The Dynamics of Global Technology and Knowledge Flows

The Dynamics of Global Technology and Knowledge Flows

This paper is intended to provide policymakers with an overview of how technology and knowledge flow at the regional and global levels.

After presenting the economic role of knowledge as well as a number of basic concepts related to its dissemination, this paper identifies certain prerequisites for successful knowledge transfer.

It subsequently discusses various channels for transfer and diffusion, including integration by firms in global value chains, participation by public and private actors in knowledge networks, and the movement of skilled individuals among institutions and across geographic regions. Throughout, the paper highlights the gradual nature of knowledge diffusion, as well as the role of collaboration in the generation, dissemination, and adaptation of innovative solutions. Finally, the paper identifies the types of policy environments that may best attract and accelerate knowledge flows, suggesting certain actions that policymakers can take to improve their region’s innovative capacity.

Increasingly, it is the capacity to create and to commercialize new ideas, rather than endowments in natural resources, which explains productivity and growth differentials across regions. Technological advancement can provide new and more cost-effective solutions to challenges in critical areas such as education, food and water, health, and shelter. It has had a profound impact on the industrialization of developed countries. The diffusion of technology and knowledge enables “catch-up”, that is, the closing of the technology gap between actors within and across countries.

Setting the Stage: How do Technology and Knowledge Flow?

Covering various time periods, recent studies show a positive relationship between business investment in knowledge-based capital, on the one hand, and macroeconomic growth and productivity change, on the other. For instance, based on estimates for the period 1995-2007, investments in this type of capital account for some 34% and 20% of labour productivity growth in the United States and in 14 countries of the European Union, respectively (Corrado et al. 2012; OECD 2013). What is more, knowledge is a significant driver of development: the correlation between the accumulation of knowledge, as measured by the Knowledge Economy Index, and levels of economic development amounts to some 87% (World Bank 2008). In addition, professionals producing or manipulating knowledge, such as scientists, engineers, programmers, and intellectual property (IP) lawyers, represent an ever-rising and highly skilled part of the workforce (WIPO et al. 2014).

Two main factors contribute to the spectacular rise of the “knowledge economy” (David & Foray 2003). First and foremost, innovation is becoming the essential means for businesses and other organizations to compete in a globalized world. At the same time, the advances in information and communication technologies (ICTs) have revolutionized the modes of knowledge-based production. In particular, ICTs allow people to remotely access and process information, to exploit enormous databases, as well as to intensify the creative interaction not only between researchers but also among product designers, suppliers, and end consumers

Knowledge transfer and diffusion

Technology transfer is the movement of knowledge or technology between two specific entities, for instance, from one business to another (Roessner 2000; Wahab et al. 2012). A technology transfer transaction, which involves a source and a recipient, should result in the sustainable deployment of a solution and improvements in the recipient’s knowledge base. Technology diffusion is a broader concept that encompasses the social change to which the transfer of technology may give rise over time.

While information simply represents a flow of messages, knowledge is created and organized by the flow of information and also through a dynamic social process of mutual exchange and shared learning (Blackler 1995; Howells 2002; Howells 2012). The spread and use of knowledge – like the spread and adoption of new technology solutions – does not take place instantaneously (David 1990). Rather this is an evolutionary process and the impacts of the dissemination of technologies and knowledge, such as improvements in productivity, can take a while to become measurable.

Knowledge can either be “codified” or “tacit” (Polanyi 1966). The type of knowledge influences the ways in which it can be transferred and absorbed. Codified (also called “explicit”) knowledge is knowledge that can be effectively expressed through symbolic forms of representation such as written or spoken words. An example is the description of an invention in a patent application. The transmission of codified knowledge does not require the recipient to directly “experience” the know-how in question, thus allowing for the use of such formats as blueprints or operating manuals (Howells 2002; Howells 2012).

In contrast, tacit knowledge is challenging to articulate or codify, as it consists of experience and understanding accumulated by a person or organization over time. Tacit knowledge (also referred to as “know-how”) is an essential and critical element of all knowledge. Even explicit knowledge cannot be understood in isolation and requires some element of tacit knowledge for its interpretation (Polanyi 1966). The holder of tacit knowledge may be unaware of, or unable to describe, all the background knowledge that is essential for the successful deployment of an invention, or for the execution of a specific skill. Symbolic forms of communication may prove inadequate to accurately capture and convey tacit knowledge (Gertler 2003). It is “an art which cannot be specified in detail and cannot be transmitted by prescription, since no prescription for it exists” (Polanyi 1962). As a result, tacit knowledge is considered particularly “sticky”, or difficult to transmit. Its transfer generally requires sustained, face-to-face interactions.