Innovation in emerging economies

A recent National Bureau of Economic Research (NBER) working paper sheds light on the relationship between innovation and globalization in emerging economies. One of the researchers’ interesting conclusions: In an emerging market, one factor that induces local firms to innovate is involvement with multinational corporations — whether through supplying them domestically or by exporting or importing.

Yuiry Gorodnichenko, Jan Svejnar and Katherine Terrell analyzed existing survey data from 27 ”transition” economies in Central and Eastern Europe and the former Soviet Union.  The researchers used a quite broad definition of innovation (on the theory that, in developing economies, innovation may involve some form of imitation, such as adopting an existing technology). Developing or upgrading a product, acquiring new technology or obtaining a new quality accreditation like an ISO certification all qualified as innovation for this study.  The study had a number of findings — including that innovation rates by local firms were not affected by having a higher proporttion of skilled workers, but that companies with more university-educated workers were more likely to innovate.

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