Why Don't Poor Countries Do R&D?

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Institutions and Firms' Return to Innovation: Evidence from the World Bank Enterprise Survey

“…This is an interesting result because this suggests that poor levels of institutions depress the return to innovation, and therefore discourage firms to innovate. Related to our findings, Goni and Maloney (2014) find that at the country level, the rates of return from R&D expenditures follow an inverted U: they rise with distance to the frontier and then fall thereafter, potentially turning negative for the poorest countries.…”

What drives innovation in micro, small, and medium enterprises?

“…Countries, especially China and India, are proliferating technologically and have benefitted from multinational firms, who do most of the patentable R&D and hence provide the necessary complementary factors. China Government's ambition to become the world's innovation leader has introduced substantial regulatory and incentive‐based changes that have increased their patent applications (Crescenzi & Rodríguez‐Pose, 2017; Goñi & Maloney, 2014; Laforet & Tann, 2006). Indian Government can design a roadmap too, and for that, research like these can help.…”

“…Emerging countries do far less R&D than rich countries as a share of GDP (Goñi & Maloney, 2014). Ayyagari, Demirgüç‐Kunt, and Maksimovic (2011) emphasize that firms in developed countries are closer to technological frontier vis‐a‐vis firms in developing countries.…”

Agricultural R&D investment intensity: A misleading conventional measure and a new intensity index

“…This literature shows that poor countries invest far less in R&D as a share of their GDP than rich countries. One explanation for this fact, relevant for this analysis, is that the necessary complementarities to R&D expenditure are likely to diminish in low‐income countries and hence reduce the efficacy of a given unit of R&D. In other words, the efficacy of R&D investment in developing countries is much lower than in HI countries owing to any number of institutional and educational factors that can offset the Schumpeter catch‐up effect and significantly reduce the returns on R&D (Goñi & Maloney, 2014).…”