New wine in old bottles: Technological diffusion in developed economies

As new and old technologies generally co-exist in the complex production methods that characterise major sectors of modern developed economies, it is important for policy makers to analyse them together in order to take full advantage of complementarities and optimise outcomes for entire economies rather than for individual industries. In this article, we look at the interrelationships between technologies of different vintages from three perspectives. Firstly, we develop a short theoretical model to demonstrate the reciprocal connections between industries that are generally described as being ‘high technology’ with the other sectors that rely more heavily on ‘non-high tech’ methods. Through the use of input-output and patent data, we then show that long-established industries that are not generally thought of as being high tech often employ cutting-edge knowledge in their own research and development and, by extension, in their other activities. Finally, we use sectoral case studies to show how so-called high tech knowledge is used in specific long-established industries. Our conclusion is that relationships between high tech and non-high tech sectors are highly symbiotic and that the health of high tech firms and industries depends heavily on their ability to sell their outputs to other sectors in developed economies.