Building technological capability

Technology and technological change affects productivity, amount and composition of output, levels of employment, skill profiles of the workforce, degree of competitiveness and trade flows. In the longer term, technology has a bearing on cultural values, social relationships and configurations of political power. Since the late 1950s, mainstream economics has gradually come to recognize the important role of technological change in the process of economic growth. However, until very recently, the economic analysis of the origin, pace, and direction of technological change has been largely ignored, or examined only within a highly reductionist and abstract framework.

Technological progressive enterprises operate within a rich network of interconnections between themselves and other institutions. Three sets of conditions can facilitate technological capacity building. The first are those not associated with science and technology policy as such but which are considered essential for the overall operation of the macro-economy (adequate economic growth, political stability, stable prices, high levels of employment, a favourable balance of payments, a dependable legal system, and adequate compensation for initiative and innovation).

A second set of conditions involves institutions and infrastructures that target technological capacity-building. The possibilities include a high-placed science and technology institute and/or national council of science and technology set up specifically to formulate technology-related policies and give guidance to national efforts relating to technological capacity-building. Supporting services include the education system as a whole as well as intelligence gathering services (from which information on technologies, production, marketing, finance, investment opportunities and the domestic and global economy).

A third set of conditions involves policy instruments that can be used to encourage technological capacity-building. These include import licensing, the foreign exchange allocation system, price controls, concessional credit schemes, investment grants or subsidies, preferential tax treatment, protection through tariff and/or quota measures, and tax exemption on imported capital goods and intermediate inputs. The procurement system of government agencies can also be fashioned to support innovative sectors and new product development.