Comparing the National Innovation Systems in East Asia and Latin America: Fast Versus Slow

Abstract

Lee and Kim analyze the NIS of East Asia and Latin America, and to show the sources of the divergent economic performance in these groups of countries. This divergence between East Asia and Latin America reflects that these two regions selected different policy priority in knowledge development; the priority was given to technology in East Asia whereas it was given to science in Latin America. The main characteristic of R&D expenditure in Latin America is that universities and public labs are taking up most of the R&D but they are decoupled from the demands from the private sector. The role of Latin America’s private sectors remains weak, and the difference in corporate R&D among the East Asian countries and Latin American countries are substantial. East Asia and Latin America initially imported foreign technologies, but only East Asia has been able to build up its indigenous technological capabilities. One of the reasons for this difference is that in East Asia, the domestic corporate sectors were the main agents of technology imports, whereas the trans-national corporations were the main agents for production in Latin America. R&D investment by TNCs in Latin America was mainly carried out in their home countries, and the TNCs sought to protect their technologies by confining it within the boundary of the TNCs [Hanson (Economic Development, Education and Transnational Corporations, Routledge, p. 54, 2008)]. Emerging new technologies in short cycle fields present better growth prospects, and the possibility of higher profitability associated with less collision with the technologies of advanced countries and the presence of first-mover advantages. This divergence in technological specialization can be considered as one explanation how the Asian countries went beyond the middle income trap situation in the mid-1980s, whereas Latin American countries failed to overcome the trap. The view of Lee and Kim based on short or long cycle times also differs from the traditional recommendation to focus on trade-based specialization, which is more suitable for low-income countries, because it argues that middle-income countries need to specialize in technological sectors that rely less on existing technologies, and look at the greater opportunities associated with new technologies. It is also complementary to the growth identification and facilitation framework of Justin Lin (New Structural Economics: A framework for Rethinking Development and Policy‚ Washington, DC, The World Bank 2012).