{
  "title": "From Adoption to Innovation: State-Dependent Technology Policy in Developing Countries",
  "publication": "IMF Working Papers, July 19, 2024",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2024/07/18/from-adoption-to-innovation-state-dependent-technology-policy-in-developing-countries-552105",
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  "summary": "Should policymakers in developing countries prioritize foreign technology adoption over domestic innovation? How might this depend on development stages?",
  "sections": [
    {
      "heading": "Key empirical findings",
      "content": "- Greater productivity gaps with foreign firms correlate with faster productivity growth after adoption, despite lower fees.\n- Non-adopters increased patent citations to foreign sellers, suggesting knowledge spillovers.\n- Korea’s historical experience shows a transition in policy from adoption subsidies toward innovation subsidies that substantially contributed to growth and welfare."
    },
    {
      "heading": "Model and mechanisms",
      "content": "- Built a two-country growth model with innovation and adoption to capture dynamics across development stages.\n- As productivity gaps narrow:\n  - Productivity gains and spillovers from adoption diminish.\n  - Foreign sellers strategically raise fees due to intensified competition.\n  - Adoption subsidies become less effective because higher fees and smaller spillovers reduce returns to adoption."
    },
    {
      "heading": "Policy implications and optimal policy interactions",
      "content": "- State-dependent technology policy: prioritize foreign technology adoption when productivity gaps are large; shift toward supporting domestic innovation as gaps narrow.\n- Adoption subsidies are effective in early stages with large gaps but lose effectiveness as the economy develops.\n- The model explores the interaction between optimal technology policy and import tariffs; strategic responses by foreign sellers affect subsidy effectiveness."
    },
    {
      "heading": "Empirical context: Korea",
      "content": "- Historical technology transfer data from Korea motivated the empirical and theoretical analysis.\n- Evidence from Korea supports:\n  - Faster productivity growth associated with adoption when gaps with foreign firms were large.\n  - Knowledge spillovers to non-adopters via increased patent citations to foreign sellers.\n  - The policy shift from adoption subsidies to innovation subsidies played a substantive role in Korea’s growth and welfare improvements."
    },
    {
      "heading": "Publication and document specifics",
      "content": "- Authors: Jaedo Choi, Younghun Shim\n- Date: July 19, 2024\n- Pages: 68\n- Volume: 2024\n- Issue: 154\n- Series: Working Paper No. 2024/154\n- DOI: https://doi.org/10.5089/9798400281341.001\n- Stock No: WPIEA2024154\n- ISBN: 9798400281341\n- ISSN: 1018-5941\n\nFrom Adoption to Innovation: State-Dependent Technology Policy in Developing Countries — Jaedo Choi and Younghun Shim\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2024/07/18/from-adoption-to-innovation-state-dependent-technology-policy-in-developing-countries-552105"
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    "Authors: Jaedo Choi, Younghun Shim",
    "Published: July 19, 2024",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798400281341.001",
    "Greater productivity gaps with foreign firms correlate with faster productivity growth after adoption, despite lower fees.",
    "Non-adopters increased patent citations to foreign sellers, suggesting knowledge spillovers.",
    "Korea’s historical experience shows a transition in policy from adoption subsidies toward innovation subsidies that substantially contributed to growth and welfare.",
    "Built a two-country growth model with innovation and adoption to capture dynamics across development stages.",
    "As productivity gaps narrow:",
    "State-dependent technology policy: prioritize foreign technology adoption when productivity gaps are large; shift toward supporting domestic innovation as gaps narrow.",
    "Adoption subsidies are effective in early stages with large gaps but lose effectiveness as the economy develops.",
    "The model explores the interaction between optimal technology policy and import tariffs; strategic responses by foreign sellers affect subsidy effectiveness.",
    "Historical technology transfer data from Korea motivated the empirical and theoretical analysis.",
    "Evidence from Korea supports:",
    "Authors: Jaedo Choi, Younghun Shim",
    "Date: July 19, 2024",
    "Pages: 68",
    "Volume: 2024",
    "Issue: 154",
    "Series: Working Paper No. 2024/154",
    "DOI: https://doi.org/10.5089/9798400281341.001",
    "Stock No: WPIEA2024154",
    "ISBN: 9798400281341",
    "ISSN: 1018-5941",
    "**Working Paper**"
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