The spread of Technology

The adoption of new technology is essential to long-term macroeconomic growth. In general, rich countries are on the technology frontier and rely on research and development to achieve further improvements in technical efficiency. Low-income countries, in contrast, have the option of adopting technologies already developed elsewhere. Yet not much is known about the process by which new technologies spread from one country to the others.

In Cross-Country Technology Diffusion: The Case of Computers (NBER Working Paper No. 8130), co-authors Francesco Caselli and Wilbur John Coleman II use cross-country panel data on computer imports from 1970-90 to analyse the determinants of technology diffusion. The idea is that for the many countries that do not have a domestic computer industry, computer imports are a measure of the flow of new computers installed in the country, and are therefore a good proxy for computer adoption.

The authors use three different datasets based on United Nations trade and production data: the first sample uses computer import data for all the countries with available information; the second excludes from that data the countries that report positive computer exports. The third sample estimates a proxy variable for computer adoption equal to computer production plus imports minus exports.

Globalisation Helps Spread Knowledge and Technology Across Borders   

It took 1,000 years for the invention of paper to spread from China to Europe. Nowadays, in a world that has become more integrated, innovations spread faster and through many channels. 

The spread of knowledge and technology across borders has intensified because of globalisation. In emerging markets, the transfer of technology has helped to boost innovation and productivity even in the recent period of weak global productivity growth.

Why spreading technology matters

Technological progress is a key driver of improvements in incomes and standards of living. But new knowledge and technologies do not necessarily develop everywhere and at the same time. Therefore, the way technology spreads across countries is central to how global growth is generated and shared across countries.

Indeed, during 1995–2014, the United States, Japan, Germany, France, and the United Kingdom (the G5) produced three-fourths of all patented innovations globally. Other large countries—notably China and Korea—have started to make significant contributions to the global stock of knowledge in recent years, joining the top five leaders in several sectors. While this suggests that in the future they too will be important sources of new technology, during the period under study, the G5 constituted the bulk of the technology frontier.

To trace knowledge flows, our study uses the extent to which countries cite patented innovations from the technology leaders as prior knowledge in their patent applications. The chart below gives a representation of these cross-country knowledge links. Two features stand out. While in 1995 the United States, Europe, and Japan were dominating global patent citations, China and Korea (depicted together as “other Asia”) have made increasingly large use of the global knowledge stock as measured by their patent citations.

For More Follow @dissenttimes