Innovation and uneven development: The challenge for low- and middle-income economies

This essay begins with a recounting of the rise of the Mass Production techno-economic paradigm and the emergence of the systemic economic crisis in the early 1970s. It then explains how this crisis was stemmed by the deepening of globalisation, which accelerated during the 1980s. However, shortly before the turn of the millennium, the internal fissures of the paradigm became more apparent, resulting in a renewed slowdown in growth and global financial crises. In the context of these global developments, most emerging economies are confronted by two structural problems. The first is the prevalence of a massive informal sector; the second is the erosion of the possibilities for a flying geese policy replicating the export success of China. However, crisis presents both challenge and opportunity, and three sets of innovation opportunities are addressed in the paper. These are the largely unrecognised innovative potential within the informal sector, the possibilities opened up by growing regional and South-South trade, and the transformative potential of the heartland technology driving the new techno-economic paradigm, ICTs. Building on seminal contribution to ideas by Freeman, we argue that these are important pillars to build an innovation agenda for inclusion in developing countries. The essay concludes with a discussion of the main policy implications to maximise the development impact of these new opportunities.