New directions in Technology Transfer

by Jeffery Atik

There continues to be a flow of academic writing and field studies concerning technology transfer, but there are no great breakthroughs to report. That said, there is an observable tiring with neoliberal approaches (which have failed to unlock the puzzle of incentivizing technology transfer). Moving the discussion to more public (if not statist) approaches to technology transfer might restore promise to what has been a disappointing field.

Collaborations do appear to be a promising institutional response; they have been reportedly successfully deployed in achieving advances in approaches to neglected diseases (such as Ebola) and climate change technologies. Collaborations are inherently public-private and can be structured to include (as full research partners) LDC institutions. These collaborations may feature government entities from the developed world, specialized development agencies, NGOs (who often coordinate), and university and state laboratories. They include private firms that carry out much of the focused technological development. As such, the success of a collaboration (as measured by innovation outcomes) depends on an effective design of incentives. Market-based financial rewards (licensing, sale of firms, IPOs) are replaced by funded contract research (similar to what occurs in defense fields) and/or prizes. Disengaging from the market permits research targeting - the ability to focus the collaboration on LDC needs and circumstances. For technology transfer to result, there must be meaningful inclusion of LDC institutions and personnel in the collaboration. LDC collaborators should not be mere observers; they make important contributions, particularly with regard to molding innovation to match the LDC environment where the technology will be deployed.

The Electronic Silk Road: How the Web Binds the World Together in Commerce by Anupam Chander

I saw a caravan once, in Afghanistan. It was a little caravan: three camels and a small family. But it was enough of a caravan to invoke in my imagination the Old Silk Road. I wondered (until a French officer ordered me to leave the area) where the travelers came from and where they were headed. All I could take away was their direction of travel: East.

In the Electronic Silk Road, Anupam Chander describes digital trade routes. The new trade proceeds along electronic pathways; it is fiber and cable and not camels that transmits value across great distances. But the Electronic Silk Road Chander studies has a marked geography; place still matters. We find Silicon Valley and Bangalore and (as before) China, marking the major stops and starts along the way (Chander likes the word entrepôt).

And the poles of the Electronic Silk Road, like the Old Silk Road, have valency. Chinese goods seduced the West for centuries: spices and trade goods and the silk that gave name to the trading route. The problem for the West was China’s notorious indifference to Western goods -- the West did not produce much the Chinese wished to have. Money was only a partial solution. It could of course pay for Chinese goods, but money, even in the days of gold and silver, was effectively a future claim on the West held by China. The Old Silk Road did not fit the mercantilist design of offsetting streams of goods.

Scarcity: Why Having Too Little Means So Much by Sendhil Mullainathan and Eldar Shafir

In Scarcity, economist Sendhil Mullainathan and social psychologist Eldar Shafir introduce the study of scarcity as a ‘science in the making.’ One of their colleagues, perhaps a sceptic and certainly a joker, gibes: “There is already a science of scarcity. It’s called economics.” But the science of scarcity Mullainathan and Shafir have in mind is not familiar economics. Scarcity is much more the subjective experience (and hence a psychological phenomenon) occasioned by want. Scarcity, say Mullainathan and Shafir, ‘captures the mind.’

Scarcity is a condition that the authors easily recognize. They suffer the curse of the hyper-successful: they have insufficient time at hand to accomplish all they have committed to do. The lack of time preys on their minds (and promotes them to waste more time worrying and complaining about their lack of time) and sets off a cascade of real-life consequences: missed appointments, neglected family, unpaid bills. And perhaps more: a sense of helplessness, depression, despair. We wrote this book, the authors declare. "We were too busy not to."

And so the first scarcity -- the scarcity the authors experience -- is the shortage of time. But their field immediately widens to include debt and poverty, hunger and the dieter’s calorie-count, and loneliness. Scarcity collects these conditions and explores their dilemmas. While many will escape a particular form of scarcity (we are not all poor), all may experience some form of scarcity (as might a recipient of a MacArthur ‘genius grant,’ such as time-pressed Mullainathan). The authors assert the existence of essential commonalities across these states.

How Asia Works: Success and Failure in the World’s Most Dynamic Region by Joe Studwell

Pity Joe Studwell. He has written a very intelligent, very thoughtful book. You might not agree with much of it; I have my doubts about his recipe. But there is little doubt what the book is: an exercise in economic history, with a focus on a peculiar developmental pathway followed by a few highly successful (generally northern) east Asian countries and not followed by certain (largely southern) east Asian countries. And geography has nothing to do with these diverging outcomes.

So poor Studwell delivers this intelligent book to his editor - one imagines - who decides it needs a snazzy title. Regardless of whether the title describes Studwell’s book. Studwell writes about ‘How Certain Asian Countries Developed’ - not about ‘How Asia Works’. He has very little to say in How Asia Works about how any of Asia works today - again, he is an economic historian. And he makes no claim within the book’s pages that Asia is ‘the World’s most dynamic region.’ Poor Studwell.

He can take comfort from having written a provocative book, which challenges much of the prevailing orthodoxy in developmental economics. And he’s obviously willing to horrify both left and right - praising Robin Hood-esque land reform (but not agricultural collectivization), autocratic leaders who impose export discipline on their cronies, and the elegant effectiveness of capital controls.

Studwell examines the East Asian development successes (Japan, Korea, Taiwan, and China) and the laggards (Malaysia, Indonesia, Thailand, and the Philippines). The winning path, according to Studwell, involves three distinct phases (“one, two, three,” he calls these in his concluding chapter). These three phases are a recipe for developmental success, they form the “same stretch of the river” that poor countries must navigate.

The first stage requires equitable land distribution to absorb labor and capture the productivity gains associated with moving to garden-style agriculture by small family landowners. The magic here is that everyone works - and most start at the same base. Garden intensity agriculture yields very low returns on labor but enhanced returns on land - it permits the accumulation of small surpluses that can be used to fund imports of necessary technology.

The second phase is the development of export-oriented industrialization. And Studwell cannot emphasize enough the importance that industrialization be export-focused; import-substitution strategies are doomed to fail. Here we see the green thumb of the successful state. Prospering East Asian nations do not (generally) direct their economies; rather they provide incentives and protection to exporting firms (fertilizer?) and then apply discipline (weeding?). The state does not pick winners, but it does cull losers. Studwell traces the development of the export-oriented automotive industry in Korea. Several firms were launched, but in the end one survives: the Hyundai/Kia complex.

Studwell’s third phase involves a sheltering set of financial policies. The state must support its exporting firms financially - which necessarily involves allocating capital in directions that would not be justified by short-term returns. Left unguided, private banks chase quickly realizable returns from investments that may have little transformative effect (luxury hotels, anyone?) Savings must be captured and directed, and this involves exchange restrictions.

So what went wrong in the other East Asian countries? Why do not Malaysia, Indonesia, Thailand and the Philippines share in the prosperity? Here the answer is straight out of Tolstoy: each fails in its own way. For Studwell, this means each (at one or more critical junctions) fails to progress down the ‘same stretch of the river’. But this simplifies the error. There are many diverging pathways, many other policy choices that can be made. After all, there are no illuminated signs marking the certain pathway to developmental success. Studwell sees certain leaders as developmentally clear-headed (including MacArthur and Park Chung-hee) and others as muddled (Mahathir); Marcos of course was a thief.

It is not a question of following advice; Studwell makes clear that most advice given developing countries is positively wrong-headed. And while history may demonstrate (as Studwell argues) that the peculiar one-two-three recipe worked for Japan, Korea, Taiwan and China, it does not follow that it will work (or would have worked) for others.

The tone of How Asia Works is dry, to put it mildly. But I did enjoy Studwell’s occasional accounts of arriving in various Asian capitals and noting the correlation of personal service to the local Gini coefficient (a metric of wealth inequality within a particular country): Studwell instantly senses the passage from Gini coefficient 3.0 to 5.0. The northern East Asian countries Studwell studies not only ‘work’ in the sense of greater per capita wealth (China aside); they also have (somewhat) more equitable distributions of wealth.

How Asia Works is longlisted for the 2013 Financial Times and Goldman Sachs Business Book of the Year Award.

See my reviews of these other longlisted books for the 2013 FT/Goldman Sachs Award:
Ray Fisman and Tim Sullivan, The Org

• Neil Irwin, The Alchemists
• Viktor Mayer-Schönberger and Kenneth Cukier, Big Data
• Moisés Naím, The End of Power

Why Nations Fail - The Origins of Power, Prosperity, and Poverty by Daron Acemoglu and James Robinson

Acemoglu and Robinson's Why Nations Fail is a thrilling read. It proposes answers to grand questions: Why are some nations rich? Why are others poor? Why are there such great disparities? Their theory is seductive -- yet it ultimately fails to give much guidance as to what can be done.

The key to prosperity, in the authors' view, can be found in a nation's political and economic institutions. The operative distinction is whether these institutions are extractive or inclusive. The most successful countries will have inclusive political and economic institutions; the most desperate will be afflicted with extractive institutions. Prescriptions seem tantalizingly accessible at first: simply replace extractive institutions with inclusive ones. But this is not so easy, Acemoglu and Robinson caution.

Labeling the 'bad' institutions extractive (as opposed to the more symmetrical 'exclusive') is a nice turn of phrase. Economists use the term extractive to describe economies that exploit endowments of valued natural resources, such as oil, gold or Mr. Kurtz's ivory, that are literally extracted. But the authors intend to characterize the relationship between the elites and the masses; elites 'extract' power and wealth from human resources through oppressive political and economic institutions.

In proposing an institutional account of prosperity, Acemoglu and Robinson reject cultural and geographic explanations. There is nothing peculiar about Northern European Protestantism (despite Weber's assertion) that suits it to the accumulation of wealth -- and folks living in temperate climes are not more industrious (or if they are -- they are not more likely to be successful). Technology is also non-determinative -- as opportunities for technological progress are frequently rejected by extractive states. Inclusive states -- the authors argue -- tend to be more receptive to new technologies, and hence enjoy the welfare gains innovation throws off.

It is a nation's institutions that matter. But despite the focus on institutions, institutions themselves (of the excellent inclusive variety) cannot assure prosperity unless a nation also possesses an adequate degree of 'centralization.' Acemoglu and Robinson do not clearly develop the notion of centralization -- and there seems to be some lingering tension between inclusivity (which diffuses power) and centralization (which focuses it). Centralization does seem to be a prior-in-time characteristic to the development of inclusive institutions in the examples explored in the book -- there exists a centralized nation that precedes the evolution of an inclusive, and so perhaps wealthy, nation.

The authors document the presence of extractive institutions in poor nations and inclusive institutions in rich ones. They describe vicious and virtuous cycles, respectively. These cycles describe both the reinforcement of tendencies between political and economic institutions, as well as a nation's trajectory over time. Of course, there should be more to the theory that this -- or we would find most nations tending toward one or the other pole (depending on the character of their historic institutions), with rare reversals of national fortunes.

In fact, the authors acknowledge, there are mixed cases -- and the most important one is today's China, which displays stunning recent growth that is restricted by extractive political and economic institutions. The authors are sanguine about China's emergence as a superpower; rather they predict that China has or will soon reach inclusivity limits imposed by its elites in order to maintain extractive conditions. In the long run, the authors believe, authoritarian regimes will falter -- and they cite the Soviet Union as the prime example. Of course, China may change institutional course, unleashing a process of creative destruction (and reallocating wealth and power within Chinese society) that might keep China growing. But in the absence of institutional change, they view a Chinese slowdown as an inevitability. We'll see.

In many other examples, where the historical record is more complete, the authors make more persuasive cases. They offer illustrations where former European colonies retain the extractive institutional legacies of their former masters. Far too frequently newly independent states have been captured by indigenous elites that prefer to maintain their holds on power by permitting an opening of civic life that would bring both greater wealth and more dynamic politics.

The authors are quite modest as to claims of their theory's predictive power -- there are many contingencies that could push China (or any other state) toward or away from wealth-inducing inclusive institutions. Yet the authors are quite confident of the power of their theory in accounting for many historic cases of wealthy and impoverished nations. To admit the theory cannot predict is to concede that it fails to fully capture the causes of wealth; at best it can serve to identify necessary elements. But without knowing more of how these elements (inclusive institutions) interplay with other, yet unidentified factors, leaves the reader with some doubts as to how complete a theory this really is.

Why Nations Fail is longlisted for the 2012 Financial Times and Goldman Sachs Business Book of the Year Award.