UNDERSTANDING TECHNOLOGY DEVELOPMENT

There are wide variations between the developing countries in the capa bilities of their enterprises to import, utilize and improve upon indu strial technologies. It is important for the purposes of industrial po licy to understand why these differences exist and how industrial capa bilities may be improved. This article presents the findings of recent research into the nature of capability development and the role of go vernment policies in promoting such development. The process of becomi ng efficient in industry is very different from the usual textbook por trayal, in which firms costlessly access and absorb new technologies. In reality, there is a long and uncertain learning process involved, d iffering with the nature of the technology, the efficiency of factor a nd product markets, and the provision of various technological informa tion and services from the infrastructure institutions. There is a wid espread risk in developing countries that all these markets suffer fro m failures: the scope for technology development policies rests on the need to remedy these failures. The experience of the most successful newly industrializing economies (NIEs) suggests that well-designed int erventions, both selective and functional, are needed to promote techn ology development. Experience clearly shows the dangers of government failure, but it is necessary to retain a large role for the government if industry is to succeed. The pattern and implementation of interven tions have to be very different. This article points out the outlines of economically desirable interventions.