A novel approach to national technological accumulation and absorptive capacity: aggregating Cohen and Levinthal

Abstract

The paper develops a more precise specification and understanding of the process of national-level knowledge accumulation and absorptive capabilities by applying the reasoning and evidence from the firm-level analysis pioneered by Levinthal (1989, 1990). In doing so, we acknowledge that significant cross-border effects due to the role of both inward and outward FDI exist and that assimilation of foreign knowledge is not only confined to catchingup economies but is also carried out by countries at the frontier-sharing phase. We postulate a non-linear relationship between national absorptive capacity and the technological gap, due to the effects of the cumulative nature of the learning process and the increase complexity of external knowledge as the country approaches the technological frontier. We argue that national absorptive capacity and the accumulation of knowledge stock are simultaneously determined. This implies that different phases of technological development require different strategies. During the catching-up phase, knowledge accumulation occurs predominately through the absorption of trade and/or inward FDI-related R&D spillovers. At the prefrontier-sharing phase onwards, increases in the knowledge base occur largely through independent knowledge creation and actively accessing foreign-located technological spillovers, inter alia through outward FDI-related R&D, joint ventures and strategic alliances.

The Effect of Technological Innovation on International Trade

“…Once countries move from the pre-catching-up and the catching-up stage to the pre-frontier-sharing and the technological frontier, the cumulative nature of the learning process and the increase complexity of external knowledge could result in a non-linear relationship between national absorptive capacity and exports. Once countries achieve a threshold level of absorptive capacity, absorption and catching-up processes may occur rapidly (Criscuolo and Narula, 2008), and firms are able to compete in world markets. Along this line, the expected non-linear relationship between technological innovation and international trade is supported by the findings of Estrada et al (2006).…”

“…Hence, a non-linear specification is preferred to a linear one. 5 Along these lines, Criscuolo and Narula (2008) argued that during the catching-up phase, knowledge accumulation occurs predominately through the absorption of trade and FDIrelated R&D spillovers. Then, national absorptive capacity and the accumulation of knowledge stock are simultaneously determined.…”

The spatial hierarchy of technological change and economic development in Europe

“…This is recognized in the literature in the notion of absorptive capacity (e.g., Cohen and Levinthal 1989;Criscuolo and Narula 2008), which is considered as a prerequisite for successful technology diffusion. A lack of absorptive capacity may lead to a vicious circle, or low-growth trap (Verspagen 1991), because countries without substantial knowledge about modern technologies will both generate low growth and be unable to benefit from imitation.…”

Innovation and Economic Development

“…However, whether or not FDI and other international knowledge sources contribute to the performance of local firms in developing countries, depends on local circumstances and capabilities of the firms on the "receiving end" (Criscuolo and Narula, 2008). It has also been suggested that the contribution of the various channels of international knowledge transfer may change over time.…”