Technology Adoption
Within a few months China will overtake America as the country with the world’s largest number of internet users. For the past three years China has also been the world’s largest exporter of information and communications technology. It already has the same number of mobile-phone users (500m) as the whole of Europe.
According to India’s telecoms regulator, half of all urban dwellers have mobile- or fixed-telephone subscriptions and the number is growing by 8m a month. India produces more engineering graduates than America.
The World Bank’s recently released its Global Economic Prospects. Between the early 1990s and the early 2000s, the index that summarises the technology adoption indicators rose by 160% in poor countries (with incomes per person of less than about $900 a year at current exchange rates) and by 100% in middle-income ones ($900-11,000). The index went up by only 77% in industrialised countries (with average incomes above $11,000). Poor and middle-income nations, the bank concludes, are catching up with the West.
The main channels through which technology is diffused are foreign trade (buying equipment and new ideas directly); foreign investment (having foreign firms bring them to you); and emigrants in the West.
In the past ten years the ratio of poor countries’ imports of high-tech products to their GDPs has risen by more than 50%. The ratio in middle-income countries has increased by over 70%. Capital goods (mainly industrial machinery) often embody new technology, and imports of these have increased faster in middle-income countries than in rich ones.
Emerging economies’ share of global trade in high-tech goods rose by 140% between the mid-1990s and the mid-2000s.
Relative to GDP, inflows of foreign direct investment to developing economies have increased sevenfold since the 1980s. In some countries, such as Hungary and Brazil, foreign firms account for half or more of all R&D spending by companies.
Nearly half the ($40 billion-worth of) foreign direct investment in China in 2000 came from Chinese abroad. Remittances have doubled in the past ten years and now account for roughly 2% of developing countries’ GDPs — more than foreign aid.
The World Bank looked at how much time elapsed between the invention of something and its widespread adoption (defined as when 80% of countries that use a technology first report it). For 19th-century technologies the gap was long: 120 years for trains and open-hearth steel furnaces, 100 years for the telephone. For aviation and radio, invented in the early 20th century, the lag was 60 years. But for the PC and CAT scans the gap was around 20 years and for mobile phones just 16.
In the World Bank’s database, there are 28 examples of a new technology reaching 5% of the market in a rich country; of those, 23 went on to achieve over 50%. In other words, if something gets a foothold in a rich country, it usually spreads widely.
In emerging markets this is not necessarily so. The bank has 67 examples of a technology reaching 5% of the market in developing countries — but only six went on to capture half the national market.
Technology use in developing countries is highly concentrated. Almost three-quarters of China’s high-tech trade comes from just four regions on the coast. More than two-thirds of the stock of foreign investment in Russia in 2000 was in Moscow and its surroundings. Whereas half of India’s city-dwellers have telephones, little more than one-twentieth of people in the countryside do.
Rich countries spend 2.3% of GDP on R&D, East Asians 1.4%, and Latin America 0.6%. In East Asia and the West companies spend most of the money and do most of the research. In eastern Europe and Latin America the government is the largest source of finance, and in Latin America universities do the largest share of the work.
“Of internet cafés and power cuts,” The Economist