<< programme

Catching-up: the role of R&D and Innovation

A Triple Helix 5 Track Proposed by:

Judith Mosoni-Fried, Institute for Research Organisation,
Hungarian Academy of Sciences, Hungary
email: h526mos@ella.hu

Jutta Günther, Halle Institute for Economic Research, Germany
email: Jutta.Guenther@iwh-halle.de

Aim of the session
During the last quarter of the 20th century (between 1973-1999), the West European core countries had an annual 1.8% per capita GDP growth rate, while the old periphery, e.g. Portugal had 50% higher growth, and Ireland had two-and-one-third times higher growth. Due to the EU integration, 20-25 years were needed for the cohesion countries (Greece, Ireland, Portugal and Spain) to catch up with the Western core.

Eastern Europe (including Russia and Ukraine) had a 0.9% per capita GDP decline between 1973-1999 (Berend, 2004). It was the small group of the new EU member countries only that have managed to cope with the transformation crises in a relatively short time horizon, and produced rather good income rates from the mid-1990s. In terms of GDP growth these nations can be regarded nowadays as potential "catching-up countries". However, as concerns innovation activity and thus sustainable and self-supporting growth, indicators suggest rather their "falling-behind" (Högselius, 2003).

The session is aimed at discussing the reasons and consequences of moderate innovation activity from the perspective of catching-up and convergence.

Lessons from the literature
According to Fagerberg and Godinho (2003) "catching-up" relates to the ability of a single country to narrow the gap in productivity and income vis-á-vis a leader country. Convergence is a little different: the gap to be narrowed is related to a region rather than a given country. Historically, one can see more difference and divergence than convergence in terms of GDP, since the necessary circumstances rarely happen to be favourable enough. Throughout history, only about 30 nations, with a total population of less than one billion – that is, about 15 percent of mankind – has managed to attain a relatively high development level, with GDP per head exceeding 15,000 USD in terms of purchasing power parity (OECD, 2001). Among the post-socialist countries Slovenia is the first where per capita GDP amounted to 15,372 USD in 2001 (Kolodko, 2002).

Early neo-classical growth models emphasized the role of capital accumulation in economic development. In the Solow-Swan model (Solow, 1956) and Swan (1956) output is produced by capital and labour. In this model technical progress acts as if it were increasing the available amount of labour. Based on this model, studies in the 1990s found empirical evidence on convergence. Mankiw and other authors (Mankiw et al., 1992) found that the Solow model performs well in explaining cross-country differences in income levels and is even more successful when human capital is taken into account. Innovation, as a driving force of long-term economic growth, appeared in the R&D-based endogenous growth models. In these models, ideas (in the form of blue-prints for new products or processes) are generated by investment in R&D. This investment (the R&D-based innovation) affects not only the performance of those actually undertaking these activities, but also gives rise to important external effects (R&D and knowledge spillovers). Innovation enhances technological capabilities, increases productivity and the growth of output (Romer, 1990).

The first prominent theoreticians of catching-up - Thorstein Veblen (1915) and Alexander Gerschenkron (1962) – focused on European development. Veblen emphasized that technological changes had altered the conditions for industrialization in latecomer economies that could take over the new, "codified" technology "ready-made", without having to share the costs of its development. According to him, technology is easily available/transferable and not very demanding in terms of skills or infrastructure. Gerschenkron, four decades later, took a different view, emphasizing the difficulty of catching-up. Gerschenkron argued that technology transfer was so demanding in terms of skills/infrastructure that market forces, in themselves, could hardly lead to success. Active intervention in markets by outsiders, and building up new financial and institutional infrastructure were considered by Gerschenkron as a must (See Fagerberg, Godinho, 2003).

Veblen and Gerschenkron studied catching-up trends prior to the First World War. The decades following the Second World War were, among others, analyzed by Moses Abramowitz (1986) who has characterized this period as "the post-war caching-up and convergence boom" (see Fagerberg, Godinho, 2003). He explained the successful catch up of Western Europe in relation to the US as the result of both increasing technological congruence and improved social capabilities. Abramowitz emphasized the role of education, public and private R&D spending, and the quality of the financial system. In his works, improvement of education, infrastructure and technological capabilities were considered as decisive factors in catching-up.

The new European cohesion countries
Statistical R&D data and empirical studies from the CEE countries are demonstrating a widening gap between the new and the old EU member countries with respect to innovation. Although each of them possesses a sound R&D base and a good higher education system, the innovation output is still rather moderate. Expectations of foreign direct investment and the potential spillover effects of foreign firms are still high, but seem to be more and more differentiated since the second half of the 1990s (see Meske and Mosoni-Fried, 2004, Radosevic and Kutlaca 1998, Hunya 2000). Despite of a few success stories (e.g. in Hungary), many cases indicate that Eastern firms are predominantly incorporated into the networks of multinationals and other companies at the lower stages of the industry value-added chain, focusing their R&D efforts on adaptations rather than the development of new products, processes or services (Sadowski, 2001). The overall tendency is that the present economic growth in this region is not – or is just moderately - driven by innovation, and this is a severe obstacle to rapid catching-up.

Questions to be raised at the session

  • Does basic research play any role in the catching-up process?
  • How can we enhance potential spillover effects of foreign direct investment?
  • How is S&T policy able to develop the knowledge skills of the citizens?
  • Are there any special opportunities for the Central and Eastern European countries and for the emerging regions in Asia, the Pacific, Latin America?
  • What are the lessons of the cohesion countries (Ireland, Spain, Portugal, Greece) that proved to be successful on catching-up "core-Europe"?
  • Which theoretical concepts of convergence and catching-up can be regarded as basic ones in innovation-context?
  • What are the conclusions of the empirical studies on the subject? What can be the main reason of contradictory views?


References:
Berend, T. (2004): “Globalization and its Impact on Core-Periphery Relations". UCLA Center for European and Eurasion Studies, Conference Papers, Paper 1, University of California, Los Angeles
Fagerberg, J. and Godinho, M.M. (2003): “Innovation and catching-up". See: http://folk.unio.no/janf/downloadp/
Högselius, Per (2003): “Can East European Countries Innovate?" Paper prepared for the DRUID Winter Conference, Aalborg, 16-18 January. See www.druid.dk/conferences/winter2003/Paper/Hogselius.pdf
Hunya, G. (Ed) (2000): “Integration Through Foreign Direct Investment", Edward Elgar in association with WIIW, Cheltenham, Northampton and Vienna, 272 p.
Kolodko, G. (2002): “Globalization and Catching-up in Transition Economies". Rochester, New York and Woodbridge, Suffolk, UK
Mankiv, G., Romer, D. and Weil, D. (1992): “A Contribution to the Empirics of Economic Growth". Quarterly Journal of Economics, 107 (May)
Meske W. (2004): “The transformation of S&T during the 1990s and the challenges for the 21st centruy". In: Werner Meske (Ed.): From System Transformation to European Integration. LIT Verlag, Münster, pp. 419-442.
Mosoni-Fried, J. (2004): "Hungary: from transformation to European integration“. In: Meske W. (Ed.), Ibid. pp. 235-258.
Radosevic, S. and Kutlaca, D. (1998): “Assessing the Basis for “Catching-Up" of Eastern Europe: an Analysis Based on US Foreign Patenting Data". STEEP Discussion Paper No 42, SPRU, Brighton
Sadowski, B. (2001): “Towards market repositioning in Central and Eastern Europe: International cooperative ventures in Hungary, Poland and the Czech Republic". Research Policy, vol. 30, pp. 711-724.







Triple Helix Conference I Amsterdam, 1996 II New York, 1998 III Rio de Janeiro, 2000 IV Copenhagen, 2002 V Turin, 2005 VI Singapore, 2007 VII Glasgow, 2009 VIII Madrid, 2010 IX Stanford, 2011 X Indonesia, 2012 XI London, 2013
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