Towards an understanding of technical change in semi-industrialized countries

Contrary to canventional wisdom, semi-industrialized countries engage, to an appreciable extent, in R&D activities leading to technical change. Much of their technical change activity consists of adaptation of foreign technology to local inputs and market preferences, and is carried out in response to contraints and distortions prevailing in their economies. Moreover, in this context, limited consideration is given to cost reduction, since the main objective is to manufacture under protection and technical change becomes a complementary response to the productive effort.A key factor in the ability to engage in such technical change activities is the availability of technically competent manpower, including scientists, engineers and technicians. At the same time, previous investment in the formation of such technical skills may result in an “excessive” supply of skilled labor, which , coupled with import constraints, will induce eexcessive adaptation of machinery and equipment and may deter from the importaion of new technology embodied in such equipment. Conversely, a pronounced scarcity of technicl skills may impade the adaptation of technology and result in excessive importantion of machinery and limit local efforts of modification, adaptation, etc.Because of the eay technical change is generated, it does not necessarily follow that it is all cases beneficial to the national economies of the countries in which it takes place. However, proper cost benefit accounting of the social returns to technical change activities is complicated by the intractable nature of many of the indirect and secondary effects, like learning from the R&D, or the impact of adaptation to domestic inputs in the development of local suppliers, etc. Also, th interdependencies between technical change and production and between various technical change activities are little understood.conventionall economic theory has contributed little to the understanding of the technical development process. The analysis of technical change in terms of the market failure metaphor, while providing useful insights, is also not very as far as understanding the problem of not very helpful as far as understanding the problem of technical change in semi-industrialized countries is concerned, since the roles of uncertainty and externalities in that situation are quite different from those foreseen in the market failure analysis for industrializerd countries. Special attention should be given to the possible application of the metaphor in trying to improve our understanding of the problems arising in the use of technical information and not only its creation. This would be particularly helpful in connection with the technical development problems of small enterprises not enjoying the benefits of the devesion of labor which are possible in larger firms.