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Technology Policy and Knowledge-based Growth in Small Countries


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  • Jaakko Kiander
  • Reino Hjerppe
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    The rapid diffusion of technology is a prerequisite for small countries to catch-up or remain at the fore-front of the technology race. The critical issue is how innovation policies can be framed so that they encourage the diffusion of technology and consequently upgrade the domestic technology structure of the host country. The range of available policy options to a small country as host to foreign R&D intensive trans-national companies (TNC) is defined by the way the country?s productive capacities can link to the TNCs global production structure. These abilities and the degree and quality of the integration can be improved with the help of foreign direct investment (FDI) and science, technology and innovation (STI) policies. While financial incentives aimed at attracting R&D intensive FDI may be necessary for a small country, such schemes need to be supplemented with policies that stimulate learning and investments in domestic firms. R&D intensive TNCs do not necessarily upgrade the technological knowledge base since high-tech industries also incorporate low-tech phases in their production processes. It is particularly important to strengthen the technological capacities of local firms to learn from foreign TNCs and to create knowledge spillovers.

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    Bibliographic Info

    Paper provided by Government Institute for Economic Research Finland (VATT) in its series Research Reports with number 110.

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    Date of creation: 25 May 2004
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    Handle: RePEc:fer:resrep:110

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    Keywords: Small countries; knowledge-based growth; national innovation systems; foreign direct investments;

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    Cited by:
    1. Maija-Liisa Järviö & Juho Aaltonen & Tarmo Räty & Kalevi Luoma, 2005. "Productivity and its Drivers in Finnish Primary Care 1988-2003," Research Reports, Government Institute for Economic Research Finland (VATT) 118, Government Institute for Economic Research Finland (VATT).
    2. Jaakko Kiander, 2004. "The Evolution of the Finnish Model in the 1990s: from Depression to High-tech Boom," Discussion Papers, Government Institute for Economic Research Finland (VATT) 344, Government Institute for Economic Research Finland (VATT).


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