Catching-up Countries Research Articles

One size does not fit all

This section is dedicated to the review of ideas, articles, books, films and other media. It includes replies (and rejoinders) to articles, the evaluation of new ideas or proposals, and reviews of books and articles both directly and indirectly related to intellectual property law. Aimed at policy makers and civil society, this collection of essays explores various aspects of intellectual property law and development. With 17 chapters, covering topics such as economics, bioethics, public health, conservation and green innovation, the collection has two principal aims: to analyse the impact of ‘diverse intellectual property (IPR) regimes on the development process’ (p. 1) and to explore ‘policy measures fostering the international diffusion of knowledge, the accumulation of capabilities in catching-up countries and the access by populations in emerging economies of the fruits of technological innovation’ (p. 36). The contributors (with backgrounds in law, economics, bioethics, policy and government) provide perspectives and insights on intellectual property that are not always found in standard, doctrinal legal commentary. Chapter 15, for example, is written by Pedro Roffe and Christoph Spennemann, from the International Centre for Trade and Sustainable Development (ICTSD) and United Nations Conference on Trade and Development (UNCTAD), respectively. Drawing on their experiences in international trade, Roffe and Spennemann provide insights about the proliferation of regional trade agreements or, as they refer to them, preferential trade agreements (PTAs). By considering recent trends in PTAs, the authors aim to ‘show the extent and breadth of the novelties introduced by PTAs and how they affect the balance between private rights and public interests’ (pp. 439–40), and expand ‘protection and enforcement measures to new frontiers’ (p. 459). According to the authors, the trend towards PTAs has reduced the public domain, which has far-reaching consequences, including hindering access to, and diffusion of, medicines, genetic resources and information.

The role of the exchange rate regime in the process of real and nominal convergence

The Balassa–Samuelson (B–S) hypothesis suggests that, in catching-up countries, inflation will be comparatively higher, as prices of non-traded goods “catch up” with the growth of productivity in the tradable goods sector; as a result, these countries will experience real appreciation. However, a general result of the literature is that the B–S effect can only explain part of the excess inflation observed in European catching-up countries. One feature of these studies is their neglect of the role of the exchange rate regime in affecting price convergence. In this paper, instead, we argue that the choice of the exchange rate regime may affect nominal convergence. To show this, we first model the regime choice and, in a second stage, estimate a B–S type of regression for each regime. Our results show that, for countries that pegged to or adopted the euro, the effect of an increase in dual productivity growth (the difference in productivity growth between the traded and non-traded sectors) on the dual inflation differential is twice as large as that in “flexible” countries. We conclude that, in catching-up countries, too early adoption of the euro may foster excess inflation, beyond what would be implied by B–S convergence only.

African financial development dynamics: big time convergence

Purpose – Assessment of African financial development dynamic convergences in money, credit, efficiency and size. The paper aims to discuss these issues. Design/methodology/approach – The empirical evidence is premised on 11 homogenous panels based on regions (Sub-Saharan and North Africa), income-levels (low, middle, lower-middle and upper-middle), legal-origins (English common-law and French civil-law) and religious dominations (Christianity and Islam). The paper examines convergence in financial intermediary dynamics of depth, efficiency, activity and size. Findings – Findings suggest that countries with small-sized financial intermediary depth, efficiency, activity and size are catching-up countries with large-sized financial intermediary depth, efficiency, activity and size, respectively. The paper also provide the speeds of convergence and time necessary to achieve a full (100 percent) convergence. Practical implications – The presence of strong links among African banking sectors may present little opportunity for portfolio diversification. The convergence patterns show positive steps toward regional integration. As a policy implication, African governments should not relent in structural and institutional reforms. Originality/value – It is the first critical assessment of convergence in financial intermediary development dynamics in the African continent.

Transnational Income Convergence and National Income Disparity : Europe, 1960~2012

This study identifies income convergence in Europe over 1960 to 2012. The Great Recession since 2008 reversed the GDP per capita convergence in the EU-15, but the extransition countries have mostly continued to catch up. We found this by analysing the Sigma convergence of GDP per capita in the European Union. With a few pauses, there has been convergence in the European Union since 1960. Historically, convergence has been faster when aggregate GDP growth has been faster. On top of that, we link evolvement in national income distributions with Europe-wide convergence. It is meaningful because if many people are left outside of income increases, then the general development is not in line with the spirit of the EU convergence. Generally, wealthier countries are found to have lower income disparities as measured by Gini coefficients than poorer countries. The GDP per capita convergence was not correlated with changes in income distribution over the period of 2000~2011 except for a group of six catching-up countries, namely Cyprus, the Czech Republic, Hungary, Latvia, Lithuania, and Poland.

The Co-evolution of Technology and Institutions in the Catch-up Process: The Case of the Semiconductor Industry in Korea and Taiwan

This paper explores the industrial specialisation of latecomer countries, particularly Korea and Taiwan, which are often referred to as successful catch-up cases. The traditional wisdom is that the ‘developmental state’, resource leverage, and technological sophistication in an export-oriented strategy have been the factors for success. However, firm strategies and a supportive government are not sufficient to explain the different features of catch-up patterns. In this paper we propose that differences in industrial specialisation of catch-up countries are attributable to the interaction between technological characteristics and institutional settings, including corporate organisation, industrial structure, and the role of the public sector.

К вопросу о “закате” крупных государств: praeteritum et praesens

The author deals with the problem of the great nations’ fall. Special attention is paid to critical interpretation of institutional and cultural explanations of socio-economic systems’ degradation. It has been proved that these approaches are unable to completely explain complex processes of big countries decline. The main weakness of institutional hypothesis lies in its focusing mainly on political rights of population and democracy. In particular, institutional approach fails to interpret the relative socio-economic decline of such countries with “excellent” institutions, as the United Kingdom and the Netherlands. In their turn, “cultural determinists” are incapable of giving satisfactory explanation of China’s decline in XIX century as well as China’s economic steep rise in the end of the end of XX and the beginning of XXI centuries. The exogenous interpretation of nations’ fail which is gaining popularity most recently also faces a number of serious objections. The most important is simplified representation of the evolution of the world economy as a result of force-majeure circumstances. The author presents its own concept of leading countries’ economic decline. The main idea is that the key factor determining the decline of great powers is connected with technology progress. Author believes that the change in the balance of forces in the world economy is caused by the difficulties with the transition of dominating power to the new technological paradigm. General algorithm of losing the leadership is as follows: instead of destruction of institutional barriers which prevent launching the next wave of technological and economic development, the country fails to resist the illusion of possibility to maintain the dominant role in the global hierarchy by outsourcing its industrial sector to global periphery and accelerating the growth of service sector. However, service sector is a weak generator of economic growth. Tertiary sector’s overgrowth undermines the stability of the economic system just to external shocks and in the long run is capable to weaken the competitiveness of the state in the global economy. As a result, torn apart by internal contradictions, de-industrialized economy cedes leadership to rapidly copying technological innovations and speedily industrializing catching-up countries. This hypothesis is verified by the cases of Great Britain at the beginning of the XX century and the USA in the beginning of the XXI century. Acknowledgement. The article has been prepared in the framework of youth grant of Astana Club of Nobel prizewinners of 2014.

Emerging Knowledge Economies in Asia: Current Trends in ASEAN-5

Part 1. ASEAN as Emerging Hub 1. Regional Headquarters in ASEAN, A. Raharso 2. Location Criteria Evaluation and Potential for Regional Treasury Centres in Brunei Darussalam, P. Polak and M. Hamdan 3. ICT Knowledge Hub in ASEAN through Formulating Enabling Environment, Building Human Resources and Collaborating with International Organizations, H. Kifle and Y. Hwangbo Part 2. ASEAN in Global Context 4. Factors that Influence the Adoption of Green Supply Chain Management among Malaysian Manufacturers, J. Ho, K. Annuar Rusli and A. Abdul Rahman 5. Conceptual and Empirical Arguments from the Indonesian Automotive Cluster in Pursuit of a Better Explanation of Knowledge based Regional Development, D. Irawati and R. Rutten 6. Tourism in Southeast Asia, M. Wan-Hassan and M. Halal Part 3. ASEAN and Innovation Support 7. The Role of Public R&D Funding in Innovation Systems of East Asia and ASEAN Catch-up Countries, H. Kroll and D. Schiller 8. Latest Issues in Economic Development and a National Innovation System in Thailand, Yokakul, N. and Promwong, K. 9. The Role of Local Creative Entrepreneurs to Shape Creative City in Indonesia, D. Irawati and E. Rahmawati

Towards an Innovation Policy in the Post Catch-Up Era

As the catch-up innovation system was exposed to a new competition environment in which second-tier catch-up countries reduced the gap with Korea and advanced Korean firms entered into the frontier product market, it is experiencing system delay in terms of organizational and policy change. Therefore, innovation policy needs to be reorganized from a dynamic perspective to analyze the problems in the transition period and enable the system to overcome organizational and institutional delays. This article investigates the characteristics of transition periods in terms of external environment changes and internal socio-economic pressures. Based on the analysis of environment changes and catch-up system characteristics, it suggests the framework for policy intervention, direction, and practical principles for post catch-up innovation policy. In particular, it suggests the network-based developmental state and policy implementation in order to overcome the limitation of centralized developmental state of catch-up periods.

Book Reviews

Gustav Ranis of Yale University reviews, “The Quest for Prosperity: How Developing Economies Can Take Off” by Justin Yifu Lin. The EconLit abstract of this book begins: “Presents a road map for country-centered economic development strategies and examines the long-term development challenges facing policymakers. Discusses new challenges and new solutions; a battle of narratives and changing paradigms; economic development—lessons from failures; lessons from successful catch-up countries; a framework for rethinking development—a new structural economics; what would be done differently under the new structural economics; putting the new structural economics into practice—two tracks and six steps; the peculiar identities and trajectories of transition economies; fostering structural change at higher levels of development; and a recipe for economic prosperity. Lin is Founding Director and Professor of the China Centre for Economic Research at Peking University and former Chief Economist and Senior Vice President of the World Bank. Glossary; index.”

The Role of the Exchange Rate Regime in the Process of Real and Nominal Convergence

During the last decade, economists have intensively searched for evidence on the importance of the Balassa-Samuelson (B-S) hypothesis in explaining nominal convergence. One general result is that B-S can at best explain only part of the excess inflation observed in the European catching-up countries, which suggests that other factors may be at play. In these and related studies, however, the potential role of the exchange rate regime in affecting price convergence in Europe has been overlooked. In this respect, we claim that the choice of the exchange rate regime has decisively affected the path of nominal convergence. To show this, we first model the (endogenous) choice of the exchange rate regime and, in a second stage, estimate a B-S type of regression for each regime. Our results show that, for countries which pegged to or adopted the euro, the effect of the same increase in the dual productivity growth (that is, the difference in productivity growth between the traded and non-traded sectors) on the dual inflation differential is more than twice as large as that in the flexible countries. We conclude that, in a catching-up country, premature euro adoption may foster excess inflation, beyond that which is to be expected as a consequence of productivity convergence on the basis of the B-S effect.

Competing with dominant global standards in a catching-up context. The case of mobile standards in China

The process of diffusion of standards and competition between standards is susceptible to initial conditions and is path dependent. In this paper, the authors are interested in investigating to which extent economic actions and public policy initiatives can modify the outcome of a path-dependent process of competition between standards. They also aim to identify the factors that affect the success of such initiatives. To this end they analyse competition between mobile standards in China across two generations (2G and 3G), with the help of essential notions of economics of standards. Different policy initiatives have been taken to stimulate the domestic innovation and to relieve the burden of foreign IPRs, culminating with the introduction of a 3G domestic standard, TD-SCDMA, to compete with the established global standards. Despite the size of the Chinese market and the strong hold of the government on the telecommunications industry, it is found that the available market data indicate that these path-breaking initiatives have not been successful from a commercial point of view. From the case study, the authors analyse the reasons for the unsatisfactory market results and outline the main lessons to be drawn. They also investigate to which extent the Chinese initiatives have contributed to other objectives related to catching-up. It is suggested that they have provided opportunities of learning to innovate and develop valuable capabilities. Building on the lessons drawn from this case, the authors discuss three standard policy and strategy options for catching-up countries: simple participation in global consortiums on agreed global standards, indigenous architectural innovation, and indigenous modular innovation.

Government Expenditure and Economic Growth in the EU: Long-Run Tendencies and Short-Term Adjustment

This paper analyses both the long and the short-run relation between government expenditure and potential output in EU countries by means of pooled mean group estimation (Pesaran, Shin, and Smith (1999)). Results show that, over a sample comprising EU-15 countries over the 1970-2003 period, it cannot be rejected the hypothesis of a common long-term elasticity between cyclically-adjusted primary expenditure and potential output close to unity. However, the long-run elasticity decreased considerably over the decades and is significantly higher than unity in catching-up countries, in fast-ageing countries, in low-debt countries, and in countries with weak numerical rules for the control of government spending. The average speed of adjustment of government expenditure to its long-tem relation is 3 years, but there are significant differences across countries. Anglo-Saxon and Nordic countries exhibit in general a faster adjustment process, while adjustment in Southern European countries appears somehow slower.

Knowledge flows in the solar photovoltaic industry: Insights from patenting by Taiwan, Korea, and China

In this paper we extend work previously undertaken in industries such as semiconductor and flat panel displays to investigate knowledge flows from advanced countries (US, Japan and Europe) to catch-up follower countries (Taiwan, Korea and China), this time in the emergent solar photovoltaic industry. The solar photovoltaic industry is of particular interest in that it is poised between exploitation of first generation (crystalline silicon technologies) and new thin film and organic compound technologies, thus providing distinct sources of knowledge flow as measured by patent citations and linkage. For this study, we deploy a new database of 19,105 solar photovoltaic patents taken out by Taiwan, Korea and China at the USPTO over the 24 years 1984–2008, and analyse the knowledge flows revealed in these patents using a set of 12 International Patent Classification technology categories that we constructed. We demonstrate commonalities in patterns of knowledge flow between solar photovoltaic and earlier industries, but also suggestive differences, such as rising dependence of the catch-up countries on their own intra-national knowledge generation and flow, indicating their shift from imitation to innovation.

Is the Economic Crisis Impairing Convergence in Innovation Performance across Europe?

Are EU Member States converging in terms of their innovative effort? To what extent is the current economic downturn impairing the convergence across the European Union countries in innovation performance? Using macro and micro data, this article shows that the EU Member States have converged in their innovative potential over the 2004–08 period. The economic crisis of Autumn 2008 has an impact on innovative investment in almost all EU countries, but the catch-up countries are the most affected, leading to increasing divergence. The danger of growing disparities in innovative capabilities may lead to divergence also in income and well-being. The article discusses some of the innovation policies that can be carried out at the EU level to facilitate cohesion.

Catch-up process and underlying knowledge flows: focusing on geographic localisation at a national dimension

One of the factors making technological catch-up possible has been suggested as an access to external technology or knowledge. Considering that just accessing external knowledge is not sufficient, this paper tries to approach this issue from the perspective of absorptive capacity building and enhancing and related knowledge and knowledge flows. From the perspective of national dimension, absorptive capacity enhancing can be regarded as having geographic elements in knowledge flows within national territory. This paper tries to utilise patent citation data made by USPTO (United States Patent and Trademark Office) for finding out the characteristics of knowledge flows which has been underlying the catch-up phenomenon of catching-up countries. We can find out that even though there is a marked difference between advanced countries and catching-up economies in terms of strong or weak localisation of knowledge flows, it is evident that the geographic localisation exists in spite of the heavy dependence on external knowledge. In addition, even in catching-up countries, technological development accompanies a strengthening of the localisation of knowledge flows, from weak to strong as well as from low to high. Therefore, we discover that technological catch-up necessitates the active attitude toward available external knowledge, not just the passive attitude, and some mechanism to spillover the adapted knowledge to other innovative firms, and a way to innovate to confirm this attitude and mechanism.

Are scientific capacities and industrial funding critical for universities' knowledgetransfer activities? - A case study of South Korea

This study focuses on the knowledge-transfer activities of Korean universities at the organisational level. Considering the idiosyncratic characteristics of the Korean university system, as well as those of universities in other recently developed Asian countries experienced a rapid economic catch-up, this study is more interested in the relationship between the scientific capacity of universities and their knowledge-transfer activities, and between universities' funding sources and their knowledge-transfer activities. According to the results of the study, scientific capacity in a specific discipline, such as engineering, is important for universities in both other developed countries and in Korea, while scientific capacity (regardless of the discipline) is apparently not important for Korean universities, particularly in the area of domestic publication. Furthermore, this result supports the proposition suggested that strategically chosen industrial sectors in rapid catch-up countries are closely related to the scientific capacity of universities in specific disciplines. In terms of funding sources, the amount of funding from industry is strongly related to the knowledge-transfer activities of universities, whereas the proportion of funding from industry relative to the total amount of funding is not as significantly related to knowledge-transfer activities. The failure to identify a significant relationship between central government funding and knowledge-transfer activities may be due to less strict requirements for commercialisation in central government R&D programmes. Otherwise, central government funding fails to generate meaningful knowledge-transfer activities in universities.

Analysis of innovation activity of Slovak and Czech enterprises

European innovation scoreboard is used to monitor and compare the innovation performance of European countries, according to which was the Slovak Republic, together with two other V4 countries, i.e. Hungary and Poland, at the time of last available data from this area, classified into the last, fourth group of countries named “catching-up countries”. These countries were characterized by the lack of innovation activity, which was well below the EU 27 average. From the V4 countries, Czech Republic achieved the best results, belongs to “moderate innovators” and is the most close to the European average. At a present time all four countries are included in a group of moderate innovators. The innovation performance of whole country is particularly influenced by innovation activities of enterprises operating in this country. For this reason, the article deals with the detailed analysis of innovative activity of enterprises by their size and sector of their operation in Czech and Slovak Republic, and also deals with the cooperation of enterprises in these activities in terms of the type of partner and the countries of their interaction.

Should “open innovation” change innovation policy thinking in catching-up economies? Considerations for policy analyses

This paper provides a review of the current state of academic and policy-level debates on “open innovation” by elaborating on the relevance of the concept of open innovation for innovation policy-making in catching-up economies. The paper shows that paradoxes and contradictions exist between the “mainstream” innovation discourse and the development challenges of the catching-up countries that have lead to “de-contextualization” of the innovation policy discourse. The paper argues that applying the concept of open innovation in its ideal-type form to the catching-up context is likely to reinforce these de-contextualization tendencies. This problem can be remedied by more conscious attention to the basic contradictions and paradoxes, which requires a more comprehensive and systemic analytical focus on innovation and technological development at the levels of firm, industry and policy.

Good or bad? The influence of FDI on productivity growth. An industry-level analysis

This paper attempts to reconcile the often inconclusive evidence on the role of FDI in the process of economic development by taking into account the heterogeneity both among industries and among countries. Using a comparable database at the industry level for 35 countries in the OECD, Asia and Eastern Europe from 1987 to 2002, we test for the influence of both stage of development and sectoral FDI patterns in the relationship between FDI and productivity growth. In certain industries and for the catching-up countries, a significant and positive relationship emerges when FDI coincides with high investment or export orientation.

The Role of the State in the Internationalization of Universities in Catching-up Countries: An Analysis of the Portuguese Higher Education System

In this article the role of the state in the internationalization of national prominent universities in a catching-up country is analysed. Taking into account the changes in higher education in the last 60 years, including the changing relationship between the state and the universities, the article takes a longitudinal analytical approach on the importance of state-led science and higher education internationalization initiatives in the integration of Portuguese universities in the global higher education arena. It is found that the state played (and still plays) a critical role in the internationalization process of universities by supporting the build-up of institutional knowledge capacity and by rewarding internationally oriented scholarly activities. Although these public policies did not lead to the emergence of national prominent universities able to compete with global research universities, they allowed for the internationalization and integration of the Portuguese universities in the global higher education.