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Technology Policy and Knowledge-based Growth in Small Countries


  • Kiander, Jaakko
  • Hjerppe, Reino


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.

Suggested Citation

  • Kiander, Jaakko & Hjerppe, Reino, 2004. "Technology Policy and Knowledge-based Growth in Small Countries," Research Reports 110, VATT Institute for Economic Research.
  • Handle: RePEc:fer:resrep:110

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    Cited by:

    1. van Beers, Cees & Berghäll, Elina & Poot, Tom, 2008. "R&D internationalization, R&D collaboration and public knowledge institutions in small economies: Evidence from Finland and the Netherlands," Research Policy, Elsevier, vol. 37(2), pages 294-308, March.
    2. Järviö, Maija-Liisa & Luoma, Kalevi & Räty, Tarmo & Aaltonen, Juho, 2005. "Productivity and its Drivers in Finnish Primary Care 1988-2003," Research Reports 118, VATT Institute for Economic Research.
    3. Kiander, Jaakko, 2004. "The Evolution of the Finnish Model in the 1990s: from Depression to High-tech Boom," Discussion Papers 344, VATT Institute for Economic Research.


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