Chapter 13: International Technology Diffusion and Productivity in Low- and
medium-technology sectors in India Saon Ray 1. INTRODUCTION The Solow growth model specifies that long-term per-capita growth can come only from exogenous technological change. Subsequent, endogenous growth models by contrast have underlined the role of knowledge generation undertaken by profit-maximizing firms to promote growth and offset diminishing returns from capital accumulation. But as the amount of domestic R&D is small in developing economies, the diffusion of technologies developed elsewhere and associated learning play significant roles in the development of technological capabilities. Thus capital accumulation in the form of imported machinery, while it may not lead to sustained economic growth in the long run, can act as a vehicle for embodied technical change and play a significant role in advancing knowledge and encouraging learning. Capturing learning, however, is far from easy. Advances in technology lead to a shift of the best-practice frontier, but firms can move towards the frontier either by learning or through changes in efficiency, or both. In the context of developing countries, technological change as conventionally measured purely in terms of R&D intensity or patenting activity is likely to be small since either there is underreporting in the case of R&D, or patent regimes are weak. As a result of this, learning-by-doing and other forms of learning emphasized by Lall and others may not be adequately captured using conventional measurement approaches. Moreover, much of such learning in developing countries is likely to come from the low- and medium-technology (LMT) sectors as opposed to the high-technology...
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