Template-type: ReDIF-Paper 1.0
Author-Name: Audretsch, David B.
Author-Email: audretsch@econ.mpg.de
Author-Workplace-Name: Max Planck Institute of Economics
Author-Name: Sanders, Mark
Author-Email: m.w.j.l.sanders@uu.nl
Author-Workplace-Name: Max Planck Institute of Economics
Title: Technological Innovation, Entrepreneurship and Development
Abstract: Industrialization has long been seen as the answer to underdevelopment 
	 and poverty. First this led countries to follow protectionist import 
	 substitution policies but as these failed developing countries have 
	 opened up to trade and FDI and tried to follow strategies of export 
	 driven industrialization. If we consider the share of non-OECD countries 
	 in global trade in manufactures, this has been a big success. But has 
	 it? Developed countries still retain their competitive advantage in the 
	 innovative and fast growing industries of the future and for every 
	 success story in Asia there are at least two tales of woo in Africa. In 
	 this paper we present a two region product life cycle model of global 
	 specialization and trade. In it we analyse the impact of three major 
	 shocks to the gradually globalizing and integrating world economy and 
	 show that these shocks have caused a transition in the global 
	 specialization pattern. The advanced and previously industrialized 
	 countries have arguable made the transition to an entrepreneurial 
	 economy in which innovation, creativity and high value added in early 
	 stage activity are the basis of competitive advantage, whereas the 
	 developing world by-and-large has absorbed mature industrial activities 
	 based on the Heckscher-Ohlinian competitive advantage based on cheap 
	 unskilled labour. The key exogenous shocks that have led to this shift 
	 are the collapse of communism, the introduction of information and 
	 communication technologies and the opening up of large, populous 
	 developing countries such as India, China, and Brazil. Our model 
	 predictions are very much in line with observed trends in developing and 
	 developed economies and as such provides insights in the possible 
	 underlying mechanisms at work.
Classification-JEL: F01, J31, O1, P0
Keywords: globalization, innovation, trade, development
Series: UNU-MERIT Working Papers
Creation-Date: 2009
Number: 2009-052
File-URL: https://unu-merit.nl/publications/wppdf/2009/wp2009-052.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2009052