Uneven Paths of Development: Insights from Case Studies

1. Uneven Paths of Development: Insights from Case Studies Banji Oyeyinka PhD Professorial Fellow, UNU-MERIT Director, Global Monitoring and Research Division, UN-HABITAT

2. Questions • What is the precise mechanics of overcoming economic development challenges in different contexts? • At the heart of it all is about how economies at different levels deploy the unending streams of information and knowledge to developmental ends. • The notion of income convergence between the poorer South and the wealthy North has proved a mirage

3. Settings • A new economic divide is evident within the South itself, and as well, between regions and within regions • The debate relating to latecomers is thus framed in discussions about regions and countries that arrive late to mastering industrialization; in achieving economic prosperity through the use of knowledge

4. Knowledge Domains and Capabilities

5. Catching Up in Capability • Economic history shows that whereas countries move relatively easily from the lowest knowledge domain to the next higher one, moving further up into knowledge domains that focus on incremental design and innovation and then to frontier innovation is ridden with significant difficulties and widespread lack of success.

6. Catching Up in Capability • Several countries on a supposedly sound catch-up path often do not move as predicted or regress along this path mainly due to the inability of these countries to manage the coordination efforts required in setting up a sound basis to move to the next knowledge domain.

7. Catching Up in Capability • Not enough to focus just on industrial policy that does not take into account the scale effects, thresholds of scientists of engineers and minimal standards of domestic knowledge infrastructure • Poor policy environment for domestic innovation are common gaps in latecomer countries.

8. Learning to innovate • Innovation is important because learning in the course of producing certain goods are finite and in the end will approach a limiting value and stops altogether ‘in the absence of the introduction of new technical processes’. • An industry, system of production or firm could not hope to rely indefinitely and exclusively on particular knowledge of production without new knowledge injected through innovation, within or outside of the firm.

9. Learning to innovate • The sources of knowledge growth are not unique to any country and are often determined by an array of historical factors; • Much of the modern knowledge in forms of technical expertise and machinery would be imported from abroad; • Successful assimilation and subsequent knowledge creation occur over time and; • The rise in knowledge stock depends on the combined use of imported technology and domestic autonomous technical change efforts.

10. Learning to innovate • The wealth of a country is directly related to the creation, validation and use of knowledge; • See next figure: advance industrial nations have acquired high levels of knowledge

11. Model of latecomers

12. Ranking on Innovation CI

13. Insights from Our Research • We advance the notion of knowledge domains, technological capabilities and learning; • It makes a contribution to our understanding of levels of development (domains indicate a country stage in the catch-up ladder) and the processes that links knowledge domains to learning and accumulation of technological capabilities.

14. Insights from Our Research • Modes of learning are different for each stage of technological capabilities building, and these are intricately linked to knowledge domains;

15. Insights from Our Research • Frontier economies belong to the group domain characterized by high science- intensive and technology-intensive activities, with relatively high levels of domestic investment in R&D; • Second, the frontier and fast learning group have developed the design engineering capabilities to relatively high level while late learners are largely engaged in mastering production

16. Insights from Our Research • Third, the frontier and fast learners have also developed through explicit investment in training high levels of skilled manpower, although a large number of countries classified in the catch-up group are still intensifying investments in building their scientific base. • The technological knowledge typologies have three major implications for development.

17. Insights from Our Research • First, there are apparent risks in comparing countries at different levels of industrial maturation and equally different industrial structures. • Advanced latecomer countries such as Taiwan, China and Malaysia that have built strong export sectors in electronics and telecommunication equipment have raised the levels of GDP/capita in quite significant fashions

18. Insights from Our Research • Second, knowledge growth in the form of rapid technological progress has led to deep going structural changes in the global economy that has profound implications for developing countries. • It has led to the growth of technology-intensive sectors, which in terms of wealth creation; contribute far more to GDP than traditional and resource-based sectors on a unit basis

19. Insights from Our Research • Third, comparisons between countries - even those that are simply based on the lines of developed versus developing countries assume similar endowments and hence the ability to capture similar benefits from knowledge creation, dissemination and growth - are too simplistic.

20. Insights from Our Research • An analytical framework that seeks to look at these from a development perspective needs to create a nomenclature of institutions, capabilities and learning implications in order to be able to draw conclusions regarding the role of local knowledge institutions in promoting development

21. Insights from Our Research • Differences in nature of tacit and codified knowledge bring to the fore several issues of relevance to the design of local knowledge institutions. • Are there differences in the kinds of institutions (formal and non-formal) that promote the accumulation and growth of tacit and codified forms of knowledge? Is one a pre-condition for the accumulation of another?

22. Insights from Our Research • How do the two forms of knowledge interact with institutions for economic growth in varied contexts? Such a framework should also help resolve the linkages between tacit and codified knowledge

23. Insights from Our Research • For instance most of the current work focus on the success cases of East Asia “advanced” latecomers to understand the reasons and different pathways to success while much less has been done on the lagging (“falling behind”) firms and countries. • In studying these countries learning has come to be conceptualized on the strength of R&D carried out and patents taken just as in the case of industrialized countries.

24. Insights from Our Research • In the lagging latecomers, learning is difficult to quantify, measure or even observe because much of the activity, including incremental technical change is experiential and tacit in nature. • At a conceptual level, R&D is not equal to innovation as it is as an instrument of learning. Non-R&D activities (prototype building, design and quality testing for instance) tend to consume a much higher proportion of firm-level level investment in new products and processes and this is highly disconnected from the limited R&D taking place in the local contexts

25. Insights from Our Research • In essence, orthodox measures create a misleading impression of the learning processes in latecomer countries

26. END • Thank You