A BEJM Topics article.

Abstract

Technology adoption in follower countries can be accomplished by local R&D activities, but it can also be achieved without formal R&D, for example, by foreign direct investment. Empirical evidence suggests that current R&D activities often expand local knowledge for future R&D, while adoption without R&D does not seem to have this effect. We formalize this idea in a quality-ladder growth model and find that this biased externality results in multiple steady states: In the long run, countries with sufficient initial knowledge and human capital converge to a state in which R&D is locally undertaken and thus become relatively rich, while other countries fully rely on technology adoption without R&D and stay poor. Switching regression using cross-country data supports the presence of multiple steady states in R&D expenditures.

Submitted: August 11, 2004 · Accepted: January 26, 2005 · Published: February 1, 2005

Originally published in Topics in Macroeconomics.

Recommended Citation

Todo, Yasuyuki (2005) "Technology Adoption in Follower Countries: With or Without Local R&D Activities?," Topics in Macroeconomics: Vol. 5 : Iss. 1, Article 2.
Available at: http://www.bepress.com/bejm/topics/vol5/iss1/art2