Is there a large-country advantage in high-tech?

High-tech is a commonly used catch-word for industries that use a relatively large share of their resources on R&D and develop many new products and processes. It is a widely held view that high- tech is good for growth, and that countries that succeed in high- tech industry perform well. Schumpeterian theory, as well as the more recent “new growth” theories, are often quoted in support of this view. However, the “new growth” theories also suggest that large countries are more likely than small ones to succeed in high-tech. This paper explores empirically the factors behind success or failure in high-tech industry for a sample of OECD countries from the 1960s to the 1980s. It is concluded that although there exists a group of high-tech industries for which the scale of the country seems to matter a lot, this does not extend to all industries where R&D and innovation are important. However, cost competition tends to be more severe in those industries where small countries can compete on equal terms. Thus, small countries do to some extent face a greater challenge in high-tech than large countries