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20NATIONAL STRATEGIES FOR SOCIO-ECONOMIC DEVELOPMENT IN THE CONTEXT OF SCIENTIFIC AND TECHNOLOGICAL PROGRESS AND THE GLOBAL ECONOMY
Luchinkin M.Y.
Student of the Program DBA of the Higher School of Economics ofRANEPA Deputy Director of ICT Competence Center 33-2, Usacheva st., Moscow, Russia
Abstract
The article is devoted to the analyses of basic national long-term strategies for socio-economic development through scientific and technological progress in the context of globalization, based on long term world experience.
Keywords: long-term socio-economic development, world economy, science and technology progress, technologies, innovations, public policy, globalization, protectionism, import substitution
Introduction
Over the past 100 years, scientists have developed various concepts for economic growth and economic development models. For centuries, economists have tried to create model "cures for success" based on the analyzing of vast amounts of statistical information and applying a wide range of mathematical methods.
However, the number of economic development trajectories is so large, and the exogenous and endogenous influences on the interrelations between the elements of the economic system are so strong, that the world economic system is more characterized by a state of chaos than a state based on the stable development of laws and a finite range factors influencing the system's change. The world economy is more similar to nature in its essence, in which certain laws are acting, but the final results in it are unpredictable in the long term and sometimes in the short term.
Scientists have not yet come to a consensus on which strategies, approaches and socio-economic development models are the most effective: development based on globalization principles and participation in global value chains or based on protectionism and regional value chains, development based on liberal economic policy without government intervention or based on a strong government role in the economy, development based on a high level of competition or through the creation of transnational corporations or oligopolies.
However, scientists argue that long-term economic development is connected with scientific and technological progress and it is based on the combination of human, technological capital development and fixed capital accumulation.
Economic history has demonstrated that there has never been a fully open market-based economy[5], perfect competition. The world economy in the 21st century is controlled by transnational corporations and oligopolies, and historically successful economic policy was based either on "managing the markets" or on setting the "wrong prices" [8]. Economists increasingly agree that the "invisible hand of the market" and the subordination of state economic policy to the principles of the "model of comparative competitive advantage" and "globalization" has destroyed many stable regional economic systems, turning them either into suppliers of resources or into markets for goods and services of "System-World" countries. Economists are increasingly saying that it is national governments that are the "invisible hand of the market" that either push national economies to the heights of prosperity or push them into a "poverty trap". World history also proves that there is no successful development model. Countries select their own developmental strategies, forming unique condition combinations, mechanisms, and resources.
The State and National Strategies
In general, national strategies are aimed at the following objectives:
- Sustainable long-term socio-economic state development and national wealth growth;
- Ensuring high rates of capital accumulation in the economy and continuous technological national industry modernization;
- Scientific and technological country development, technological capital accumulation and reproduction, striving for the upper layers of the "global technological corridor";
- Significant increase in the per capita income level and life quality of its citizens, continuous human capital development;
- Ensuring high scientific and technological progress rates in the priority sectors for development, which have significant scientific, technological and production potential, as well as total factor productivity growth in the national economy;
- Income and welfare growth for national companies and the creation of the most comfortable conditions for them to do business in the territory of the state and beyond its borders;
- State support provision for the development of "nascent" and priority economic sectors and related industries, corresponding to current and future technological waves [7];
- Attracting direct foreign investment into the economy, considering the independent technological
control level, as well as proceeding from the necessity to ensure national economic security and the possibility of convergence between national and foreign technologies and knowledge;
- International trade development with simultaneous control level of openness of the national economy;
- State's competitive improvement in the world economic and political spaces;
- Ensuring national security.
On the one hand, national development strategies are not limited only by territorial boundaries, but are supranational in nature, i.e. they provide state interests that go beyond national borders. On the other hand, each state has a different capability to implement its national development strategy, since each country has a different combination of its own military, financial, economic, and technological advantages, as well as the ability to attract external resources for its development. Effective state national development strategies are aimed at the conditions formation, either of allowing the country to take a leading position in a new systematic accumulation cycle, a new long economic cycle, or allowing the state to ensure a current leading position, keeping in mind the long-term future.
It is possible to distinguish five basic socio-economic development strategies on the basis of scientific and technological progress:
- Development strategy based on domestic core technologies and radical innovations (USA, Japan);
- A strategy based on imitation of technology and innovations (China, Taiwan, South Korea);
- An intelligence resource provider strategy (India);
- A production factory strategy (China, Taiwan, Vietnam).
- A combined strategy.
Countries combine strategies based on the rea-sonability and cost-effectiveness and the potential return on investment on a national scale, seeking in the long term to occupy key positions in global value chains, as well as to form a set of advantages and opportunities that would provide an unconditional competitive advantage in certain technological areas and industries in the global market and obtain a "monopolistic type rent" based on their own technology and innovation.
Each basic strategy is characterized by a set of advantages and disadvantages, i.e. risks that countries take in order to extract the potential benefits. At the same time, protectionism, import substitution, publicity and export support policies are inherent companions of combined strategies.
Effective national development strategies peculiarities
The author's research showed that the most effective national development strategies have a number of common characteristics.
First. National development strategies are long-term in nature, determine the strategic development guidelines for at least one long economic cycle, which roughly corresponds to a technological wave time period. At the same time, in the author's opinion, national
development strategies should cover the period corresponding to the systemic capital accumulation cycle.
Second. National development strategies are built on the basis of possible efficiency realization of unique existing comparative competitive national advantages in resources, people, technology, knowledge, and previously accumulated capital. Development strategies include the protection and strengthening of competitive advantages, as well as new advantage acquisition.
Third. National development strategies are built on scientific and technological country development priorities, both at the use of national knowledge and technology, and at the use of foreign technological and intellectual capital, human capital development along with the fixed capital accumulation as a production factor. Therefore, national development strategies form the conditions for external knowledge, technology and human resources absorption, as well as the creation of new knowledge and new technology.
Fourth. National development strategies are based on international economic formation, political and scientific and technological alliances, considering the balance of interests and based on the need to combine countries' resources to achieve strategic political, economic and scientific-technological goals.
Fifth. National development strategies are based on a balance between national economic openness and closedness, as well as a balance between national company protection and foreign company access to the national market.
Sixth. National development strategies provide for mutual market capital penetration as an export/import mechanism, economic and production ties strengthening between partner countries, international trade development, as well as a national capital accumulation mechanism.
Seventh. National development strategies are based on technological, market specialization principles and on regional specialization. National strategies take into consideration the phases of economic cycles and the long trajectory for innovative development.
Eighth. Based on limited resources and opportunities, national strategies are based on the supporting several "emerging" and priority economic sectors, especially high-tech industries, providing a comparative advantage to such industries, both in relation to other national industries, and in comparison, with similar industries in other countries.
Ninth. National development strategies provide for the creation of new or significant participation in global value chains, while ensuring that key elements of regional value chains function and remain in control at the national level.
Tenth. National development strategies include meeting international legal requirements while preserving the rights and opportunities to protect national political and economic interests. In addition, national strategies strive and participate in international legislation in order to strengthen their own competitive position.
Necessity for technological and market specialization in national development strategy is based on the
limited resources available according to state and economic agents. On the basis of certain technological and market specialization, a set of sectoral, technological and product state development priorities is formed, the target for state support and its parameters for the short-term, medium-term and long-term periods are determined.
Regional specialization proceeds from the fact that different territories within one state have different scientific and technological, personnel, production capacities and potential. At the same time, in limited resources conditions, the state cannot simultaneously develop the same set of technology and support creating
the same production opportunities in all territorial formations, creating in them the same scale of innovation systems.
The "knowledge supplier" and "production factory" strategies
The "knowledge supplier" and "production factory" strategies allow developing countries to gain access to technology and cash flow. However, if access to technology owned by other technologically advanced countries is restricted, if production is shifted to other countries, or if export orders are withdrawn, these strategies can lead to profound issues.
Table 1.
Advantages and disadvantages of the "knowledge supplier" and the "production factory" development strategies
Strategy
Advantages
Disadvantages
"Knowledge supplier"
• Access to technology and knowledge through foreign investments;
• Employment growth. Workers' incomes in some industries are higher than the national average;
• Significant revenues to the national economy, primarily due to foreign exchange earnings from the services exports.
• Opportunity to support other economic sectors and scientific and technological development, as well as the development in related economic sectors;
• Developing skills and competencies in the national workforce. "Experience effect";
• Working out export supply chains and channels. Possibility to build a global intellectual services hub.
• The strategy mostly works for small countries or former colonies;
• Value added and labor productivity is lower compared to countries that have their own technology and produce final goods, intellectual ready-made solutions, or control of the supply service channels to final consumers;
• Critical dependence on intellectual services exports;
• The risk of «brain drain» abroad, national human capital reduction risk;
• New knowledge created generally does not lead to national technological capital development;
• Often high export license payments to the country, which is the right technology holder;
• Development of one's own products and solutions is mainly based on foreign technology;
• Attraction of foreign investment to significant public expenditures;
• The necessity of expenses connected with the requirement to provide constant increase in the number of qualified labor resources;
• Income growth rate from intellectual services, including exports, is lower than the income growth rate for the employed population._
«Production factory»
• Access to technology and technological modernization in national industries through foreign direct investments;
• Employment growth. Workers' incomes at productions created by foreign companies are higher than the average income in the country;
• Capital accumulation, investment growth in the economy;
• Competence development in the national workforce. «Experience effect»;
• Increased national production of components, materials, intermediate goods in related economic sectors;
• Working out export supply chains and channels (if there are agreements with foreign investors).
• The opportunity to create a global export hub for certain goods;
• Possibility of further transition to imitation goods strategy through national and foreign technological capital convergence._
• Insignificant national value-added share in global value chains;
• Labor productivity is not generating explosive growth;
• Barriers to further transition to commodity imitation strategy through domestic and foreign technology convergence;
• Barriers to export channel development (in the re-export agreements absence);
• Production factor prices will increase over time, which reduces comparative national advantages;
• The existence of sufficiently high public expenditures associated with foreign capital attraction;
• In the situation when foreign investors transfer production from the country's territory, significant economic losses are possible;
• Increasing technological dependence and opening up of various domestic markets, for which the country has a comparative competitive advantage, to foreign companies in exchange for technology and investment.
It is important to understand that in the context of globalization, the localization of the production of goods with a high share for added value in the country's territory and foreign investment does not mean receiving large profits. The lion's share goes to companies with basic technology and intellectual property rights. For example, in 2009. China produced iPhones worth 1.9 billion USD, but only 73.5 million USD was value-added from Chinese production.
For intellectual service providers, it is possible to recall the Indian and Irish experience. In 2018, these countries jointly exported about USD 155 billion in IT services. Ireland and India account for about 28% of all global IT service exports, including software exports. However, these countries are characterized by a share of value added in ICT output that is below the global average.
Development strategy based on domestic core technologies and radical innovations
Development strategy based on domestic core technologies and radical innovations is characteristic for countries with considerable accumulated technolog-
ical capital, developed human capital, significant production capacities and financial investment resources, sufficient for structural changes in the national and global production and economic system.
The strategy is mainly characteristic of countries that form the "System-World" core in the corresponding systemic capital accumulation cycle or a long economic cycle. The countries possessing basic technologies and radical innovations form new international cooperation in order to combine technological, human, production and resource capabilities, and also own a «technology cluster» and a «basic product portfolio», which form the basis of the corresponding world technological wave.
Such countries, within the systemic capital accumulation cycle or a long economic cycle, based on their goals and priorities, form (or seriously change) the international relationship rules, including in international trade, intellectual property circulation, create new global chains for value-added good production and service provision, while determining their partner network from other countries, change global investment, trade and financial flows.
Figure 1. Development Model based on domestic core technologies and radical innovations Source: compiled by author
The strategy provides for a fairly long implementation period - from 40 to 75 years, with each implementation stage corresponding to different tasks, approaches, and mechanisms used.
The first stage may last from 20 to 40 years, affecting the previous long economic cycle and technological wave. At this stage the basis for further structural changes in the national and global production and economic system is formed, resources are concentrated for a breakthrough, technological capital is accumulated, the focus is on fundamental and applied research, necessary human capital is formed, basic production
capabilities are developed based on a new combination of production factors, a comprehensive state support system is formed, and new conditions for business and industry are created.
The second strategy stage (up to 20 years) is mainly aimed at developing a set of products and services, to develop a «technological cluster», primarily by expanding R&D application, increasing investment in priority sectors in order to develop production capabilities, stimulating demand for new goods and services
and supporting national technology diffusion in domestic and foreign markets, including through the simultaneous technology and capital export.
At the third stage (up to 15 years) the strategy is aimed at maintaining high profitability in the economic sectors of highest priority, supporting domestic demand, aggressive policy in foreign markets, shortening
the life cycle of goods through improving innovation, and maximizing profit extraction. This stage is in preparation for a new development cycle. It seems important that for effective strategy implementation the technological priority clarification and technological capital accumulation should be carried out on an ongoing basis.
Table 2.
Advantages, opportunities, disadvantages and risks for development strategy based on domestic core tech_nologies and radical innovations_
Advantages
Disadvantages
• A country with basic technology and radical innovation can launch structural changes in the global economy;
• «System-World» formation, in which the country is the leader. Leading positions in international technological and economic unions. Gaining strategic advantages in the global market;
• Obtaining revenues on the basis of a «quasi-mo-nopolistic type» in the long-term;
• State and transnational companies created with its support actually control world markets;
• The country forms new global value-added chains, while occupying positions that provide the highest income;
• The country has a sufficiently long innovation lag, provided intellectual property protection and recognition by the established international rules of other countries in the intellectual property protection field;
• Forming new international rules, including in an international trade. Creating new international development institutions, global technological standards;
• Obtaining additional market and political power, gaining the ability to influence other countries._
• Development solely on the basis of its own technology does not provide high economic growth rates in the long-term;
• Emergence randomness in basic technologies and radical innovation, i.e. the need for huge investments with an ambiguous result;
• The need to maintain a very high investment growth rate in R&D. Huge investments to adapt the national production and economic system to a new combination of production factors, as well as investment to support changes in the global market;
• A long preparation period for the country's own human capital;
• The emergence at the first stage of loss of labor productivity in traditional economic sectors;
• Significant free resources required or free access to the resource base to build new industries on a national and global scale;
• Huge investments necessary for new technology diffusion, both within the national and in foreign markets.
Features
Risks
• Basic technologies and radical innovation possession allows for the creation of fundamentally new economic sectors, fundamentally changing the quality of life and consumer mentality, providing the state with super profits in the long term;
• Explosive productivity growth not only in the economic sectors that are basic to this technology and innovation, but also in related segments, which provides a significant increase in employee income and «accelerates» the economy;
• Creates new jobs, both in new industries and in related industries. Changes the skill level and expands the national workforce's competencies;
• Opportunities for additional development of sources through the windfall revenues.
• Demand consumer lack for fundamentally new goods and services due to their inadequacy to mee consumers' needs. Mental unreadiness of the consumer market;
• Lack the necessary sub-technologies set, restrictions by other countries on access to such subtechnologies;
• Better technologies emerging in other countries that are more responsive to needs;
• Countries with other similar technology (competing technology available) and significant resource capabilities may not allow to start a new technology cycle and new technology diffusion globally, protecting earlier investments in prior generation technology;
• Lack of resources may leave developments based on new technologies at the prototype level;
• Rapid technology and product imitation by other countries;
• State development institutions and the national innovation system do not support the economic sectors development based on the new technology and radical innovation;
• The state cannot provide new industries with a comparative advantage over other countries and other national industries.
Talking about risks, it is possible to quote A. Grove, who said [4] that «American companies, realizing that production and engineering are cheaper in Asia than in America, began to move their engineering and production centers to Asian countries. American companies certainly benefited in profits, but the «job-creation machine» stalled because «Americans had too much faith in technology startups' ability to create new jobs».
According to the author, it is important to implement a number of conditions for the successful development strategy based on domestic core technologies and radical innovations.
First, basic technological capital and technological knowledge, which are essential to the formation of new national production and economic system should be hard to copy, which will increase the imitation lag and, therefore, increase the windfall revenues period. Technological knowledge should be protected by patents or through the introduction of different instruments to ensure that there are barriers to its imitation by other countries.
Secondly, public policy should aim, on the one hand, at lengthening the learning period in other countries in order to lengthen the imitation lag, and, on the other hand, at shortening the learning period in order to penetrate knowledge as quickly as possible for growth in consumption. That is, the policy should aim to ensure the rapid knowledge penetration in other countries, sufficient enough to understand the values of the new technological knowledge and new products and services, and consequently sufficient for the rapid penetration in foreign markets for these products and services, but not sufficient enough for the rapid technology, products or services to be imitated by other countries.
Thirdly, there should be constant reproduction for new technological knowledge through constant investment growth in R&D with simultaneous national production capacity development. At the same time, government policy should be targeted at supporting and developing the national demand for goods and services in order to lengthen the foreign reactionary lag, as well as to manage the propensity to import in the national market.
Fourth, the national production and technological system should permanently ensure the diversification of the national portfolio of goods and services, including expanding and improving and the number of pseudo-innovations.
Fifth, the state must provide manageable protection against the penetration of foreign technological knowledge into the country;
Sixth, the set of actions and mechanisms applied should be aimed at creating such conditions in which the imitation period and the cumulative costs of other countries' imitation reduce the potential imitation effect to the point where this effect for the imitator becomes insignificant and unprofitable;
Seventh, on the one hand, the state should create conditions and stimulate the flow of foreign technological knowledge into the country for its further processing or imitation and implement measures aimed at reducing the imitation lag for national companies. On
the other hand, it is necessary to stimulate and ensure national technological knowledge penetration into other countries in order to develop consumer demand in these countries for national goods and services created and provided on the national technological capital basis;
Eighth, an important condition for the successful strategy implementation is to develop and support the worldwide dissemination of new scientific economic theories and models, which are based on the new knowledge that the country possesses.
Development strategy based on imitation of technology and innovations
The development strategy based on imitation has become the primary one for the successful growth of a number of developing economies in the world, ensuring the convergence of countries on the technological and socio-economic development levels over the past 50 years at least. All of the countries around the world, including technological leaders, are engaged in imitation along with the development on their own technology. At the same time, the world is experiencing an increase in the volume of simulation with simultaneous simulation processes acceleration. As a result, there is a situation in which R&D costs for obtaining new technology and developing new innovative products is constantly growing, and the time lag for the innovator to make a super profit is constantly decreasing.
An imitation strategy is a consistent set of actions implemented jointly by entrepreneurs, national governments and system actors in scientific and technological development, which are aimed at the conscious choosing of a set of priorities related to simulated technologies considering national technological and production potential, providing access to these technologies, studying borrowed technologies and their convergence with national knowledge and technologies, their rapid copying and implementation in production, ensure penetration of imitated product at first in national market and in global market at subsequent stages.
A country which possesses basic technology and radical innovation provides the country which has chosen a development strategy on the imitation basis with technology, experience, knowledge, investment capital, extracting a certain set of benefits. Among such benefits, access to domestic and geographically related foreign markets, gaining access to specialized resources, technologies, knowledge, human capital available in the follower country, obtaining income from the intellectual property use, obtaining various tax and other benefits provided by the follower country, supplying equipment, intermediate goods, components and materials can be noted. The leading countries tend to transfer to other countries technologies from previous generations, reserving for themselves the possibility of further the windfall revenues through monopolistic type and preserving strategic competitive positions.
At the same time the follower countries strive to imitate commercially successful technologies and products, to have access to more modern technologies and intellectual property objects, which can be further processed using national technologies and knowledge.
States periodically increase foreign technology borrowing to develop their technological capital and increase potential combinations of knowledge, technology, and innovation, and some countries have been «global technology vacuums» for the past decades. For example, over 42% of Japanese goods and technologies owe their origin to foreign technologies that were imported into the country [3].
The countries which have chosen the imitation strategy pose a threat to the countries which are innovators, because they, even in the international legislation conditions on protection the intellectual property, cannot realize in full their opportunities on receiving the «monopolistic rent». In this case researchers note that innovator countries reduce these risks by improving policies and technology commercialization methods through using unique combinations of production factors, intellectual property protection and rapid expansion of technology diffusion in the global market, implementing «disposable products» or «planned obsolescence» technologies and goods concepts.
It is possible to note strategy features number of development strategy based on imitation.
At the first stage (about 20 years) the attracting foreign direct investments and large transnational corporations to the country in priority branches considering technological, market and regional specialization, which provides the basic technological capital, knowledge, fixed capital accumulation and national investment and production opportunities development, becomes of key importance.
Each country, using foreign direct investments mechanisms, determines what is acceptable for its country dependence on foreign investments and technologies. Proceeding from the given policy, the state, certainly, creating favorable conditions, for inflow to the country foreign direct investments as the technologic and economic development factor, establishes access restrictions for foreign corporations on domestic markets and defines conditions for their activity in the country, including proceeding from national manufacturers protection necessity.
The policy choice depends on many factors and is related to the country's size and potential domestic market, the presence or potential development of own technological capital, the production potential level, investment opportunities, etc. International experience shows that countries that choose the significant dependence on foreign direct investment strategy form their local competencies and institutions by developing specialized infrastructure. Countries that have chosen a more independent policy are more focused on the technological
and human capital development, the borrowing and imitation policy of foreign technologies and products, their further processing and development on the convergent national production capabilities.
The key focus in R&D is development while conducting applied research. For example, in China for a long time there has been the following domestic spending distribution on research and development: 5% basic research, about 12.5% applied research and about 82.5% spent on development (82.7%).
In turn, the state support system is aimed at technology transfer and supporting their imitation and attracting foreign direct investments. At the same time the human capital development and the scientific-technological and innovation system modernization are carried out to support the national technological and product development trajectory. These processes are supported by a significant increase in national R&D expenditures, significant investments in high-tech economic sectors, domestic demand development for hightech goods and services, as well as export development mechanisms.
The follower countries at the first stage ensure forming a critical entrepreneur's mass in the priority sectors, building up the research base, supporting small and medium entrepreneurship concentrated around large companies. Necessity to support the development of small and medium innovative business is that small innovative companies create 2.5 times more inventions than large companies, about 50% of all major technological innovations, while consuming a small part of national spending on R&D [2]. However solvent demand for these innovations is concentrated in large companies.
At the first stage special attention by the state is given to identify development restrictions and realize mechanisms on their elimination, including by providing national companies with access to technology and cheap investment credit resources. At the state level various strategic sectoral plans and scientific and technological development plans are formed, a system of restrictions and barriers designed to protect national companies in the domestic market is formed.
The follower countries, attracting foreign investment, in exchange for access to the domestic market and using their unique comparative competitive advantages, gradually provide through the state policy implementation an increase in the materials percentage, intermediate domestic goods in the production cost goods structure produced at the enterprises, created at foreign capital expense.
Supranational level
Participation in developing international standards Increased participation in the activities by international development institutions
Obtaining technological and financial assistance International regulation of trade, circulation of intellectual property
Using international financial system mechanisms
Foreign markets
Attracting foreign transnational corporations
Scientific institutions
Private companies
Researchers
> Technology Transfer
National level
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Technological and market cooperation formation
Demand generation and stimulation
Marketing and investing in new markets. Support for foreign companies
Protection against foreign technology penetration into the market. Strong protection of own _technology and knowledge to foreign markets._
Creating conditions for the foreign companies' access to the domestic market
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New unique comparative competitive advantages, unique comparative conditions for entrepreneurial activity and scientific and technological development are _developed and formed. Technological, market and regional specialization_
Imitation technology
• Science Institutions;
• Higher education institutions;
• Private companies;
• Private researchers
Own technological capital
Acquired technological capital
International and national technology convergence
"Production mirrors" creation, national production _development_
Imitation technologies, products. Goods production under foreign _brands_
Create their own large companies. Protectionism and _import substitution_
Convergent technology diffusion in the domestic market
r
Export development
" ~ Preparing for the new development
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Support for small and medium-sized businesses
Supporting domestic demand and high profitability
Export orientation
Stimulating innovation
Technological priorities are clarified and technological capital is constantly being built up and developed
10-20 years
10-15 years
• Focus on research: developments;
• State support system aims to support technology imitation, technology transfer and foreign direct investment. Key: venture investments, R&D personnel concentration;
• Public support system and national innovation system preparation for priority development areas. Human capital development.
• Focus: applied research, basic science;
• The state support system is aimed at creation, development and protection of national companies, developing the scientific-technological base;
■ Promoting domestic demand for national technology and goods. Support for technology diffusion. Investment growth.
10-15 years
• Focus: Basic science and applied research;
• State support system is primarily aimed at supporting exports and technology and products diffusion in foreign markets;
• Active search for new basic technologies and transition to the development strategy based on own basic technologies and innovations
Figure 2.
Development model based on imitation of technology and innovations Source: compiled by author
At the subsequent stages in the country strategy implementation gradually begin to pass to the development strategy on their own or convergent technology, actively involving national resources in the accumulation and development of their own technological capital, national production capabilities development. The state policy is mostly aimed at supporting national companies, forming national transnational corporations, supporting the domestic demand for goods produced on the basis of their own technological base, while pursuing an active policy on foreign markets. At this stage, follower countries begin to form their own technological and economic alliances and cooperation, competing with innovator countries in global markets. The focus
in R&D is shifting from development to fundamental and applied research.
Countries are increasingly limiting, through direct or indirect regulatory mechanisms, foreign access to the domestic market, as well as the weakening of opportunities for foreign companies in the national market, including those who used to invest in the national economy development. Gradually, the national technology contribution to the scientific and technological progress and to the economic growth rate begins to exceed the foreign technology contribution.
A national development strategy based on imitation is characterized by a number of advantages, opportunities, disadvantages and risks.
Table 3.
Advantages, opportunities, disadvantages and risks for development strategy based on imitation of tech_nology and innovations_
Advantages Disadvantages
• Lower total cost for basic technological capital formation and the cost to organize the goods production. For innovative products, the cost to copy, on average, is 65% of the innovation cost, and the borrowing time cost is about 70% less compared to the time it takes to create a new product [6]. The borrowing cost will be less the higher the human capital quality [6], and the cost to copy technology will be less the greater the trade volume between the leading country and the follower country [6]; • The lack of the «primary randomness factor» due to the imitation of commercially successful goods and services, for which there is already a demand; • The predictable assessment of technology and innovation diffusion rate; • More efficient available resource use; • Approaching the «global technological corridor» upper boundaries through foreign capital and foreign technology; • Modern high-tech production formation in the country's territory. Lower adaptation costs of the national economy to new combination of production factors; • Appearance of new «points of economic growth», national economy structure diversification; • National exports development through goods re-export produced by industrial enterprises set up with the foreign capital participation. Working out export supply chains and channels. • A lack of the windfall revenues based on monopolistic rents from basic technology and radical innovation. Lower total imitation costs are associated with lower potential returns, but as long as the share of national innovations and technology in products is negligible; • Lower labor productivity and lower return on technology compared to countries with basic technology and radical innovations; • Output per worker in the follower country does not reach the output level in the leader country. The level of per capita consumption in the follower country in most cases is also less than the consumption level in the leader country [6]. However, it's possible in the follower country with very strong state regulation and a significant domestic consumption market; • The model works for a limited, though significant, time period, until the countries possessing the basic technology don't feel threatened by the country imitating technologies. Then the innovator countries limit access to their technologies and innovations; • Significant exports of goods and services are carried out over a long time period not by national, but by foreign companies that have placed their production facilities in the follower country; • Dependence on foreign investment, foreign technology, key imported materials, components and equipment.
Features Risks
• Opportunity to access advanced technologies, knowledge and experience through foreign direct investments; • National capital accumulation opportunity at the external sources with the simultaneous possibility of investing into the national scientific and technological support system, educational system, national companies support at the internal financial resources; • The possibility to modify foreign technologies, their convergence with national technologies, to create alternative productions («production mirror») with a significant share using national technologies, materials, intermediate goods; • Higher economic growth rates due to the simultaneous foreign and national technologies applications. • Lack risks to access to advanced basic technologies and innovations, as well as restrictions on access to sub-technologies set, which will not allow successful imitation and competitive quality products production; • Lack risks of experience and national human capital required to build industries based on imitated technologies; • International rules violations on the intellectual property use can lead to serious economic and political consequences; • Restrictions risks by innovator countries on follower countries' access to foreign markets; • Lack risks of demand for simulated technologies and products; • Risks associated with system unreadiness of scientific and technological development and the national innovation system to support the development processes and national technological capital commercialization and convergence processes between national and foreign technologies; • Insufficient internal resources for development; • Readiness lack of the national economic agents to develop national production capabilities and invest into R&D; • Decrease lack in the propensity to invent, a decrease in the activity of researchers [6].
«Opportunity windows» and a national strategy for development based on imitation
World history suggests that there are several «op-portunity windows» for implementing the imitation strategy as public policy for national industrial development and economic growth.
First, the «opportunity window» opens at the depression stage, the forming of new «technological clusters», at the initial trajectory stages of product development and low technology diffusion. The reasons the presence of the combination of factors characteristic of several countries or economic agent groups, including the alternative technology availability, basic technologies rapid licensing, appropriate production availability, investment opportunities and human capital. First «opportunity window» can be defined as a «rapid second».
The second «opportunity window» for the follower countries, on the one hand, is associated with a
set of factors and the availability of comparative competitive advantages, primarily related to factor prices, a significant domestic market or the availability of raw materials, new materials, etc., and on the other hand -associated with the signs of decreasing capital returns, decreasing productivity rates and decreasing income growth rates in certain industries in innovative countries (or if innovator countries, for example, have the strategy to relocate production to low-wage economies). In this «opportunity window», there is an increase in foreign direct investments, which allows some countries to access to capital, technology, and knowledge and launch imitation strategy. However, this opportunity is open if the country has unique comparative advantages, political and economic factors, as well as the national government's will presence expressed in real practical actions both to form more favorable in comparison with other countries conditions for doing business in certain economic spheres and to carry out structural reforms.
Figure 3. "Opportunity windows" for implementing the imitation strategy Source: compiled by author
The third «opportunity window», which can be characterized as «chunk out of market». This «oppor-tunity window» arises at the diminishing returns on capital and investment stage, a decrease in the labor productivity growth rate due to the emergence of diminishing returns on the technologies used, a decrease in the technology diffusion rate and the diminishing marginal utility of goods and services produced (provided) on the obsolete technologies basis. At the same time the penetration level for a set of technologies in the market is already high enough, but the market still
has opportunities for growth. Consumers have an «indifference effect», and price becomes one of the dominant factors.
At this time, the leading countries or technological leaders begin to switch to other technological and market areas. At the same time, other countries, which occupy some share in the technological market segment, have accumulated sufficiently significant national technological capital, human resources, have production and financial capabilities.
In the third «opportunity window» there may be realized a situation of real needs and values mismatch
to the opportunities offered in the goods and services by technologies combination with simultaneous limits approach of technological development for one technology group and marginal utility reduction for another technology group. In this period, countries can implement imitation strategy in a particular technological field or set of technological areas, using their comparative competitive advantages, while increasing their market share and displacing the leaders. As an example, we can take Chinese mobile device manufacturing company Huawei, which in just 8 years (2010-2018), according to statista.com, increased its global market share almost 9-fold from 1.5% to 13%, using the second and third «opportunity windows» under the Chinese government's public policy.
Conclusion
On the one hand, global economic development history has shown that there is no typical national development model with typical conditions, approaches, resources, and state support tool combinations. This is due to the fact that countries differ in size, technology ownership level, size of accumulated technological capital and production capabilities, qualification level of human capital, and investment opportunities. Therefore, countries independently design national development strategies, forming unique conditions, approaches, resources and mechanism combinations. However, the study showed that the number of basic development strategies in the scientific and technological progress context are limited. And the choice of each basic development strategy as a priority is characterized by different benefits, drawbacks, opportunities and risks set.
Completely «open» or completely «closed» economies have failed or collapsed. Countries that have succeeded have been those that have been able to combine growth models that provide, on the one hand, protection of national producers and, on the other, a manageable level of country openness. A country benefits from globalization only by having strong national production, a set of unique competitive advantages and accumulated comparative advantages in certain world economic sectors. Some countries, effectively using the «imitation strategy» and «development strategy based on domestic core technologies and radical innovations» combination, were able to profitably realize their comparative competitive advantages, create their own large high-tech industrial enterprises and ICT-companies, capable of producing competitive products and providing competitive services in domestic and foreign markets.
Countries that built their strategy solely on borrowing technology failed to make an economic breakthrough. However, the convergence of their own and foreign technology generates a synergistic effect, which allows for about 20-30 years to make a qualitative leap forward and ensure sufficiently high growth rates. Researches show that only relying on one's own technology, it is possible to provide economic growth rates at a level of no more than 2-3% a year, while borrowing simultaneously from effective foreign technology (technology transfer with imitation and processing possibility) it is possible to reach economic growth rates of 6-8% a year [1].
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