Lucas (2009, the reference in the end) shows that the catching up effects of "open" countries is substantial. Lucas estimates θ=0.67. This means when the developed countries grow constntly at μ (μ × 100 percets), the catching up countries will grow at

                          μ(H/h)^θ

where H is the GDP per capita of leading countries and h is that of catching up counties. (Lucas estimates μ= 0.02).

Lucas explains this phenomenon as spillovers of knowledge. However, the actual mechanism how this spillovers occur is debatable. Lucas hinted that the knowledge was transferred by trade. This is still very ambiguous because it may mean that the knowledge was transferred by importing machines and high tech materials but it may also mean that the learning by production for export permitted the accumulation of knowledge.

East Asian experience including Japan, Korea, Taiwan and others tells the learning by production was important. If this is true,  R&D investments may play a minor role in the catching up process.

Is there any good research that tried to estimate and differentiate various effects for catching up process? 

Reference;

Lucas, Robert, E., 2009 Trade and the Diffusion of the Industrial Revolution, American Economic Journal: Macroeconomics 1(1): 1-25.

R & D is needed to create solution for local problem. Yes, least developed countries should invest more in R&D, but only to tackle their own problem.

From my perspective, this R&D should focus on Health, education; Food security and of course making use of the advance tech already develop by others.

Dear Colince,

Health, education and food security are important but do they demand R&D or suitable implementation of public measures? If we need health, education and security all over the nation,  what we should expense from the budget must not be the R&D on these activities. It will be sufficient that R&D occupies only a small part of total budget.

Do you have any specific reason that government or firms should spend more money on R&D?

Should LDCs invest more resources in R&D?

I believe, yes they should.  But,  since the return from the investment more often than not takes along time, these countries need to be aware of the consequences of  such an investment arising out of the failure to invest in other competing and urgent claims. . 

Thank you, Rabindra.

As you rightly point it out, to estimate the effectiveness of investment should be done in comparison with other investment. As the LDCs have limited supply of saving, it is necessary to make a kind of triage in investment. Urgency and effectiveness must be the criteria.

I feel that we should also extend our range of choice from what we normally classify as investment to other expenditures.  Education is one of them.

Leaning by doing (producing) is another point to take into account.  

In order to answer your question it is fundamental to understand the profound restructuring process followed by innovation systems in the developed, core countries taking the ecosystem of Silicon Valley as a paradigmatic case. This restructuring process that I refer to as the configuration of an imperial innovation system commanded by the large multinational corporations reduces labour costs, transfers risks and responsibilities, and capitalizes on the advantages of controlling the patent process. Four over-arching aspects characterise this restructuring process:

a) The increasing internationalisation and fragmentation of research and development activities. In contrast to the traditional innovation processes occurring ‘behind closed doors’ in research and development departments internal to large transnational corporations, this trend is known as open innovation. This denotes

the sharing of knowledge-intensive corporate functions with the growing network of external partners, such as suppliers, clients, subcontractors, universities, etc., to create ‘ecosystems’ of innovation (OECD, 2008);

b) The creation of scientific cities—such as Silicon Valley in the United States and the new ‘Silicon Valleys’ established in peripheral or emerging regions, principally in Asia—where collective synergies are created to accelerate innovation processes (Sturgeon, 2003); 

c) The development of new methods of controlling research agendas (through venture capital, partnerships and subcontracting, among others) and appropriating the products of scientific endeavours (through the acquisition of patents) by large transnational corporations. Actually, the rhythm of patenting has increased exponentially in the last two decades to the point that a new slogan for neoliberal capitalism could be patent, patent (in addition to accumulate, accumulate). This is also closely associated to the logic underlying ‘free trade’ agreements (NAFTA,

ASEAN, TFTA) as a strategy for controlling/administrating global markets by the large TNC, mainly based in the US ; and 

d) The rapidly expanding highly-skilled workforce – particularly in the areas of science and engineering – in the Global South, is being tapped by TNCs for research and development in peripheral countries through recruitment via partnerships, outsourcing and offshoring (Batelle, 2012). In fact, this spatial restructuring of R&D has crystallized into a new geography of innovation, in which following the pattern of industrial production, R&D is shifting to peripheral economies. 

This, of course, does not mean that Research and Development (R&D) investment in Least Developed Countries (LDCs) is not profitable or worthwhile. What I try to convey to you is the necessity to be cautious about the patenting process established by the World Intellectual Property Organization (WIPO) and the strategies followed by the large multinational corporations in order to appropriate and control the products of scientific and technological innovation. The case of Ecuador is quite interesting in this regard (Prometeo program, Yatchay program, Ateneo, program, etc. in the context of the national development project of Bivir Bien). South Korea was also a good example of the positive impacts of R&D investment in the framework of a national development process although this experience was prior to the restructuring of innovation systems that I referred to at the beginning.

Investment in R&D could take LDCs to higher economic growth position but it depends upon the quality of R&D activities.

Dear Raúl Delgado Wise,

we should not be bewildered by Silicon Valley model. ICT and other cutting-edge technologies occupy a rather small percentage of the total world production. Even if LDCs pursue catching-up policy in these fields, it is inevitable that they fail.

Korea and Japan (before the WWII) started by producing common  products which can be produced by few high tech knowledge. The producers (mangers and workers) learned by producing their products. Kenneth Arrow named this process learning by doing (including producing). Rosenberg pointed that learning by using was also important.

In the recent arguments in economic growth, especially after the New Growth Theory (NGT or endogenous growth theory), this learning by doing aspect was practically forgotten and emphasize the importance of R&D. R&D may be helpful or eve vital for the sustainable development for firms in developed countries,  LDCc must build up a strategy. In this regard, leaning by doing is much more important than the so-called R&D. Japan  started to increase R&D expenditure after 1960's when Japan had virtually caught up top developed countries in technologies. Before that, major part of R&D "investment" was in fact made in universities and not in industries.

Development economists who follow the NGT have strong tendency to think that R&D is the sources of industrially useful knowledge. It may be true for developed countries but LDCs should not get illusion that R&D can play a similar function in their countries. LDCs should first develop (low tech) industry and and give chances for mangers and workers to learn. The current low wage rate is one of the biggest arms to build up competitive industries in the global economy. This is one of my dissatisfied points in the NGT. See my comment paper on Growth Theory that I will cite below.           

Raúl Delgado Wise is a high authority in immigration problem. If we put political problems aside, a solution to the emigration problem and brain drain is to create job inside the country.

References:

Kenneth Arrow 1962 The Economic Implications of Learning by Dioing. Review of Economic Studies.

Nathan Rosenberg 1982 Leaning by Using. Chapter 6 in Inside the Black Box: Technology and Economics, Cambridge University Press.

Y. Shiozawa 2016 Growth Theory As It Ought to Be: Comments on Kurz and Salvadori's Two Survey Papers on Old and New Growth Theory

https://www.researchgate.net/publication/311439320_Growth_Theory_As_It_Ought_to_Be_Comments_on_Kurz_and_Salvadori%27s_Two_Survey_Papers_on_Old_and_New_Growth_Theory

Working Paper Growth Theory As It Ought to Be: Comments on Kurz and Salvad...

Dear Dr. Arjun Yallappa Pangannavar,

please examine some industrial development processes more concretely. In the case of India, your economy is very complex. You have some high tech industries and highly trained engineers. Then it may be possible to have some high tech industries and this may show a new track of economic development. Even in that case,  you should not forget that you have also a huge army of not-well educated workers. For those workers, I believe that some thing different from R&D must be considered. If not, your society will be more and more divided one.  

Dear Yoshinori Shiozawa,

Many thanks for your thoughtful comments. I have recently been involved in a highly-skilled migration Project for the General Director of the National Council of Science and Technology in Mexico. There is a growing selectivity in migration worldwide. In the case of Mexico there are at least 1.2 million professionals abroad. There are more PhDs in STEM areas abroad than in Mexico. In order to analyse this phenomenon I conducted a study for analysing the new context in which the demand of highly-skilled labour occurred. From this study I attempted to conceptualize how the Silicon Valley ecosystem actually functions. My impression is that this is closely connected with the expansion strategy followed by the large multinational corporations globally. Following the property of patents, the nationally of inventors and the free trade agreements, has been quite fruitful for disentangling what actually happened in the case of Mexico and NAFTA. I have written extensively on these issues, from a Dependency theory perspective. In any case, I truly believe that investing in S&T in LDCs (peripheral) countries is fundamental, but we have to be aware of the context in which tha investment takes place and perhaps even more importantly, to analyse the characteristics of the national development project followed by the LDC..

Dear Yoshinori,

In response to your question "do they demand R&D or suitable implementation of public measures?"

The problem in LDCs, most of the policies are copies of practices from elsewhere, without adaptation to the local context. A research in education will help : i) will study and propose the adequate contents. Remember that, without a proper education system, even the R&D you are mentioning will not work.

The next sector is the food security: People can only think when they are not hungry, and the quality food is related to our local environment. Research in food security will enable a local production; by also will create sufficient employment to maintain the country stability. Remember that mayor reason for the failure of the Doha round of negotiation is associated to the food trade (subsidies in USA, tariff cuts in EU, and agricultural machine in developing countries). In addition, the food security is strongly related to health. Good food is also less sickness. LDC food system is simply inappropriate copy of what happen elsewhere.

Finally, health system. Human like other animals should be able to treat themselves in their natural environment. From a purely naturalist perspective, and apply the theory of the conservation law (“la loi de la conservation”: nothing is lost, nothing is created. It is just a transformation), the fact that human are not able to discover appropriated medicine to treat their sickness is simply a breakdown of the harmony between human and their natural environment. What is the percentage if LDC GDP associated to import of food, Medecine?

What is the impact of all these leaders from LDC who adopted the foreign culture as the modele, just because they study there and not because the use foreign education to complement their own.

If I remember very well, a key aspect of Japanese success was to send people abroad to learn enginering and the came back to japan with a poper  combination of Japan and foreign knowlege and culture.

Dear Coline,

please note that I am not proposing that R&D activities are lacking. I am not proposing to increase its value in the budget. I am thinking that we have many other urgent affairs to do before considering of R&D.

To reorganize the question, teaching your children is not normally thought to be R&D activities. Improvement in food production and health has many facets, but R&D occupies a small part. Then, is it an urgent question to ask to increase R&D investment?

You wrote in your first answer (post #3):

• R & D is needed to create solution for local problem. Yes, least developed countries should invest more in R&D, but only to tackle their own problem.

You are right in this statement. But you are ignoring what your statement actually means. The majority of the search and research for solutions of local problems is not classified as R&D investment. To send the young people abroad to learn technologies and others is not classified as R&D. Even if they are included as a part of expenses for University Education, the conventional aim of R&D is not that you imagine. For example, development as D indicates means not economic development or human capability development. It simply means product and process development for commercial production.

The study of economics and economic policies and research of the local economy are not considered as a part of R&D. But, as you know it, these are very important and even vital for the appropriate economic development. The most important activities are excluded from R&D concept. In this state of facts, it is very dangerous simply to ask the increase of R&D investment. This kind of claim is, as you put it, is simply copying the idea and policies of developed countries. We should find another path.

The LDC should definitely invest on such researches. The research provides more correct and accurate guidelines to select areas more needed for development. The blind development of LDC' s can encounter with lots of losses to the nation.

 We have to argue the definition or concept of R&D. Here are three typical definitions:

OECD's Definition:

• Research and development is a term covering three activities: basic research, applied research, and experimental development. (Updated June, 2013)

SNA Definition:

• Research and development by a market producer is an activity undertaken for the purpose of discovering or developing new products, including improved versions or qualities of existing products, or discovering or developing new or more efficient processes of production. (November, 2001)

UNESCO's Definition:

• Research and development services in natural sciences and engineering; social sciences and humanities and interdisciplinary.
• Any creative systematic activity undertaken in order to increase the stock of knowledge, including knowledge of man, culture and society, and the use of this knowledge to devise new applications.
• Includes fundamental research, applied research in such fields as agriculture, medicine, industrial chemistry, and experimental development work leading to new devices, products or processes. (March, 2003)

UNESCO's definition is explicit. R&D includes "social sciences and humanities and interdisciplinary." However, in the other two definitions,  is it evident that researches that Colince GUEDJE NGATSI has proposed is included in the R&D?

We have a special document prepared for the use of developing countries:

Working Party of National Experts on Science and Technology Indicators

MEASURING R&D IN DEVELOPING COUNTRIES

Annex to the Frascati Manual

http://www.oecd.org/innovation/inno/49793555.pdf

In this document, we read the following sentence:

• 5.3 Industrial activities: reverse engineering and incremental changes

35. Minor or incremental changes are the most frequent type of innovation activity in emerging economies and developing countries (Oslo Manual, §499). Activities leading to minor, incremental changes or adaptations should in principle not be counted as R&D activities unless they are part of, or result from, a formal R&D project in the firm.

It is explicit that incremental changes or adaptations are excluded from R&D. But these are very important activities in the catching up process of a less developed countries.

As for Social Sciences and Humanities (SSH), we read the following clauses:

• 5.4 Research in the Social Sciences and Humanities
• 36. Although the Frascati Manual (FM) recommends that the Social Sciences and Humanities (SSH) be included in R&D totals, research in SSH tends to be under-reported around the world. Some countries exclude R&D in SSH from their business sector surveys so that R&D in SSH relates only to activities in the higher education sector, government sector and PNP organisations.
• 37. Development research, research on sustainable development and mitigation of climate change often include elements of R&D in SSH. As such, they should be considered R&D, but only as long as they are in the development and testing phase, and be then allocated to the appropriate Field of Science.
• 38. In terms of what should be excluded from R&D, the Frascati Manual (FM §143) emphasises the test of novelty: “projects of a routine nature, in which social scientists bring established methodologies, principles and models of the social sciences to bear on a particular problem, cannot be classified as research”. FM §144 provides examples of such excluded activities.
• 39. Evaluation and impact assessment may constitute R&D if they are part of an R&D project or if the methodology meets the test of novelty. This may include for example field experiments on development policies that use randomised control techniques.

Paragraph 36 testifies that there are many countries that excludes or under-report SSH as a part of R&D. Paragraph 39 specifies that a special type of social experiments (that employ randomized control) are admitted but more standard type of social science researches are excluded.

Given these facts, can we say like Vinay Anand Bourai Bourai that "The LDC should definitely invest on such researches"?  The research that "provides more correct and accurate guidelines to select areas more needed for development" is most likely to be excluded from R&D statistics.  

Dear Yoshinori Shiozawa,

I think your question is very interesting and links directly with two "classical" concepts from the Technological Change literature. First, the concept of "social capability" (Abramovitz, 1986), which refers to the diversity of factors (education, infraestructures, innovation system....) that affects the economic growth. It is very important take into account that these factors have complementary effects, so R&D should be accompanyed by other social capabilities in order to have virtuous effects on economic growth.

The second concept is the "absorptive capacity" (Cohen & Levinthal, 1990) that deals with the firm's ability to identify valuable information and assimilate it to apply it to commercial objetives. Obviously, R&D could be an important aspect to support this capacity.

Finally, I think that you can find new interesting ideas in the recent literature about the relationship between the Innovation Systems in LDCs and the participation of these countries in Global Value Chains (GVC). In general, this literature show that the structure and performance of each innovation system (including R&D activities) matter when the learning capability of LDCs from their participation in GVC is analysed. You will please find more details about this idea in the following references:

Morrison, A., Pietrobelli, C., & Rabellotti, R. (2008). Global Value Chains and Technological Capabilities: A Framework to Study Learning and Innovation in Developing Countries. Oxford Development Studies, 36(1), 39–58. 

Pietrobelli, C., & Rabellotti, R. (2011). Global Value Chains Meet Innovation Systems: Are There Learning Opportunities for Developing Countries? World Development, 39(7), 1261–1269.

Lema, R., Quadros, R., & Schmitz, H. (2015). Reorganising global value chains and building innovation capabilities in Brazil and India. Research Policy, 44(7), 1376–1386.

Thank you, Óscar Rodil Marzábal. You have organized the whole discussion in a good conceptual arrangement.

I learned much from your answer and surely so do our colleagues in LDCs. Social capability and absorptive capacity teach us the importance of a good proportion of R&D with other efforts to enhance growth and development. 

I have read one of your papers written with your colleagues:

The relationship between innovation and export behaviour: The case of Galician firms, Technological Forecasting & Social Change 113: 246-286.

In particular,  learning-by-exporting hypothesis that you use in your paper is exactly what I wanted to emphasize by indicating learning by doing (or learning by making).  Learning by exporting must also be an important aspect of learning by doing. I did not know this concept. I can use it usefully in the future. Thank you.

I am a specialist neither in development economics or technology transfer, but rather a specialist in international trade theory. In section 2 of your paper, your are referring to a large number of literature. Among them, I found a few papers in international trade, e.g. Melitz.(2003) and Grossman and Helpman (1991) and others. So far, the theory of international trade had a bad chemistry with management science or firm-level researches. The international trade theory stayed rather in a macroeconomic level. This was one of the reason why Metitz's "new new trade theory" is accepted enthusiastically. However, it is constructed in a general equilibrium framework, even though it is not necessary to do so. In this regards, please read my working paper:

The New Theory of International Values: An Overview

https://www.researchgate.net/publication/304717720_The_New_Theory_of_International_Values_An_Overview

The merit of the new theory is two. First, it suppose that each firm has its own production techniques (no needs to assume a production function of country level). Second, it has an explicit logic of choice of techniques. The theory shows that a pattern of specialization and a system of international values (the set of wages for countries and set of prices for  products) exist and unique in certain sense, in which every firm is taking a global optimal procuring strategy. Therefore, it is the best framework to analyze global value chain. 

There were many theory papers which studied offshoring and fragmentation, but they assumed an established pattern of division of labor (or pattern of specializations). The new theory can starts without making any such particular assumptions. After having explained the general  theory, I have given two particular applications: (1) catching up process called flying gees and (2) fragmentation of production process across boundaries.

In this way, I have made a bride between international trade and firms level research in trade and technology improvement. I believe you can use the new theory usefully in your research.

For all readers of this question page:

I wish you and the world a happy and peaceful new year!  

Working Paper The New Theory of International Values: An Overview

Many thanks, Yoshinori Shiozawa, for reading our paper and for your additional comments and working paper that are very interesting and useful for my current and future research. 

Best wishes for the new year!

The R&D expenditure of a country broadly indicates the innovation capabilities of that country – adaptive and new product development capabilities. The human capital, infrastructure, finance, etc. constitute critical aspects of the capabilities. As countries move progressively in building up such capabilities, the spending on R&D will also increase. Therefore, low investment in R&D by LDCs in not a surprise.

The growth in R&D expenditure in China provides an interesting illustration of how R&D spending is related to the building up of innovation capabilities. In the mid-1980s, the share of R&D expenditure in GDP was the same in India and China – 0.9%. While this share of India still hovers around the same figure, China has raised it above 2% by 2013. The Government of China played a very important role in building up of capabilities by investing in education, infrastructure, etc. and facilitating technology transfer and “catch up” through FDI by means especially of joint ventures. The combined efforts by the public and private sectors in R&D resulted in fast growth in R&D expenditure, which increased from less than 1% of GDP to above 2% of GDP by 2013 in a matter of 12 years. Gao, Jian and Jefferson G.H. (2008), call such leap as “S&T take off”. Most OECD countries took, on average, about a decade to transcend their R&D investment from below one percent of GDP to above two percent of GDP. 

It appears that developing and least developed counties will be constrained to follow the Chinese model of using foreign investment for acquisition of innovation capabilities. Much of foreign investment in China was in the manufacturing sector. Foreign investors established R&D facilities to support their manufacturing activities. However, the advancements in ICT has led to the emergence of R&D networks, which is mostly contractual arrangements, in similar lines of global production networks. This enables a firm to have a part of production in one country and the related R&D in some other country. Growth in global R&D networks while helps the firm to lower its costs, makes it difficult for the host country to harness the spill over effects from FDI which is linked to having R&D and manufacturing facilities in the same country.

Thanks Óscar Rodil Marzábal for the very useful insights. 

 ……………………..

Gao, Jian and Jefferson G.H. (2008), “Science and Technology Take Off in China?: Sources of Rising R&D Intensity”, pp.47-61, in Sun, Yifei; Zedtwitz, Maximillan von and Simon, Denis Fred (eds.), Global R&D in China, Routledge, Oxon

Dear Yoshinori,

This becomes a very interesting question that relates closely to some of the discussions you have written about. It is possible to go in the direction of value theory and here I think there are some interesting contrasts between classical economics (as represented by Sraffa) and the neoclassical approach (as represented by Debru) and how they relate to technical change. The more challenging issue is to deal with technological learning and in this context you took an interesting angle that makes use of Herbert Simon. It is interesting that creativity was a central topic for both Herbert Simon and Joseph Schumpeter, but it is rare that the two are put together.

Another angle that may be fruitful for you is to read some of the writings of Stan Metcalfe. You must know his work because he wrote several papers together with Ian Steedman on Sraffian trade theory, but Stan later wrote some very interesting papers on evolutionary economics, and are informed by the history of thought in the broad sense of the term. He has a very nice book titled "Evolutionary Economics and Creative Destruction". The book by Nelson and Winter is generally considered to be the starting point for most discussions in evolutionary economics.  

If you are dealling with the issue of R&D directly and the possibility of catching-up, then the previous contributor identified two key papers. But I would also think in terms of R&D as knowledge and that this knowledge can be both codified or tacit. The other issue is that author's often assume there is a linear relationship between R&D and economic growth, when it is non-linear. You allude to this in your references to Brian Arthur. But this is why innovation becomes in interesting topic for growth and catching up.

All the best,

Mark 

Thank you, Reji K. Joseph.

Yes, the historical dimension is very important. Cross-sectional analysis often leads to a bad understanding of the problem. We should always take into count the time series of R&D investment and the stage of the economy. In some cases, we have much more urgent activities to pore our efforts.  In some others, R&S investment is crucial to the economic growth.

Your information on China is instructive.  Japan followed the similar trajectory like China, of course, many years earlier than China. The important fact is that two counties followed the similar change in R&D investment. This must give some lessons for LDCs. 

Dear Mark Knell,

thank you for your comments and for reading my paper: The New Theory of International Values: An Overview.

I had no idea that I am pulling a common topic from Schumpeter and Herbert A. Simon. I have been studying H. A. Simon for a long time always from the bounded rationality aspect and did not imagined that it is related to creativity. You taught me a good point.

As for Stanley Metcalfe, I had read some of his papers. He once came to Japan and I met him in Tokyo. I also possess the book that you have cited: Evolutionary Economics and Creative Destruction. It seems that I had rapidly read it, because at many places I have marked some lines. But I must confess that I had almost all forgotten, or better I had not understood what was written there. At your advice, I re-read some part of the book, especially chapter 4: Science Policy and Technology Policy When Competition is an Evolutionary Process. 

Re-reading chapter 4, I acknowledged that it is a good summery of policy research works that were accumulated in the United Kingdom, including works done in SPRU of Sussex University. We may not say that this chapter is a good introduction to S&T policy study, because what Metcalfe tells is highly distilled essence and it is sometime difficult to understand the whole story that he talks about. Fortunately, as it has many references, it may become a good guide article if the readers follow many of those references. 

There is no explicit criticism of the New Growth Theory but it is alluded to by his comments on the public good aspect of technology. His criticism on "golden egg" and linear model (or production line model) ideas is also important. As Metcalfe elucidates, science and technology are very different entities and their relations to innovations are not simple at all. They are embedded in a complex texture of scientific and industrial institutions. Detached from careful attention to these relations (or the National System of Innovations), a simple increase of R&D investment would produce no big effects. This is the point that we must keep in mind when we think of R&D. 

Thank you for your good suggestion.

Yoshinori

I think the issue of R&D investment is a dilemma for LDCs, especially in Sub-Saharan Africa. This is because many researchers, having acquired the necessary skills, migrate to other countries where the environment is more conducive for research and their discoveries elicit better rewards, thereby putting the home country at a loss. This is connected with the poor state of infrastructure in the home countries and the reason why I agree with @Óscar Rodil Marzábal that "R&D should be accompanied by other social capabilities in order to have virtuous effects on economic growth". Perhaps, the scope of R&D spending should be widened to include the necessary infrastructures and economic environment to retain the producers of new knowledge.

Another issue is whether LDC governments make use of the products of R&D. I cannot readily provide references or data on this, but there has been enormous wastage of resources in Sub-Saharan Africa as a lot of research outputs have not been integrated into policy formulation by the government. Furthermore, there is acute shortage of R&D data in Sub-Saharan Africa.

Science and technology are very different entities and their relations to innovations are not simple at all. They are embedded in a complex texture of scientific and industrial institutions. A simple increase of R&D investment would produce no big effects.

I think that is correct!

I want to add ..

I think, developing countries need to have a better education, it would be able to use advanced technology in domestic and foreign enterprises.

The positive effect of the transfer of technology and knowledge would come to expression.

This is the point where to put the emphasis in developing countries, mostly in increasing the level of education, especially vocational education that low investment in R & D which will be lost in developing countries as a drop in the ocean.

As Metcalfe elucidates, science and technology are very different Entities and Their Relations to innovations are not as.

Low level of education is among the factors that FDI not have a significant impact on economic growth in transition countries and in the development of the Western Balkans (Besides institutional factors that obstacles  FDI).

This is proven in many publications, and in my last publication:

http://www.uet.edu.al/images/doktoratura/NAKIJE_KIDA.pdf

http://www.uet.edu.al/index.php/sq/publikimet

Dear Nakije Kida,

thank you for your post. I have opened your dissertation, but as it was written in Albanian, I could not read it. I agree with you on the importance of  vocational education. Many prestigious universities in Japan, such as Hitotsubashi University and Tokyo Institute of Technology started as middle level vocational school.

I worked for a long time for Osaka City University and now Professor emeritus. It started as Practical School for Commerce. At some development level of the economy, vocational schools play much more important role than universities. It is more important that majority of young people can receive a good education than that small number of people get a high level education at the edge.·

 Dear Ifeolu Olagbaju,

you know the dilemma. To attack a dilemma, we need an in-depth study. Statistical study may indicate some symptoms but does not necessarily clarifies the real problem we face.

If the brain drain is the problem, it is necessary to study cases together with macro-statistical studies. I feel that the current state of economics is too inclined to macro-statistical studies. 

Yes, it is serious problem. Indian corporate sector should invest more in R & D, instead of depending on government. Also their is need for to change the outlook of the people regarding R & D, in India.

I don´t know what happen in other countries; but in Mexico the government is the promoter and investor of the Research.

Yoshinori, United Nation recomend 1% GDP for R&D; however most of LDC invest less than, Mexico about 0.5%, meanwhile Romer P. speaks of a guaranted rate research invest. No doubt R&D is key if LDC wish reach development path. 

Martha, Mario and Dr, Pangannavar,

thank you for your posts.

Mario, are you sure that there is a fixed minimum rate of R&D investment? What I have been arguing is that R&D investment has a steep non-linear characteristics and it may not be wise for LDDs to try to invest in R&D without paying due attention to many other circumstances that enhance the economic development. You point that the United Nations recommend 1% GDP for R&D. What basis did this recommendation come from? 

The problem for middle income countries are different. Mexico faces different problems from those of LDCs. 

You probably mentioned Paul Romer and his New Growth Theory (NGT). Have you examined the logic of his models? It is based on a very simplistic assumptions and it is quite doubtful if his model applies to LDCs countries. He examined the product of R&D as a common knowledge. It is sure that technological knowledge has such an aspect, but as we have argued in the previous posts, technological knowledge has many other aspects.

Technological knowledge can be classified into three groups (I owe this classification to Hiroyuki Yoshikawa, former President of Science Council of Japan and chairperson of Japan Science and Technology Agency):

(1) knowledge at the pre-competitive phase

(2) knowledge at the competitive phase

(3) knowledge at post-competitive phase

Yoshikawa recommended that the government has to play the major role in two classes of knowledge: namely phases (1) and (3). Knowledge at the competitive phase must be developed by business firms as their investment. The government of a country like Japan should promote phase (1)  knowledge and contribute to disseminate phase (3) knowledge to less developed countries as a part of international obligation and solidarity.

Science and technology are an enormous mass of knowledge. LDCs have the advantage to use the phase (3) knowledge practically free of charge. For least developed countries, to mobilize the phase (3) knowledge at maximum is an option. They can use the knowledge at this stage as "merits of backwardness" (Gerschenkron). If LDCs and even middle income countries imitate the R&D policies of most developed countries without necessary modifications, they will lose their good chance and suffer a failure from ineffectual investment.

NGT does not clarify these structural differences. If applied blindly, it may bring a serious mistake for development policies. For this point, please read my working paper:

Growth Theory As It Ought to Be: Comments on Kurz and Salvadori's Two Survey Papers on Old and New Growth Theory

https://www.researchgate.net/publication/311439320_Growth_Theory_As_It_Ought_to_Be_Comments_on_Kurz_and_Salvadori%27s_Two_Survey_Papers_on_Old_and_New_Growth_Theory

Major part of the working paper is a criticism of  the NGT. Another fault of NGT is that it is based on the closed economy model. In the age of globalization, this assumption is a grave defect as an entire theory of growth and development.  

Working Paper Growth Theory As It Ought to Be: Comments on Kurz and Salvad...

Yes, absolutely; see the attached article.

Regards,

MV

I actually think that while it is desirable for all countries to invest in R & D, I think LDCs should spend resources maximising the use of existing technologies and adapting them to these countries' beneficial use to boost production. If resources are limited as they always are, methods and mechanisms to boost productive capacity have to explored and developed. Full blown R & D can take up so much of the limited resources. Innovation and adaptation of technologies to local conditions can be much more beneficial. Yes R & D is desirable but LDCs have to be strategic in the way they deploy their limited resources.  

Thank you, Marco Vivarelli,

you must be referring to my remark below in my last post (post #30).

• The problem for middle income countries are different. Mexico faces different problems from those of LDCs. 

Your survey paper on middle income trap (MIT) is superb. I recommend this to all economists who are interested in MIT questions. Although my question is concerned with the LDCs case, the R&D investment must play much more crucial role in solving MIT questions.

To differentiate development stages must be important when we consider R&D in particular and development policies in general. The real subject-matter I want to pose is the danger of simplistic model argument mainly represented by the new growth theory (NGT).  It has the strong tendency to ignore the crucial questions like entrepreneurship and local initiatives. As you put it in the abstract of your paper, 

• a recent stream of literature underscores the potentials of local innovative entrepreneurship.

The following paragraph of your paper seems to me extremely important.

• On the whole, the (mainly empirical) literature on the MIT clearly suggests the roles of capabilities, structural change and technological progress as the key factors able to better position a middle income country in front of the challenges posed by the risk to enter into an MIT. Nevertheless, this literature fails to go beyond these empirical suggestions and lacks a proper theoretical framework.

Nowadays empirical studies are inclined to estimate correlations between various factors but avoids in-depth examination how these relations come to be observed. We can say that measurement without theory is now again rampant. It is quite deplorable state of economics. 

firstly, LDC have low income level, what if they try to develop to focus on R&D they will get into the another ambiguous circle for the payment to the researcher, i guess it is better to learn form the history and experiences of others. 

but mind it, it is not possible that from where you are getting experiences is 100% match to your economy.

Dear Lindani and Farrukh

I agree with you. Everything has its proper stage. Even if we learn from the case of a developed country, we should learn more from the history of that country.

We have now too many of cross-section data and are inclined to draw a hasty conclusion from the examination of that data. However, the development stage is very different between compared countries and it may not be wise to transfer the present state of affairs of a developed country to the situation of another developing country. If a country A is to learn from more advanced country B, we should detect the date when the country B had the same real income per capita. If it is 19XX, then we should study the history during the period which spans from 19XX to present.

With the spread of regression method and cross-section analysis, we have a strong tendency to forget the history. This is very dangerous.

Yoshinori

MEASURING R&D: Challenges Faced by Developing Countries

(http://www.uis.unesco.org/Library/Documents/tech%205-eng.pdf)

Investing in R&D and innovation in developing countries for addressing societal challenges

(http://inco-conference.eu/sites/default/files/3.J.Guimon_0.pdf)

The overall scope of R&D statistics among developing countries

(http://archive.unu.edu/unupress/unupbooks/uu09ue/uu09ue0d.htm)

Developing countries can learn from South Korea’s R&D experience

(http://www.eco-business.com/press-releases/developing-countries-can-learn-from-south-koreas-rd-experience/)