Neo-Schumpeterian perspectives on economic catch-up

Since the early work by Gerschenkron (1962) and Abramowitz (1986), numerous studies have followed, but it is the Schumpeterian economists who provide a more theoretical skeleton for the empirical work on the catch-up phenomenon. The work of Nelson and Winter (1982) not only revives evolutionary economics with its explicit linkages to Schumpeter's insight but also stimulates research applying this line of thought to catch-up. A distinctive feature of these studies by neo-Schumpeterians is their emphasis on innovation and technological capabilities as the enabling factors for catch-up. They note that in the 1960s and 1970s, the main factor supporting catch-up is capital accumulation, whereas in the 1980s and 1990s, the accumulation of technological capabilities is more relevant. Currently, only those countries that have invested heavily in the formation of skills and R&D ability seem to be capable of catching up, and those that have not made such investment are falling further behind.

However, while innovation has been the main source of economic progress in the West, learning has also been important for the catch-up of the rest of the non-Western latecomers (Amsden 1989, 2001). Similarly, Jaffe, Trajtenberg, and Henderson (1993) note that, as technological innovation can be regarded as the exploitation of available knowledge stock to generate new knowledge, latecomers tend to reap the benefits arising from the flow of knowledge from advanced economies to facilitate research and invention. Therefore, institutions for local learning and access to the foreign knowledge base are recognized as the critical factors for successful catch-up. Moreover, indigenous technological capabilities have become increasingly important because of the tendency of developed economies to pursue and enforce their IPR in developing countries.