Global Integration and Technology Transfer

Global Integration and Technology Transfer

Global Integration and Technology Transfer

Global Integration and Technology Transfer

Synopsis

The importance of international technology diffusion (ITD) for economic development can hardly be overstated. Both the acquisition of technology and its diffusion foster productivity growth. Developing countries have long sought to use both national policies and international agreements to stimulate ITD. The "correct" policy intervention, if any, depends critically upon the channels through which technology diffuses internationally and the quantitative effects of the various diffusion processes on efficiency and productivity growth. Neither is well understood. New technologies may be embodied in goods and transferred through imports of new varieties of differentiated products or capital goods and equipment, they may be obtained through exposure to foreign buyers or foreign investors or they may be acquired through arms-length trade in intellectual property, e.g., licensing contracts.'Global Integration and Technology Transfer' uses cross-country and firm level panel data sets to analyze how specific activities--exporting, importing, FDI, joint ventures--impact on productivity performance.

Excerpt

Development experience over the past 50 years suggests that trade liberalization and increased international integration are critical elements of a successful strategy to promote economic growth. The World Bank has been an advocate and supporter of a trade agenda that enables developing countries to gain as much access to foreign markets as possible, but it has also stressed the importance of developing countries opening their own markets to international trade and investment.

This volume presents a rich set of analyses exploring how trade and foreign direct investment (FDI) can help increase economic growth by allowing firms to tap into and benefit from the global pool of knowledge. The chapters demonstrate that both obtaining access to foreign markets and opening their own economies to trade and FDI are crucial to promoting economic growth in developing countries, because they stimulate international technology diffusion. The volume also identifies government policies that can facilitate technology transfer and its absorption in the developing world.

Among the conclusions emerging from the research contained in this volume, a number stand out. First, the evidence suggests that an open trade regime facilitates the diffusion of knowledge. Undistorted access to capital equipment and imported inputs that embody foreign knowledge allow firms to acquire know-how; the greater competition from imports lowers the mark-ups over costs that firms charge customers. At the same time, given that technology markets are associated with increasing returns, imperfect competition, and externalities, the argument against trade protection is not unconditional. The conclusions hinge on the scope of knowledge spillovers. International spillovers, for which there is considerable evidence, strongly tilt the balance in favor of free trade. If national spillovers are also important, there may be a potential role for intervention. Trade policy, however, is . . .

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