Catching Up, Absorption Capability and the Organisation of Human Capital

In order to identify, assimilate and exploit knowledge spill-overs from technological leaders, lagging countries need absorption capability. The main determinant of absorption capability is the organisation of R&D personnel. Relatively more research scientists and engineers must be employed in the productive sector than in the university and public research sector. To increase the absorptive capacity of the productive sector it is necessary that enterprises engage in in- house R&D activities. This conclusion implies that the possibilities to exploit the catching up potential are highest for countries whose initial technology gaps are relatively small. This is quite at odds with the conventional convergence hypothesis.