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Diversification, innovation, and imitation inside the Global Technological Frontier

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  • Klinger, Bailey
  • Lederman, Daniel

Abstract

Recent research highlights the relationship between economic development and productive diversification, which may be hindered by market failures. After identifying stages of diversification in disaggregated export data, the authors develop a metric for the flows of export"discoveries,"or inside-the-frontier innovations in developing countries. They then explore the empirical relationship between economic development and (1) inside-the-frontier-innovation as reflected by the introduction of new export products, (2) export diversification measured by an index of export-revenue concentration, and (3) on-the-frontier innovation as reflected in patents. The data suggest, unsurprisingly, that inside-the-frontier innovation is more common among poor countries than among industrial economies. Overall export diversification increases at low levels of development but declines with development after a high-income point, whereas patenting activity rises exponentially with development. The data also suggest that the relationship between the frequency of export discoveries and economic development is not due to changes in the industrial composition of exports. The authors use a simple model of innovation and imitation to test the hypothesis that the threat of imitation inhibits the discovery of new exports. Econometric evidence suggests that the frequency of export discoveries across countries rises with the returns of export activities (proxied by exogenous export growth during the sample period), but the magnitude of this effect increases with barriers to entry. The count-data estimations deal with unobserved international heterogeneity, and the results are robust to various changes in the specification of the empirical model. This finding supports the hypothesisthat market failures inhibit inside-the-frontier innovation.

Suggested Citation

  • Klinger, Bailey & Lederman, Daniel, 2006. "Diversification, innovation, and imitation inside the Global Technological Frontier," Policy Research Working Paper Series 3872, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3872
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    References listed on IDEAS

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    1. Jean Imbs & Romain Wacziarg, 2003. "Stages of Diversification," American Economic Review, American Economic Association, vol. 93(1), pages 63-86, March.
    2. Blundell, Richard & Griffith, Rachel & Windmeijer, Frank, 2002. "Individual effects and dynamics in count data models," Journal of Econometrics, Elsevier, vol. 108(1), pages 113-131, May.
    3. Rodrik, Dani, 2004. "Industrial Policy for the Twenty-First Century," CEPR Discussion Papers 4767, C.E.P.R. Discussion Papers.
    4. Wolfgang Mayer, 1984. "The Infant-Export Industry Argument," Canadian Journal of Economics, Canadian Economics Association, vol. 17(2), pages 249-269, May.
    5. Hausmann, Ricardo & Rodrik, Dani, 2003. "Economic development as self-discovery," Journal of Development Economics, Elsevier, pages 603-633.
    6. Mattias Ganslandt & James R. Markusen, 2001. "Standards and Related Regulations in International Trade: A Modeling Approach," NBER Working Papers 8346, National Bureau of Economic Research, Inc.
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    Cited by:

    1. repec:eee:inteco:v:151:y:2017:i:c:p:26-47 is not listed on IDEAS
    2. Hailu, Degol & Kipgen, Chinpihoi, 2017. "The Extractives Dependence Index (EDI)," Resources Policy, Elsevier, vol. 51(C), pages 251-264.
    3. Henrekson, Magnus & Stenkula, Mikael, 2009. "Entrepreneurship and Public Policy," Working Paper Series 804, Research Institute of Industrial Economics.
    4. Hodler, Roland, 2009. "Industrial policy in an imperfect world," Journal of Development Economics, Elsevier, vol. 90(1), pages 85-93, September.
    5. David Moore & Athanasios Vamvakidis, 2007. "Economic Growth in Croatia; Potential and Constraints," IMF Working Papers 07/198, International Monetary Fund.
    6. Gregorio Giménez, 2011. "Imitations, economic activity and welfare," Documentos de Trabajo dt2011-03, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    7. Bailey Klinger, 2007. "Uncertainty in the Search for New Exports," CID Working Papers 16, Center for International Development at Harvard University.
    8. Asier Minondo, 2011. "Does comparative advantage explain countries’ diversification level?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 507-526.
    9. Dani Rodrik, 2008. "Second-Best Institutions," American Economic Review, American Economic Association, vol. 98(2), pages 100-104, May.
    10. Gozgor, Giray & Can, Muhlis, 2016. "Export Product Diversification and the Environmental Kuznets Curve: Evidence from Turkey," MPRA Paper 69761, University Library of Munich, Germany.
    11. Klinger, Bailey & Lederman, Daniel, 2006. "Innovation and export portfolios," Policy Research Working Paper Series 3983, The World Bank.
    12. Diego Bastourre & Luis Casanova & Alejo Espora, 2011. "Tipo de Cambio Real y Crecimiento: Síntesis de la Evidencia y Agenda de Investigación," Department of Economics, Working Papers 082, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
    13. Haddad, Mona, 2007. "Trade integration in East Asia : the Role of China and production networks," Policy Research Working Paper Series 4160, The World Bank.
    14. Manuel Agosin & Claudio Bravo-Ortega, 2009. "Surgimiento de nuevas actividades de exportación en América Latina: el caso de Chile," Research Department Publications 3266, Inter-American Development Bank, Research Department.
    15. Lederman, Daniel, 2009. "The business of product innovation : international empirical evidence," Policy Research Working Paper Series 4840, The World Bank.
    16. Dalila NICET- CHENAF (GREThA-GRES) & Eric ROUGIER (GREThA-GRES), 2008. "Recent exports matter: export discoveries, FDI and Growth, an empirical assessment for MENA countries," Cahiers du GRES (2002-2009) 2008-17, Groupement de Recherches Economiques et Sociales.

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    Keywords

    Economic Theory&Research; Markets and Market Access; Water Resources Assessment; Achieving Shared Growth; Airports and Air Services;

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