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Technology Policy and Knowledge-based Growth in Small Countries

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  • Kiander, Jaakko
  • Hjerppe, Reino

Abstract

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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    File URL: https://www.doria.fi/handle/10024/148570
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    References listed on IDEAS

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    1. Michael Lechner, 2002. "Program Heterogeneity And Propensity Score Matching: An Application To The Evaluation Of Active Labor Market Policies," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 205-220, May.
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    4. Jochen Kluve & Hartmut Lehmann & Christoph M. Schmidt, 2000. "Disentangling Treatment Effects of Polish Active Labour Market Policies: Evidence from Matched Samples," CERT Discussion Papers 0007, Centre for Economic Reform and Transformation, Heriot Watt University.
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    6. Rajeev H. Dehejia & Sadek Wahba, 1998. "Causal Effects in Non-Experimental Studies: Re-Evaluating the Evaluation of Training Programs," NBER Working Papers 6586, National Bureau of Economic Research, Inc.
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    8. Czarnitzki, Dirk & Fier, Andreas, 2002. "Do Innovation Subsidies Crowd Out Private Investment? Evidence from the German Service Sector," ZEW Discussion Papers 02-04, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    9. Venetoklis, Takis & Kangasharju, Aki, 2002. "Business Subsidies and Employment of Firms: Overall Evaluation and Regional Extension," Discussion Papers 268, Government Institute for Economic Research Finland (VATT).
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    Cited by:

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

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