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ECONOMIC CONSIDERATIONS IN THE SELECTION OF GENERIC TECHNOLOGIES
Abstract
A vast array of new processes and product innovations can arise from a single broad-based generic technology such as biotechnology. A small country like Australia faces some difficult choices in determining which science-based generic technologies should be supported and to what extent. This paper explores the economic factors that should be taken into account by firms and by Government in determining the choice of generic technology. It considers the problem of identifying ex ante the particular technologies in which Australia may have a comparative advantage. It also shows why certain facets of the existing industrial structure are relevant to the selection of generic technologies.
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NOTES AND REFERENCES
In particular, see M. Abramovitz, ‘Resource and output trends in the United States since 1870’, American Economic Review, 46, 2, May 1956, pp. 5-23; R. M. Solow, ‘Technical change and the aggregate production function’, Review of Economics and Statistics, 39, 3, August 1957, pp. 312-320; J. Kendrick, Productivity Trends in the United States, Princeton University Press, New York, 1961; E.F. Denison, The Sources of Economic Growth in the United States and the Alternatives before Us, Committee for Economic Development, Supplementary Paper No. 13, New York, 1962; and for Australia, H.R. Edwards and NT. Drane, ‘The Australian economy, July 1963’, Economic Record, 39, 87, September 1963, pp. 259–282.
See, for example, F. M. Scherer, ‘Demand-pull and technological invention: Schmookler revisited’, Journal of Industrial Economics, 30, 3, March 1982, pp. 225-238 and Michael Gort and Richard A. Wall, ‘The evolution of technologies and investment in innovation’, Economic Journal, 96, 383, September 1986, pp. 741–757.
R. Nelson, High Technology Policies: a Five-nation Comparison, American Enterprise Institute for Public Policy Research, Washington, D.C., 1984.
K. Pavitt, ‘International patterns of technological accumulation’ in N. Hood and J.E. Vahlne (eds), Strategies in Global Competition, Wiley, London, 1986.
G. R. Saxonhouse, ‘Biotechnology in Japan: industrial policy and factor market distortions’, Prometheus, 3, 2, December 1985, pp. 277–314.
For a similar view see D. J. Teece, ‘Profiting from technological innovation: implications for integration, collaboration, licensing and public policy’, Research Policy, 15, 1986, pp. 285–305.
In a more general sense, the key question is whether the Australian firm can appropriate most of the benefits of the technology through negotiation with overseas licensees or through direct investment abroad. Success in negotiation may sometimes depend on the strength of the patents held while on other occasions it may depend on the ability to keep the nature of the innovation secret from non-licensees.
The Sarich orbital engine may be a case in point.
An alternative approach might be for the Australian firm responsible for the innovation to establish its own manufacturing facilities overseas but in the circumstances described this appears to have no net social advantage compared with manufacturing the product at home.