STEG Working Paper Series Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy, Research Theme 5: Political Economy and Public Investment

From Adoption to Innovation: State-Dependent Technology Policy in Developing Countries

WP091_ChoiShim_FromAdaptiontoInnovationStateDependantTechnologyPolicyinDevelopingCountries.pdf

PDF DOCUMENT • 1.78 MB

Hyundai

Should policymakers in developing countries prioritize foreign technology adoption over domestic innovation? How might this depend on development stages? Using historical technology transfer data from South Korea, we find greater productivity gaps with foreign firms correlate with larger productivity growth after adoption, despite lower fees. Furthermore, non-adopters increased patent citations to foreign sellers, suggesting knowledge spillovers. Motivated by these, we build a two-country growth model with innovation and adoption. As the gaps narrow, productivity gains and spillovers from adoption diminish and foreign sellers strategically raise fees due to intensified competition, making adoption subsidies less effective. Korea’s shift from adoption to innovation subsidies substantially contributed to growth and welfare. We also explore the optimal policy and its interaction with import tariffs.

Related content

STEG Working Paper Series

Financing Costs and Development

Tiago Cavalcanti, Joseph P. Kaboski, Bruno Martins, Cezar Santos • Research Theme 0: Data, Measurement, and Conceptual Framing
STEG Working Paper Series

Paternalistic Discrimination

Nina Buchmann, Carl Meyer, Colin D. Sullivan • Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy
STEG Working Paper Series

Self-employment Within the Firm

Vittorio Bassi, Jung Hyuk Lee, Alessandra Peter, Tommaso Porzio, Ritwika Sen, Esau Tugume • Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy
STEG Working Paper Series

Worker Mobility in Production Networks

Marvin Cardoza, Francesco Grigoli, Nicola Pierri, Cian Ruane • Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy
STEG Working Paper Series

The Great Upgrade

Alexandros Ragoussis, Jonathan Timmis • Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy
STEG Working Paper Series

Spatial Production Networks

Costas Arkolakis, Federico Huneeus, Yuhei Miyauchi • Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy
Active project

Digitizing Bureaucracy

Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy • Larger Research Grants
STEG Working Paper Series

Misallocation and Product Choice

Stepan Gordeev, Sudhir Singh • Research Theme 3: Agricultural Productivity and Sectoral Gaps
STEG Working Paper Series

Occupational Inheritance in Africa

Nicolas Syrichas • Research Theme 2: Labour, Home Production, and Structural Transformation at the Level of the Household
STEG Project Policy Brief

Paternalistic Discrimination

Nina Buchmann, Carl Meyer, Colin D. Sullivan • Research Theme 0: Data, Measurement, and Conceptual Framing