Technology is becoming increasingly very important to the success of all business firms, and to the economic growth therefore there is a need to analyze the rate at which developing countries are trying to catch up with the developed economies. The process of globalization is driven by technology development and the ability of corporations to uplift the use of technology effectively and rapidly. The technological gap between developed countries and emerging nations has narrowed but still remains huge. The first step to narrowing the gap further is for emerging nations to absorb technology successfully. The rapid economic growth achieved by the newly industrialized economies has generated a vast amount of research on the mechanism behind the economic take off. According to F. Montes-Negret (2008), progress in developing countries reflects the absorption of pre-existing technologies not at the frontier inventions. In general terms, catch up refers to the ability of a country to reduce the gap in productivity and income with respect to the leading international countries (Fagerberg & Godinho 2005).
Perez (1988) views catching up as a question of relative speed in a race along a fixed track, according to him, technology is understood to be a unidirectional process. Furthermore, he observes that every country is a beginner in terms of the newly emerging techno-economic paradigm, which implies the possibility of being a latecomer. Research has shown that in the catching-up process, the late-comer does not simply follow the path of a technological development of the advanced countries. Instead, they would rather skip some stages or even create their own individual ways which are different from the developed countries. By doing this, it may result in the developing countries becoming latecomers in technology advancing.
For the country to have growth in economy and industrial development, it needs to have an absorptive capacity and ability to tap in the world's technology pool. Cohen and Levinthal (2000) explain absorptive capacity as the ability to assess the value of external knowledge and technology and to make necessary investments and changes to absorb and apply these changes in a productive manner. The development of new-to-the world knowledge can be considered to be innovative which can be a costly learning activity that a country can employ in order to catch up with others through technology absorption.
Innovation and technology absorption are two distinct processes, that is, innovation promotes absorptive capacity because the generation of human capital and new ideas, and the associated knowledge spillover effects, help build absorptive capacity.
Absorption of technology is considered a necessary step to promote the development of human capital and the productive base, paving the way for innovations at the global knowledge frontier. R & D, patents, trade, and foreign direct investment are regarded as major channels of technological absorption, allowing diffusion of new ideas and manufacturing best practices among countries and firms. R & D is a key input into innovation and is considered to be a very important in the absorption of technology (Cohen and Levinthal). Rogers (2003) defines examples of technology absorption as the adoption of new product and manufacturing processes developed in other countries; upgrading of an old product or process, licensing technology, improving organizational efficiency and achieving quality certification.
This paper will discuss how properly designed economic policies can significantly influence the degree to which a country absorbs new technology, that is, it will discuss the pre requisites for technology catch ups. Further more the paper will discuss the channels that developing countries can use to catch up with other developed countries through technology absorption such as trade flows, foreign direct investment (FDI), R&D and patents.
Most of the literature on catch-up through technology is shown by countries that in the past decades have managed catch up with the developed countries, others that have succeeded ahead and several that have fallen behind in technology and failed to be par with the developed world (Abramovitz 1986). More research has identified a series of factors that have affected the sources of catch-up. Catch-up countries should try to adopt the Schumpeterian view of the process of innovation, according to which economic agents are likely to innovate as a reaction to unexpected changes within the economic environment (Schumpeter, 1947). The presence of learning and capabilities in the domestic markets is regarded as one of the factors that can lead to good catch up systems. Marleba (2006) has lamented that early traditional literature has indicated how it was possible to close the gap though technology transfers and the imitation of easily available technology.
The literature further shows how technology in growth is the missing link between the developed and the less developed countries. There is a possibility of a 'catch-up' scenario in the event that less developed countries are able to access and employ developed technology. In other words, less developed countries would grow at a higher rate until at such time that the differences between developed and less developed countries are negligible. This can be shown by the experience of East Asian countries (World Bank 1993).
Catching up is usually assumed to be dependent on the level of human capital and knowledge. Capital is a necessary tool for the economic success in the world today, because countries need the capacity to mobilize knowledge and use it to the fullest. A study by the World Bank (2009) indicates that countries in the Sub Sahara of Africa (SSA) must harness both more capital and more knowledge. These African countries need to invest heavily in physical infrastructure and productive capacity for the enhancement of the absorptive capacities. However, maximizing productivity and achieving competitiveness will depend upon success in augmenting human capital and raising its quality. This has been shown by South Africa as it was ranked the 41st and 25th respectively in terms of technological innovation and benefiting from good scientific research institutions competitiveness report. These rankings make South Africa to be the highest ranked in SSA. South Africa's innovative potential could be at risk with a university enrollment rate of only 15 percent, which places the country 94th overall. From this case we can learn that the use of technology requires skilled labor force. As earlier pointed out, investment in human capital remain a critical issue for South Africa and other developing countries (Global Competitiveness Report, 2009).
Nations such as Australia, Chile, Malaysia, and Spain have responded by developing cross-sectoral policy frameworks to promote science, technology, and innovation. Within Sub-Saharan Africa, Mozambique, Rwanda, and South Africa are leading the way with similar cross-cutting strategies. Other SSA countries that have produced national science and technology policies since 2000 include Botswana, Ethiopia, Ghana, Lesotho, Malawi, Senegal, Tanzania, Uganda, Zambia, and Zimbabwe (Mouton 2008).
Technology absorption is often regarded as a pre requisite for breaking up a high cost economy and creating an economic competitive market internationally. The initial gap for countries which are trying to catch up with technology should not be too wide for them to be able to absorb knowledge from technological leaders. Moreover, late comers must have, or create, sufficient absorption capabilities. In this context, sufficient absorption capabilities are described as having qualified researchers who are able to understand external knowledge spillovers and recognize their value in operation. Developing countries need a strong human capital base that will be able to understand the new innovative systems that have been put in place by the advanced countries, hence they need well developed scientific, engineering and technical skills. Cohen and Levinthal (1990:129) suggest that accumulated knowledge increases both the ability to put new ideas into practice. If the stock of knowledge is increased, in general, additional learning will be facilitated. The growth of knowledge adds value to the country's ability to adapt to new ideas thus becoming fast in catching up with technology.
Technological progress depends on more than being exposed to foreign technologies. How fast it spreads within a country is important and depends on the domestic technological absorptive capacity, the quality of technological literacy of the population and the quality of the business climate. Although major centers and leading firms may be relatively advanced, the rural population and the majority of firms do not exploit the best technologies, often because the necessary infrastructure and human competencies are not available. This may lead to some lags in technology catch up for developing countries.
Nelson and Rosenberg (2003) explain the importance of the link between science and technology as this is one of the important tools for technology catch up. The technological progress requires the mobilisation, co-ordination and integration of many different types of knowledge, and thus involves different types of knowledge producing organizations like firms, research institutes, and universities. Research organizations should be able to communicate to each other about technology innovations that are occurring within their countries. This will enhance knowledge diffusion. With respect to the co-ordination and integration of knowledge across the research sector, communication or even interaction is needed. This can be accomplished by co-operation, strategic alliances, clusters, and networks, all of which install channels along which knowledge can be communicated. If communication exists within countries, the developing countries may be able to learn this as a good tool for success in technology absorption. Knowledge is becoming the solution to all endeavors conducted within a shifting network of informal professional interactions, it is no longer the disciplinary monopoly of a few institutions of higher learning (Gibbons 2000).
The technological progress in developing countries is mainly a process of adopting and adapting to pre-existing technologies, hence developing countries perform relatively little when it comes to research. For the developing countries, technological progress mainly occurs through the adoption and adaptation of already existing technologies. The rapid increase in technological achievement owes much to increased linkages between developing and developed countries. Globalization in the form of imports of advanced products, and the transfer of business process technology through foreign investment has increased the exposure of developing countries to more advanced technologies (Rogers 2003)
Technology absorption needs a stable and conducive policy framework hence policy makers should ensure that openness is maintained. They need to concentrate on strengthening domestic competencies, promoting the dissemination of technology and reinforcing the local business environment in order to avoid the constrain on technological progress in developing countries. The relationship between the government and the dynamics of technological change is of high importance in technology absorption, in particular to the institutions and implementation of the policies. As technology absorption is regarded as being innovative and competitive, a high level of competency and responsive governance is expected from the civil service in order for the countries to maintain discipline needed to perform long term programmes such as industrialization (Edquist, C & Hommon, L. 2008)
a. International trade and foreign direct investment
International trade policies have had a variety of impacts on technological development. It appears that technological development has been faster in countries which have linked with the international trade to industrial advancement. Lall (2006) showed that South Korea had a strong policy which made them to be able to maintain regulatory controls over direct foreign investment and foreign technology licensing. On the other hand, India protected local industries, by providing limited export incentives and restricted the importation of foreign technology, by doing so, India was trying to promote local innovative skills but this led to a slow pace of technological transformation.
Foreign Direct Investment (FDI) is the most and easiest way to access foreign technology as it is a good tool for promoting technology transfers among countries. Rapid access to new technology and subsequent upgrading, with local effort can help late comers to be efficient absorbers of technology. A paper by Clark and Juma (2002) indicates that Singapore has maintained an open policy for technology and capital imports which are oriented by a dynamic export market dominated by foreign markets.
Reduction to FDI barriers can facilitate technology absorption hence there is a need for developing countries to change their policy environment, especially in relation to economic liberalisation measures. In order for late comers to attract FDI, they have to be export oriented in production networks, that is, they should have stable, transparent and welcoming policies, and also they have to have good macroeconomics management such as introducing market incentives that will continue to play as an important role in promoting technological innovation. In some instances, instruments such as subsidies for technological innovation are unpopular hence it is obvious that other forms of state intervention will need to be devised to promote technological innovation in the poorer developing countries. Such intervention measures will need to be more closely linked to trade liberalization measures (Jansen and Tarr 2007).
b. Patents and R & D
A study made by the World Bank uses patent database in the US in order to establish the presence of specific channels of absorption in decision making. A paper presented by Negret (2008) uses the data on patent citations from the European Patent Office (EPO) and the US Patent and Trademark Office (USPTO) as proxies for the knowledge absorption process. The study shows that patents play an important role as a channel of technological diffusion and there are also good for the flow of technology knowledge among firms. Branstetter (2008) came up with the results that showed the importance of Science and innovation policy, he further said the ECA countries should be encouraged to promote international collaboration and should support a greater role for the private sector in knowledge generation. Governments should encourage foreign R&D investment and international R&D collaboration. Measures to support R&D are ineffective when the human capital and investment climate are insufficient and less competitive, and the developing countries should adopt these studies and learn from the countries such as Germany, The Unite States of America, Japan, South Korea and some major European economies which has shown a good collaboration with inventors through patterns of co-invention (World Bank 2008).
There is a high possibility for developing countries to catch up through technology absorption.
Developing countries can manage to this by being able to adapt and adopt new knowledge, and utilizing the use of information technology which will make their economies become fast learners. On the other hand, late comers will be left with a challenge to combine a strong science base with national institutions that promotes individual and organizational learning. For example, most developing countries do not have proper institutional arrangements that can assist them in monitoring technological changes. Furthermore, they need to benchmark with other developed countries and acquire some skills they have adopted such as to create incentives for efficient creativity, dissemination and use of knowledge. If the developing countries are able to adapt to this pressures, the rate of transformation in technology will be accelerated by improvements in their education systems and thus becoming competitive in the global market.
The future growth of the developing countries depends on technology upgrading and match up with investment to productivity improvements. The use of advanced technologies to deliver new products and services may also accelerate technological catch up within the developing countries. Human capital formation and technical competence is unlikely to make sustained advances in technological development if the developing countries does not have a skilled workforce which is able to fully exploit the emerging technologies and deliver modern services.
Another important lesson that developing countries can learn is that technology absorption needs a stable and conduce policy environment and strong policy support from the governments. High level of productivity within the public sector is a major requirement so that policy implementation can take place. Corruption need to be controlled effectively in order to enhance the openness of the country. This will attract foreign direct investment as it is linked to technology accessibility.