Globalization and Technology Absorption in Europe and Central Asia the Role of Trade, FDI, and Cross-Border Knowledge Flowspaper

World Bank Working Paper No. 150

Posted: 23 Jul 2008

See all articles by Itzhak Goldberg

Itzhak Goldberg

CASE - Center for Social and Economic Research; Fraunhofer Center for Central and Eastern Europe

Lee Branstetter

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; National Bureau of Economic Research (NBER)

John Gabriel Goddard

World Bank

Smiita Kuriakose

affiliation not provided to SSRN

Date Written: June 20, 2008

Abstract

These papers are published to communicate the results of the Bank's ongoing research and to stimulate public discussion. Innovation and cross-border absorption of knowledge are central forces behind economic convergence and sustained growth. Absorption of technology is considered a necessary step to promote the development of human capital and the productive base, paving the way for innovations at the global knowledge frontier. Research and development, patents, trade, and foreign direct investment are major channels of technological absorption, allowing diffusion of new ideas and manufacturing best practices among countries and firms. These channels constitute the central focus of this study.

This study uses patent databases, surveys of enterprises, and case studies to investigate how the presence of specific channels of absorption molds decision making about technology. Trade and FDI flows show considerable promise as catalysts for the region to upgrade its technology and near the global technology frontier. Econometric analysis using enterprise surveys from all ECA countries helps us understand the conditions and policies that induce firms to incorporate external knowledge and technology into their overall growth strategies.

We find evidence of learning by exporting, underscoring the importance of trade as a driver of absorption. A case study of several manufacturing firms in Serbia complements this perspective, providing a detailed picture of the positive dynamics that are produced by FDI, particularly in terms of investment and risk-taking incentives that are critical for technology absorption. Examination of patent citations shows that cross-border knowledge flows need to be strengthened to foster closer connections between the region's public sector R&D and global private sector efforts.

Keywords: Technology transfer-Asia, Central, Technology transfer-Europe, Investments, Foreign-Asia, Central, Investments, Foreign-Europe, Globalization-Asia, Central, Goldberg Itzhak, Globalization

Suggested Citation

Goldberg, Itzhak and Branstetter, Lee and Goddard, John Gabriel and Kuriakose, Smiita, Globalization and Technology Absorption in Europe and Central Asia the Role of Trade, FDI, and Cross-Border Knowledge Flowspaper (June 20, 2008). World Bank Working Paper No. 150, Available at SSRN: https://ssrn.com/abstract=1163780

Itzhak Goldberg (Contact Author)

CASE - Center for Social and Economic Research ( email )

Al. Jana Pawła II 61/212
Warsaw, 01-031
Poland

Fraunhofer Center for Central and Eastern Europe ( email )

Germany

Lee Branstetter

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

John Gabriel Goddard

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Smiita Kuriakose

affiliation not provided to SSRN ( email )

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