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Promoting innovation and imitation in a small open economy: The role of human capital, R&D and trade

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  • Bye, Brita
  • FæHn, Taran

Abstract

For small and open economies, absorption of knowledge spillovers from abroad can play a more important role for domestic growth than domestic innovations. However, there are interrelations between innovation and imitation processes, as they both depend on domestic investments in human capital and R&D, as well as trade. This article explores the implications for the desirable growth policy design when R&D policies, trade promotion and education simultaneously affect both innovation and absorption of knowledge spillovers from abroad. We find that devoting similar public funding to R&D, R&D based export or education all stimulate innovation as well as absorption. But the industrial pattern and the relative roles of imitation and innovation processes for productivity growth and welfare differ between the policy alternatives.

Suggested Citation

  • Bye, Brita & FæHn, Taran, 2011. "Promoting innovation and imitation in a small open economy: The role of human capital, R&D and trade," Conference papers 332158, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332158
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