Accelerating Innovation and Digitalization in Asia to Boost Productivity
Departmental Papers, January 9, 2023
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Bibliographic details
- Authors: Era Dabla-Norris, Tidiane Kinda, Kaustubh Chahande, Hua Chai, Yadian Chen, Alessia De Stefani, Yosuke Kido, Fan Qi, Alexandre Sollaci
- Published: January 9, 2023
- Series: Departmental Papers
- DOI: https://doi.org/10.5089/9798400224034.087
Key findings: productivity, innovation, and digitalization trends
- COVID-19 hit on the back of weakening productivity growth in many advanced and emerging Asian countries, a trend that could be exacerbated by the pandemic.
- Productivity growth in the region was slowing even amid increased innovation effort, as proxied by spending on research and development (R&D) and number of patents.
- A key element underpinning this disconnect is the growing dispersion in productivity growth, innovation effort, and digitalization across and within sectors.
- Asia has risen to become an innovation powerhouse, contributing to more than half of world patents.
- The rise of Asia as an innovation hub has been driven by a few frontier countries that have experienced a sharp increase in digital and computer-related patents, supported by solid R&D spending and a large share of researchers in the labor force.
- Within countries, R&D has become more concentrated in a smaller share of firms in frontier Asia.
- Empirical evidence using firm-level data highlight that the high concentration in R&D is associated with large dispersion in productivity.
Channels of diffusion and heterogeneity
- External exposure to competition and innovation, including through trade, supports innovation and helps close productivity gaps for firms closer to the frontier.
- Non-frontier Asian developing countries have benefited from technology diffusion through a higher share of imported high-technology goods and by granting more patents to non-residents.
- These diffusion benefits are supported by improvements in human capital and digital infrastructure.
- For non-frontier countries, greater integration into the international economy, including global value chains, greater entrepreneurship, and expanding innovative labour supply could support productivity by encouraging innovation, including process innovation which is associated with larger productivity at the firm-level.
Policy recommendations (grouped by proximity to technological frontier)
- For countries close to the technological frontier:
- R&D tax credits and grants.
- Business-university R&D collaboration.
- Lower trade barriers to support broader-based innovation and help close productivity gaps.
- For countries farther from the frontier:
- Further improvements in digital infrastructure.
- Strengthening the skilled labor force.
- Greater openness to trade and FDI.
- Stronger patent protection.
- These measures could promote resource reallocation to the most productive firms and enhance incentives for technological adoption, supporting diffusion and higher productivity.
Publication metadata and scope
- Pages: 61
- Volume: 2023
- Issue: 001
- DOI: https://doi.org/10.5089/9798400224034.087
- ISBN: 9798400224034
- ISSN: 2616-5333
Source: Accelerating Innovation and Digitalization in Asia to Boost Productivity, Departmental Papers 2023, 001; Era Dabla-Norris et al.; January 9, 2023.