New World Bank report - Technology Diffusion in the Developing World

Contributed by James Robinson
21 January 2008

In it's annual Global Economic Prospects report, the World Bank focuses on technology transfer in the developing world

You can read the forward to this report at the bottom of this page or download the full report here. Note: The file is large 5.4MB! There's also a short article on scidev.net here

But in 224 pages the word stove appears twice, and in a list of 'technologies likely to be mastered by 2020' the only domestic scale energy technology is 'cheap solar' (cited from another report). Does this reflect the current lack of development in the household energy sector or a gap in our advocacy at the higher levels of research and policy making?

Report Forward

Each year, Global Economic Prospects explores critical “here and now” economic developments that are relevant to low- and middle-income countries. Past editions have examined the economic implications of international and regional trade liberalization, and migration and remittances. Last year’s report looked at the recent acceleration in growth among developing countries and its sustainability over the longer term.

This year we take a closer look at technology, a critical determinant of sustainable growth and poverty reduction. We do so by directly measuring the extent to which countries use technological inputs (including scientific technologies embodied in goods and services and business processes) and produce technological outputs. The report also examines trends in the major channels through which technology is transmitted internationally, and in the country-specific factors that determine how well it is absorbed domestically.

Encouragingly, this Global Economic Prospects finds that, since the early 1990s, technological progress in both low- and middle-income countries has increased more rapidly than in high-income countries. As a result, the level of technology used in developing countries is catching up with high-income countries. However, the technology gap between them remains wide. Globalization has underpinned much of the recent progress by exposing developing countries to foreign technology through imports of high-tech consumption, intermediate and capital goods. Countries have also benefited from rising levels of foreign direct investment that often brings with it knowledge of important process technologies and foreign markets. Finally, highly skilled international diasporas are exposing developing countries to technology, both through the trade and marketing contacts that they provide to their countrymen and through the return of former émigrés.

Unfortunately, progress in improving the capacity of developing countries to absorb and make use of those technologies throughout their economies has been much weaker. Whether technological progress in developing countries will continue to outpace high income countries will depend on the improvements in this regard. The main impediments to further progress is not access to technologies, but the weakness of domestic skills and competencies, which prevents many developing countries from exploiting these technologies, and rigidities in the regulatory environment that prevent innovative firms from being created and expanding. The diffusion of technologies within countries is often slow, which means that although some firms may have technologically sophisticated operations, most do not. Moreover, most of the population and most firms operate in a low-tech environment. As a result, despite having technologically sophisticated cities and world-class firms, the economy-wide level of technological achievement in countries like China and India is not very different from that in other countries at similar levels of development.

This report suggests a number of policy directions to bolster technology diffusion and absorption within developing countries:
  • First, developing countries should safeguard the principle of openness and actively strengthen skills in the domestic population to ensure that they are able to take advantage of future opportunities.
  • Second, to assist diffusion throughout the economy, policy needs to reinforce technological absorptive capacity at the subnational and regional levels and to strengthen dissemination channels within countries, including the outreach, testing, marketing, and dissemination activities of applied R&D agencies.
  • Third, authorities should ensure that publicly supplied technological services and technology-enabling infrastructure are widely available, whether they are delivered directly by the state or by private firms.
  • Fourth, in low-income countries and in those middle-income countries with uneven access to quality secondary and tertiary schooling, efforts should concentrate on raising the quality and quantity of schooling.
  • Finally, governments may need to intervene directly to encourage the rapid diffusion of technology and a domestic culture of “new-to the- market” innovation. However, caution is required. Although direct interventions have sometimes been associated with some important technology successes, in many instances they have not. Policies that have succeeded have tended to make subsidies conditional on performance and put in place high-quality and independent-of-industry oversight systems.
Alan Gelb
Acting Senior Vice President and Chief Economist
The World Bank