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T he middle income trap requires strategies for building technological capabilities to overcome it. This study focuses on the development patterns of two types of technological capabilities: implementation and concept design. A conceptual approach developed from evolutionary economics and innovation systems literature is constructed to distinguish between the types of technological capabilities and how they develop. The approach is mainly applied to the cases of Korea's development and it highlights the differences in developing implementation and concept design capabilities.The findings of the study emphasize the need for the development of concept design capabilities, which requires (i) setting challenging targets, (ii) developing human resources, infrastructure and knowledge accumulation, and (iii) using an incremental process of trial-and-error and course correction. More broadly, sociocultural institutions may need to be changed to accommodate higher risk-taking but also require different approaches to change. The study extends the concept of technological capabilities by emphasizing the concept design capability that requires trial-and-error beyond R&D activities.

In the context of emerging economies, long-run economic growth and development encompass mechanisms from technological catching-up to moving forward by one’s upgrading. However, as the economy reaches the middle-income range, economic growth mostly slows down unless adopting strategies for building technological capabilities. To identify the bottleneck in sustainable technological development and the ways to avoid the middle-income trap, therefore, this chapter focuses on the development patterns of two different types of technological capabilities: implementation and concept design capabilities. Our first finding from the empirical study emphasizes the need for the development of the concept design capability, describing the middle-income trap as a “capability transition failure” or “middle-innovation trap”. Secondly, discussing difficulties of the capability transition from the institutional rigidity perspective, this chapter highlights “innovation commons” as a coherent transition platform for the development of concept design capability.

We examine the spillover effect of neighboring ports on regional industrial diversification and their economic resilience using the export data of South Korea from 2006 to 2020. First, we build two distinct product spaces of ports and port regions, and provide direct estimates of the role of neighboring ports as spillover channels spatially linked. This is in contrast to the previous literature that mainly regarded ports as transport infrastructure per se. Second, we confirm that the knowledge spillover effect from neighboring ports had a non-negligible role in sustaining regional economies during the recovery after the economic crisis but its power has weakened recently due to a loosened global value chain.