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The Optimal Structure of Technology Adoption and Creation: Basic Research vs. Development in the Presence of Distance to Frontier

Author

Listed:
  • Ha, Joonkyung

    (Hanyang University)

  • Jin Kim, Yong

    (Ajou University)

  • Lee, Jong-Wha

    (Asian Development Bank)

Abstract

This paper presents a theoretical model and empirical evidence to explain the observation that a country in which the level of technology approaches the technology frontier tends to rely more on technology creation than adoption, and to invest more in basic research than in development. The model shows that technology creation involves both basic and development research processes while technology adoption uses only the latter process. Thus, research and development (R&D) investment in our model involves three different processes: basic research in technology creation, development in technology creation, and development in technology adoption. The results suggest first, that the rate of growth is positively correlated with the level of basic research activities in the technology creation sector, if one country’s technology gap with the technology frontier is small enough. Second, an increase in the efficiency of the education system for highly skilled workers raises the level of basic research and the rate of growth. Third, verifying these theoretical results, empirical analyses using panel data of Japan; Republic of Korea; and Taipei,China show that the narrower the technological distance to the frontier, the higher the growth effect of basic R&D, indicating that the share of basic R&D matters for economic growth. Last, these also show that the quality of tertiary education has a significantly positive effect on the productivity of R&D.

Suggested Citation

  • Ha, Joonkyung & Jin Kim, Yong & Lee, Jong-Wha, 2009. "The Optimal Structure of Technology Adoption and Creation: Basic Research vs. Development in the Presence of Distance to Frontier," ADB Economics Working Paper Series 163, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0163
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    References listed on IDEAS

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    1. Susanto Basu & David N. Weil, 1998. "Appropriate Technology and Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1025-1054.
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    3. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    4. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(4), pages 1055-1089.
    5. Joonghae Suh & Derek H. C. Chen, 2007. "Korea as a Knowledge Economy : Evolutionary Process and Lessons Learned," World Bank Publications - Books, The World Bank Group, number 6755.
    6. Ben S. Bernanke & Refet S. Gürkaynak, 2002. "Is Growth Exogenous? Taking Mankiw, Romer, and Weil Seriously," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 11-72, National Bureau of Economic Research, Inc.
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    Cited by:

    1. James B. Ang & Jakob B. Madsen, 2011. "Can Second-Generation Endogenous Growth Models Explain the Productivity Trends and Knowledge Production in the Asian Miracle Economies?," The Review of Economics and Statistics, MIT Press, vol. 93(4), pages 1360-1373, November.

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    More about this item

    Keywords

    Basic research; technology creation; technology adoption; economic growth;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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