational, regulatory, and financial innovation affect accumulation and failure. To address these concerns, the key components of a conceptual framework for investigating non-technological capabilities for transition consist of the existing government, R&D organizations, and inter-firm relations. We analyze the performance and limitations of non-technological capabilities in the process of transition from the catch-up system to the innovation-based system in Korea. Using the case study of system rather than mass products, we hope that this research can contribute to the understating of non-technological features of energy-sector transitional dynamics in Korea. Finally this research would provide a new approach to the challenges from a non-technological aspect and can also provide differentiated science and technology policy strategies for the catch-up economies.

Technology Upgrading in Emerging Economies

The chapter applies a newly developed approach to technology upgrading to a sample of sixteen economies during 2002–16. The “Index of Technology Upgrading” is based on three complementary, but autonomous components that proxy for three different dimensions of the technology upgrading process: scale or intensity of technology activities (A); breadth or scope of technology upgrading activities (B); and interaction with the economy related to technology exchange (C). The results of our study reveal facets of the technology upgrading process and the relative positions of countries, which conventional mainstream approaches and composite indicators do not make evident. We conduct an econometric exercise, which shows that the index of technology upgrading contributes significantly to explaining changes in both total factor productivity and labor productivity, but that the index of technology exchange has no explanatory power. This latter result suggests that to contribute to increased productivity, openness to technology exchange needs to be complemented by domestic technology accumulation activities.

Catching Up or Developing Differently? Techno-Institutional Learning with a Sustainable Planet in Mind

Developing as a latecomer country is tricky. It implies competing with established production systems that benefit from know-how, economies of scale, and network externalities accumulated over decades. It is thus unsurprising that very few countries have been able to close the technological and income gap. Those that did, like South Korea and China, started by inviting foreign investors, buying licenses, and emulating the early movers’ proven business models until they had enough capabilities to chart their own pathways and become wealthy knowledge societies—and role models for other latecomers. Global warming and other major environmental crises, however, reveal the unsustainability of a techno-economic paradigm based on burning fossil fuel and maximization of material throughput and consumption. Hence, latecomers can no longer build on emulating technologies and institutions, but need to start deviating from established practices early on. Still, the successful country cases hold important policy lessons for them.

Leapfrogging on Steroids

Accounts of economic development as catch-up, via technological leverage and leapfrogging, have been successfully applied to explain cases of catch-up by East Asian countries, from Japan through Korea to Taiwan, Singapore, and others. Now in the twenty-first century it is the turn of emerging industrializing giants, led by China, but with India, Brazil, and others also looking to catch up, drawing as much as possible from the prior experiences and strategies of East Asia. But these emerging giants are looking to industrialize in fundamentally different circumstances from those that applied in earlier cases as industrialization powered by fossil fuels and linear resource flows is no longer feasible, not just because countries have pledged to reduce carbon emissions, but because at the scale required for the industrialization of China, India and others, fossil fuels present insuperable energy and resource security problems. They confront geopolitical limits to growth that demand alternative green strategies if they are to be evaded. The argument is developed in this chapter that green development strategies are the only feasible strategies for such countries to enable them to bring their industrialization processes to fruition. This chapter outlines the issues and options open to them, and evaluates the strategies pursued so far, demonstrating how they necessitate a break with the path dependence inherited from earlier patterns of industrialization. Green growth strategies turn out to be a strategic necessity; they promise to become the developmental norm in the twenty-first century, enabling the more recent industrial arrivals to leapfrog their predecessors.

Technological Learning Strategies and Technology Upgrading Intensity in the Mining Industry

Despite extensive research on technology upgrading in firms from emerging economies, we know little about micro-level learning strategies underlying technological capability accumulation or technology upgrading intensity, particularly in natural resource-intensive industries. Through a study of Brazil’s mining industry we found that: (1) leading firms implemented technological learning strategies as responses to changing windows of opportunity; (2) these technological learning strategies manifested from imitative and defensive to the offensive, with elements overlapping during the technology upgrading process, involving two forms of knowledge: “doing, using and interacting” (DUI) and “science, technology and innovation” (STI), which were operationalized through various learning mechanisms; (3) the use of learning mechanisms changed qualitatively over time affecting firms’ technology upgrading intensity positively. We contribute to furthering the understanding of latecomer firms’ technology upgrading by providing in-depth empirical insights through a comprehensive approach to innovation capabilities and learning strategies in an under-researched natural resource-intensive industry in a middle-income resource-rich country.

Macro and Micro Foundations for Technology Upgrading and Innovation

Technological upgrading and innovation is necessary for long-term economic development. Nonetheless, creating the conditions that allow technological upgrading and innovation to occur is far from simple, especially for developing economies. While policymaking may create important macro- and meso-incentives for economic agents, it is at the micro-level that policy effectiveness can truly be verified. In this chapter we analyze the recent development of the Brazilian shipbuilding sector where an entire institutional setting was put in place to boost technological and industrial development. We investigate the policies and results by contrasting the macro-, the meso- and the micro-perspectives. Though policies put in place gave an initial boost to the sector, coordination uncertainties and critical bottlenecks at the micro-level generated high capability building costs that precipitated the subsequent failure of the shipbuilding industry to catch up and to upgrade sufficiently in order to really become internationally competitive.

Economics of Technological Leapfrogging

Latecomer economies are firms which may be able to leapfrog older vintages of technology, and make pre-emptive investments in emerging technologies to catch up with advanced countries in new markets. Leapfrogging can be defined as latecomers trying something different ahead of the forerunners, thereby leaping over them. The answer to the question whether the fourth industrial revolution represents a new window of opportunity for leapfrogging or whether it constitutes a source of further risks for latecomers is that this depends entirely on the country’s response and readiness, that is, its industrial policy, digital literacy, the skill and education level, as well as domestic market size and position in the GVC. Policy recommendations for leapfrogging can also be made for different types of firms, such as incumbents and start-ups. The former comprises three types of firms, namely leaders, followers, and laggards. Path-creating type leapfrogging is more likely to take place in start-ups because they have invested the least in existing technologies or business models. Leader or follower type firms in emerging economies tend to have some experience with technology and absorptive capacity and are thus likely to be in a position to skip one or several stages, while managing the risks associated with leapfrogging. Lastly, laggard firms should not attempt pre-mature leapfrogging but should first build some absorptive capacity in their niche area and upgrade by moving up the higher end of the GVC.

Innovation Surveys as Evidence for Technological Upgrading and Catch-Up Studies

This chapter looks at the contribution to the innovation capability measurement that is made through innovation surveys. The increased availability of data at the firm level provides new and comprehensive indicators on the accumulation of innovation capabilities. Better understanding of long-term dynamics and the heterogeneity of sectoral trajectories of innovation capabilities sets the stage for adaptable and targeted innovation policy and facilitates new insights on the technology upgrading and economic catch-up mechanics. The chapter presents an approach to assessing innovation capabilities at the national and sectoral levels using composite indicators of output-based innovation modes and illustrates the proposed ideas using the data from the Russian innovation survey. The proposed indicators bring empirical evidence to the discussions of path dependence and gradual change in the technological upgrading studies. Identification of the heterogeneity of innovation capabilities at firm and industry level contributes to a more profound understanding of the upgrading dynamics and helps to draw implications for effective policymaking.