Page 152 - Global Political Economy_Understanding The International Economic Order

SIG NIFIC ANCE O F NEW T HEORI ES
regardless of its size, nationality, or other features is believed to have
an equal opportunity to appropriate and exploit the fruits of scientific
and technical advance around the world. Thus, when a firm makes
an investment decision, the neoclassical assumption is that it can in-
corporate “state-of-the-art” technology in its new plant and thereby
be competitive in world markets.
The new growth, location, and trade theories assume, to the con-
trary, that technology can be and is being, at least temporarily, appro-
priated and monopolized by its innovators. Private firms and national
governments can and do attempt to slow down the international dif-
fusion of the most advanced technologies at a moment when achiev-
ing and maintaining control of technology and knowledge have be-
come more and more important as factors in economic growth and
international competitiveness. Thus, at the beginning of the twenty-
first century, the technological leaders (Japan, the United States, and
Western Europe) attempt to restrict transmission of their most ad-
vanced technologies to foreign competitors and to protect their intel-
lectual property rights, especially from the encroachment of develop-
ing countries. Although an effort to safeguard intellectual property
rights against piracy is proper in most cases, such efforts can lead to
technonationalism and even denial of important medical technology
to poor countries. 20

Technological Leapfrogging
The new growth theory is based on the assumption that technological
change is generally incremental within a well-established technologi-
cal paradigm and that an oligopolistic firm can expect to maintain
its lead over its rivals through continuous investment in established
technology. This theory also suggests that technological leapfrogging
can sometimes explain drastic reversals among firms and nations in
their economic fortune and relative position, thus occasionally trans-
forming the hierarchy of power and the structure of the international
system. From time to time, one economy suddenly moves to a higher
stage of technological development and productive efficiency. Such
technological leapfrogging, especially when major powers are in-
volved, can have profound and disturbing consequences for interna-
21
tional economic and political affairs. The new growth theory may
20
Sylvia Ostry and Richard R. Nelson, Techno-Nationalism and Techno-Globalism:
Conflict and Cooperation (Washington, D.C.: Brookings Institution, 1995).
21
Elise S. Brezis, Paul R. Krugman, and Daniel Tsiddon, “Leapfrogging in Interna-
tional Competition: A Theory of Cycles in National Technological Leadership,” Amer-
ican Economic Review 83, no. 5 (December 1993): 1211–19.
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