I. Introductory Remarks
The dynamics of knowledge generation and diffusion have been fundamentally transformed by the rapid and cumulative progress in science and technology (S&T) and the consequently astounding and continuous decline in the cost of information and communications technologies (ICTs). The progressive and innovative incorporation of "artificial intelligence" into an ever larger number of products, equipment, production methods, and services has given rise to the knowledge-based economies (KBEs) and the comparative advantages enjoyed by them. (1) This is because competitiveness is increasingly underpinned by the cost-effective acquisition and application of new knowledge, the self-reinforcing complementarities between new and existing knowledge, the speeds of learning and ongoing competence-building, and the tactical and strategic deployment of existing proprietary knowledge by entrepreneurs and firms (Carr 2003; Popp 2003; Shapiro 2000; and Lanjouw and Schankerman 1999).
Reinforced by rapid advances in transportation technologies and logistics, the ICT revolution has changed significantly the meaning of national borders and distances, and the organizational modalities in value creation. In particular, many economies have shifted towards more decentralization, greater dispersion (or deverticalization), and leaner systems in their production and services activities, stimulating further the proliferation of national and cross-border production arrangements and service platforms. This trend, often driven by foreign direct investment (FDI) among developing economies, is especially evident since the mid-1980s (Yusuf et al. 2003; Urata 2001; Borrus, Ernst, and Haggard 2000; Ito and Krueger 2000; and Lipsey 2000). In the process, what separates developed from developing economies is the substantial, and widening, gap in knowledge creation, ownership of intellectual property (IP) assets, and the sophistication of applied industrial technologies and organizational techniques (Stiglitz 2003, p. 4; and Romer 1992, pp. 64-66).
Meanwhile, the liberalization and deregulation of various cross-border transactions and of domestic product and factor markets have been in progress in virtually all economies, regardless of their former shades of ideology. This has led to a huge expansion of trade and financial flows as a response to the substantial increase in world demand for goods and services as well as the emergence of vast and new business opportunities across the globe. Additionally, value creation is now subject to intensified global competition and commercial rivalries, and more sophisticated and exacting consumer choice. (2) In the process, most manufactured goods have become standardized and are produced or customized in mass for greater economies of scale, scope, and agglomeration. Commoditization helps to counterbalance the falling prices and squeezed profit margins of many manufactures; the shorter product cycles and lead-time advantage; and the rapid obsolescence of costly technologies, equipment, and acquired skills. (3)
All these developments have enhanced greatly the intrinsic importance of inventive entrepreneurship and the technology-driven small--and medium-sized enterprises (SMEs) as a major source of competitiveness in developed and, to a rising degree, developing economies. (4) Indeed, about nine-tenths of gross domestic product (GDP) of the United States are generated (directly and indirectly) from innovations and inventions since 1870 (Baumol 2002, pp. 133-34), yet another indicator of the much larger gains in total factor productivity (TFP) among the KBEs (more later in the text). As such, IP and the evolving global and regional regimes on intellectual property rights (IPRs) will have an even more profound and unprecedented influence on the social well-being, technological capabilities, and economic progress of interdependent economies in the years to come, those in the developing region especially. …