Technology diffusion in the developing world

This chapter reports on results of a large-scale effort to estimate directly the extent to which different technologies have penetrated the economies of developing countries and the pace at which penetration has been changing. It finds that on average middleincome countries use technologies at about one-half the rate of intensity of highincome countries and that the pace of technological progress in these countries has been much faster over the past 15 years. However, the level of technology achieved and the pace of progress vary widely across countries with the most advanced middle-income countries about as advanced as the less advanced high-income countries. Increased access to foreign technologies, through foreign direct investment, imports of high-technology products and intermediate inputs have played a central role in the dissemination of technologies from high-income countries to developing countries. However, such flows are not in themselves sufficient. A country’s technological absorptive capacity (the level of basic and advanced technological literacy, the quality of the regulatory environment, access to finance, and the effectiveness of proactive government policies to promote technology creation and diffusion) determines the extent to which these technologies are absorbed by domestic firms and incorporated into daily economic life. Weak absorptive capacity in Latin America suggests that it is converging towards a lower level of technological achievement than countries in Europe and Central Asia.