Technology diffusion in the

developing world

Andrew Burns

World BankJune, 2008

Technology diffusion in the developing world

The technology gap between rich and poor countries has narrowed -- but remains large

Progress in developing countries reflects the absorption of pre-existing technologies – not at-the-frontier inventions

Globalization has been a main driver of technological progress

Technology diffusion across countries has picked up, but diffusion within countries remains slow and penetration rates uneven

Persistent weakness in technological absorptive capacity may constrain further technological progress

Measuring technological achievement

Started out with some 70+ candidate series, final selection based on time-series availability and cross-country coverage

Final index based on 20 sub-indicators along 4 dimensions

1. Scientific innovation and invention2. Penetration of older technologies3. Penetration of recent technologies4. Exposure to foreign technologies

Used principal components to provide flexible data-driven weighting scheme for each sub-index and the overall index.

Technology gap: narrowing but still wide

0

20

40

60

80

100

120

High Income Upper MiddleIncome

Lower MiddleIncome

Low Income

Index of technological achievement, high-income countries=100

1990s

2000s

Source: World Bank, Global Economic Prospects (2008)

There is significant variation in achievement within regions

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

East Asia Europe and Central Asia

Latin America & Caribbean

Mid-East & N. Africa

South Asia

Sub-Saharan Africa

Index of technological achievement

Technology diffusion in the developing world

The technology gap between rich and poor countries has narrowed -- but remains large

Progress in developing countries reflects the absorption of pre-existing technologies – not at-the-frontier inventions

Globalization has been a main driver of technological progress

Low levels of human capital, uneven distribution of older technologies and low rural penetration rates are important weaknesses

Persistent weakness in technological absorptive capacity may constrain further technological progress

Developing countries are scarcely active at the global technology frontier

0

20

40

60

80

100

High-income Upper-middle-income

Lower-middleincome

Low income

Intensity of scientific innovation and invention, High-income countries=100

Source: World Bank, Global Economic Prospects (2008)

Technology progress is mainly about absorbing and adopting technologies developed elsewhere

Source: World Bank, Global Economic Prospects (2008)

Technology in the developing country

Exposure to foreign

technology

Capacity to absorb

=

+

Technological progress

In-country diffusion

Technological diffusion within countries is key

Leading firms and cities use technologies relatively intensively– But rural areas lag (70% urban cell phones in India, 7% rural)– Physical, human and regulatory infrastructure matter

Technology diffuses mainly through the actions of firms and individuals:– New-to-the-market innovations: Successful introduction of cut

flower industry into Colombia, Kenya– New-to-the-firm innovations: Adoption of cell phones or internet

into the operations of firms

Therefore commercialization / diffusion is as (more?) important as R&D

The technology gap between rich and poor countries has narrowed -- but remains large

Progress in developing countries reflects the absorption of pre-existing technologies – not at-the-frontier inventions

Globalization has been a main driver of technological progress

Low levels of human capital, uneven distribution of older technologies and low rural penetration rates are important weaknesses

Persistent weakness in technological absorptive capacity may constrain further technological progress

Technology diffusion in the developing world

0%

1%

2%

3%

4%

5%

6%

EastAsia

EmergingEurope

LatinAmerica

Mid. East& N.

Africa

SouthAsia

Sub-SaharanAfrica

Market openness and contact with the diaspora stimulate technology transfer

0

2

4

6

8

10

1993 1996 1999 2002

High-tech Imports (% of GDP)

Source: CEPII, BACI database; World Development Indicators

Upper-middle

Low income

Lower-middle

Size of diaspora (% of origin-country population)

Technology diffusion in the developing world

The technology gap between rich and poor countries has narrowed -- but remains large

Progress in developing countries reflects the absorption of pre-existing technologies – not at-the-frontier inventions

Globalization has been a main driver of technological progress

Technology diffusion across countries has picked up, but diffusion within countries remains slow and penetration rates uneven

Persistent weakness in technological absorptive capacity may constrain further technological progress

Diffusion across countries has accelerated but penetration within countries remains weak

0

20

40

60

80

100

1800s 1900-50 1950-75 1975-00

Years for technology to reach countryPercent of countries to reach 25% penetration threshold

Year technology invented

Technology diffusion in the developing world

The technology gap between rich and poor countries has narrowed -- but remains large

Progress in developing countries reflects the absorption of pre-existing technologies – not at-the-frontier inventions

Globalization has been a main driver of technological progress

Technology diffusion across countries has picked up, but diffusion within countries remains slow and penetration rates uneven

Persistent weakness in technological absorptive capacity may constrain further technological progress

Measuring technological absorptive capacity

Index based on 15 sub-indicators along 4 dimensions

1. Basic and advanced technological literacy 2. Governance3. Macroeconomic environment4. Financial structure and intermediation

Weights for summary and overall index derived using principal components analysis.

Progress in absorptive capacity

Substantial improvements1. Macroeconomic environment2. Financial structure and intermediation

Relatively weak improvements1. Basic and advanced technological literacy 2. Regulatory environment and governance

Despite high enrolment rates, few students pass standardized tests (2000s)

0

20

40

60

80

100

SouthAfrica

Uganda Namibia Malawi Turkey Argentina Colombia Morocco

Enrolment

Meet standard

Sixth graders Fourth graders

Sources: SACMEQ II (2000), PIRLS (2001), and DHS

% of relevant population

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0 5000 10000 15000 20000 25000 30000 35000 40000

All Log. (All)

Technological achievement versus per capita income by region

The rise in technological achievement tends to flatten out as income rise

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan AfricaHigh income OECD High income Other AllLog. (Europe & Central Asia)

Technological achievement versus per capita income by region

All countries

The rise in technological achievement tends to flatten out as income rise

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan AfricaHigh income OECD High income Other AllLog. (All) Log. (Europe & Central Asia)

Technological achievement versus per capita income by region

Europe & Central Asia

All countries

The rise in technological achievement tends to flatten out as income rise

-0.1

-0.05

0

0.05

0.1

0.15

0.2

0.25

0.3

0 5000 10000 15000 20000 25000 30000 35000 40000

East Asia & Pacific Europe & Central Asia Latin America & CaribbeanMiddle East & North Africa South Asia Sub-Saharan AfricaHigh income OECD High income Other AllLog. (All) Log. (Europe & Central Asia) Log. (Latin America & Caribbean)

Technological achievement versus per capita income by region

Europe & Central Asia

All countries

The rise in technological achievement tends to flatten out as income rise

Latin America & Caribbean

Key features of a pro-technology policy stance

No detailed roadmap for promoting technological progress, but certain policy directions are indicated:

– Maintain openness to trade, foreign direct investment and participation of diaspora

– Further improve the investment climate so as to allow innovative firms to grow and flourish

– Improve basic infrastructure (roads, electricity, telephony)

– Raise the quality and quantity of education throughout economy not just major centers

– Emphasize technology diffusion by reinforcing dissemination systems and the market-orientation of R&D programs

For more info:

http://www.worldbank.org/gep2008

Technology diffusion in the

developing world