Catching up or standing still?

Abstract

Over the final two decades of the 20th century, a number of formerly industrializing economies and historical imitator countries achieved levels of innovative capacity commensurate with or greater than those of some economies that were historically more innovative. We investigate the factors that enabled such emerging innovator economies to achieve successful catch-up while some historically more innovative countries experienced relative declines in innovative productivity. We focus our analysis on the estimation of a production function for innovations at the world’s technical frontier. Based on the results of this analysis, we classify countries into categories reflecting their historical levels of innovative capacities and develop counterfactual indices that identify the factors that correspond to long-run improvements in innovative roductivity. These exercises suggest that the development of innovation-enhancing policies and infrastructures are necessary for achieving innovative leadership, but that these are insufficient unless coupled with ever-increasing financial and human capital investments in innovation. © 2004 Published by Elsevier B.V.