Social Absorption Capability, National Innovation Systems and Economic Development

We will argue that the capabilities that a country that lags technologically needs to absorb the technology of more advanced economies have much in common with the capabilities needed to create new technology. We will argue that investing to develop those capabilities is an important part of the explanation for the rapid economic development of the most dynamic developing economies. However, we will examine this in the context of two other factors that appear to be an important part of the explanation for successful economic performance. These are the macroenvironment, mostly as reflected by the level of investment in GDP, and the incentive regime, in particular the extent to which price signals reflect world prices and there is competitive pressure and the absence of restrictive government regulation which may inhibit the activities of the productive sector. We also examine the interplay among these factors, as well as between them and the national innovation systems of a dozen developing countries as part of the explanation of their different economic performance. The heart of this chapter will draw from a large comparative study of national innovation systems in which both authors were involved, and also from a set of studies done under the auspices of the World Bank.