A novel approach to national technological accumulation and absorptive capacity: Aggregating Cohen and Levinthal

The paper develops a more precise specification and understanding of the process of national-levelknowledge accumulation and absorptive capabilities by applying the reasoning and evidence from the firm-levelanalysis pioneered by Cohen and Levinthal (1989, 1990). In doing so, we acknowledge that significant cross-bordereffects due to the role of both inward and outward FDI exist and that assimilation of foreign knowledge is not onlyconfined to catching-up economies but is also carried out by countries at the frontier-sharing phase. We postulate anon-linear relationship between national absorptive capacity and the technological gap, due to the effects of thecumulative nature of the learning process and the increase complexity of external knowledge as the country approachesthe technological frontier. We argue that national absorptive capacity and the accumulation of knowledge stock aresimultaneously determined. This implies that different phases of technological development require different strategies.During the catching-up phase, knowledge accumulation occurs predominately through the absorption of trade and/orinward FDI-related R&D spillovers. At the pre-frontier-sharing phase onwards, increases in the knowledge base occurlargely through independent knowledge creation and actively accessing foreign-located technological spillovers, interalia through outward FDI-related R&D, joint ventures and strategic alliances.