Globalization and Technology Absorption in Europe and Central Asia: The Role of Trade, FDI, and Cross-Border Knowledge Flows »

Innovation and cross-border absorption of knowledge are central forces behind economic convergence and sustained growth. Absorption of technology is a necessary step to promote the development of human capital and the productive base, paving the way for innovations at the global knowledge frontier. Research and development, patents, trade, and foreign direct investment are major channels of technological absorption, allowing diffusion of new ideas and manufacturing best practices among countries and firms. These channels constitute the central focus of this study.

This study uses patent databases, surveys of enterprises, and case studies to investigate how specific channels of absorption molds decision making about technology. Trade and FDI flows show considerable promise as catalysts for the region to upgrade its technology and near the global technology frontier. Econometric analysis using enterprise surveys from all Europe and Central Asia countries helps to understand the conditions and policies that induce firms to incorporate external knowledge and technology into their overall growth strategies.

Foreword     vii
Acknowledgments     ix
Executive Summary     xi
Introduction     1
Definition of Innovation and Knowledge Absorption     1
Diffusion of Knowledge in Support of Productivity Growth: Literature Review     2
Conceptual Framework: Economic Conditions and Capacities for Knowledge Absorption     4
Patents as Indicators of Technological Activity in the ECA Region     7
Patent Data Provide a View of the Knowledge Absorption Process     7
Implications for Policy     18
The Links among Knowledge Absorption, Trade, and FDI     23
Trade and its Benefits     24
Foreign Direct Investment     31
Discussion of Results with Implications for Policy     49
How Does FDI via Company Acquisition Impact Technology Absorption? A Case Study of Serbian Enterprises     55
Investment Climate and Sequence of Mergers and Acqusitions, and Greenfield FDI     57
The Background of the Serbian Privatization Program     61
Policy Implications from Case Studies     76
Appendixes     81
Statistical Tables for Chapter 2     83
Regression Variables Used in Chapter 3     85
Questionnaire for Company Interviews     87
Correlates of ICT and Quality Certification     93
Bibliography     115
List of Tables
Correlations of "Composite" Measure of Absorption with Firm Characteristics [+] positive correlation, [-] negative correlation     xix
Comparing the Effects of Privatization on FDI versus Domestically-owned Firms     xxi
Top 10 Russian Generators of U.S. Patents     15
Trade Restrictiveness Indices     27
Logistics Performance Indices, 2007     30
Regression Results for New Product Introductions as Dependent Variable     39
Regression Results for Product Upgrades as Dependent Variable     42
Regression Results for Introduction of New Technology as Dependent Variable     44
Linear Regression Results Based on a "Composite" Measure of Absorption     46
Regression Results Based on Composite Measure of Absorption, Panel Data     48
Results of the Serbian Privatization Program     62
Revenue and Employment Trends Pre- and Post-acquisition     65
Productivity Trends Pre- and Post-acquisition     67
Financial Ratios Pre- and Post-acquisition     69
Patent Citations in ECA and Comparator Regions     83
Hypothesis Tests for Equality of Sample Means     84
Definition of Variables Used in Regressions      85
ISO Certification and Web Use across Sectors     97
ISO Certification and Web Use, Firm Size, and Age     98
ISO Certification and Web Use, Firm Ownership, and Trade Integration     98
Variable Definitions     102
Determinants of ISO Certification and Web Use-Cross-Sectional Regressions     104
Determinants of Technology Adoption across Country Groups     106
Determinants of ISO Certification and Web-Use-Panel Regressions     108
List of Figures
U.S. Patents Granted per Million Population     xiii
U.S. Patent Grants for the ECA 7 vs. India and China     xiv
Indigenous Patents and Coinventions in ECA: 1993-2007     xv
Trade Restrictiveness Index (TRI), 2005-06     xvii
FDI Inflows as a Percentage of GDP, 2005     xviii
Innovation and Absorption as Inputs into Growth and Productivity     5
ECA Region Patenting in the EPO     9
ECA Patenting in Europe, by First Inventor Country of Residence     10
ECA Coinvention by Partner Country     11
U.S. Patent Grants for the ECA 7, India, and China     12
The Expanding Role of International Coinvention in the ECA 7     13
International Coinvention in Russia     14
National Innovation Systems      21
Overall Trade Restrictiveness Index-tariff (all goods), 2006     28
Overall Trade Restrictiveness Index-tariff + non-tariff (all goods), 2006     28
3.3     35
3.4     35
ISO Certification and Web Use across ECA Countries     96
List of Boxes
Measuring the Impact of Trade and FDI on Technology Absorption     34
New Foreign Competition: Lowering Profits and Raising Efficiency     35
Methodology: Company Selection, Data Sources, Fieldwork     63
A Closer Look at Productivity Trends     68
Identification Strategy     101