The determinants of technological capability: A cross‐country analysis

Existing studies aimed at explaining cross-country differences in technological capabilities among developing countries have tended to use crude and unrealistic proxies—such as expenditure on R&D or the number of registered patents—which bear little or no relation to the findings from firm-level studies. This paper introduces a more realistic measure of technological capability based on an index developed by UNIDO, which is related to the complexity involved in the manufacture of engineering goods. The significance of this measure derives from the fact that in developing countries, the mastery of known technologies is far more important than the ability to generate new technologies through formal R&D. A regression analysis carried out with this measure points to the significance of market size, the stock of scientists and engineers and trade policy orientation as important determinants of cross-country differences in this measure of production capability