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Understanding multilevel interactions in economic development

  • Micheline Goedhuys

    (UNU-MERIT and Maastricht University)

  • Martin Srholec

    (Centre for Technology, Innovation and Culture, University of Oslo)

National framework conditions mediate the effect of technological capabilities of firms on their productivity. Although this has been recognized in the literature for a long time, a quantitative test that explicitly considers this hypothesis has been lacking. Using a World Bank datasets of about 19,000 firms in 42 countries, most of which are developing, we estimate a multilevel production function with effects of firm’s technological capabilities nested in the national framework conditions. Our results confirm that various facets of firm’s technological capabilities and national economic, technological and institutional conditions influence total factor productivity of firms. Furthermore, we find that the effects of the national conditions and firm’s technological capabilities are closely intertwined with each other. Adherence to international standards, formal training of workers and access to technology through foreign ownership make more difference for productivity of firms in less developed countries, while R&D capabilities on the contrary boost significantly more performance of firms in countries at the technological frontier. Different features of the national framework are shown to be responsible for this.

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Paper provided by Centre for Technology, Innovation and Culture, University of Oslo in its series Working Papers on Innovation Studies with number 20100208.

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Length: 39 pages
Date of creation: Feb 2010
Date of revision:
Handle: RePEc:tik:inowpp:20100208
Contact details of provider: Postal: Postboks 1108 Blindern N-0317 Oslo
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  1. Castellacci, Fulvio, 2006. "Evolutionary and new growth theories: are they converging?," MPRA Paper 27602, University Library of Munich, Germany.
  2. Fagerberg, Jan, 1987. "A technology gap approach to why growth rates differ," Research Policy, Elsevier, vol. 16(2-4), pages 87-99, August.
  3. Dosi, Giovanni, 1997. "Opportunities, Incentives and the Collective Patterns of Technological Change," Economic Journal, Royal Economic Society, vol. 107(444), pages 1530-47, September.
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  7. Bengt-Ã¥ke Lundvall & Jan Vang & K.J. Joseph, 2009. "Innovation System Research and Developing Countries," Chapters, in: Handbook of Innovation Systems and Developing Countries, chapter 1 Edward Elgar.
  8. Abramovitz, Moses, 1986. "Catching Up, Forging Ahead, and Falling Behind," The Journal of Economic History, Cambridge University Press, vol. 46(02), pages 385-406, June.
  9. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth Through Creative Destruction," Scholarly Articles 12490578, Harvard University Department of Economics.
  10. Dahlman, Carl J. & Ross-Larson, Bruce & Westphal, Larry E., 1987. "Managing technological development: Lessons from the newly industrializing countries," World Development, Elsevier, vol. 15(6), pages 759-775, June.
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