The Growing Technological Divide in a Four-speed World

The massive transfer of manufacturing capacity from OECD members to the developing world is one of the most striking changes in the global distribution of industrial activity over recent decades. Against the backdrop of shifting wealth, this chapter focuses attention on some of the major characteristics of the growth process in converging countries, particularly on their ability to absorb technologies and generate new ones. Shifting wealth has been accompanied by a growing technological divide between those developing countries which are capable of innovating, and those which seem not to be. There are several different channels through which technological generation and acquisition can take place – upgrading of human capital, R&ampD, FDI and trade. To meet the challenge of achieving competitive advantage, policy makers in developing countries must promote effective policy actions that help domestic firms absorb state-of-the-art technology and management know-how. However, this requires a far more active government policy to create an enabling environment than typically exists in most poor and struggling developing countries today.