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CHAPTER 1
The Globalization of Knowledge
and Technology
In the last decades of the twentieth century, knowledge has become an orga-
nizing force in Western society, much in the same way that energy drove the
industrial revolution. Knowledge takes the form of the fundamental science that
underlies the new technologies transforming industry and commerce. It includes
the data, news, and information generated at prodigious rates by firms, govern-
ments, universities, and international organizations. It also encompasses the
timely information about Made, standards, pnces, and business opportunities nec-
essary for participation in competitive markets. Indeed, entire industries have
been created to transmit, store, and organize knowledge and information, or to
produce the devices that do. Computer technology, a tool only some 50 years old,
is a vital part of these industries, and it also is affecting the everyday lives of a
large fraction of the world's citizens through their communications, banking,
health care, and workplace. Science itself has become an enormous enterprise,
with billions of dollars invested in research and development worldwide, and
research is constantly generating new knowledge that may be vital to human
survival and prosperity.
In response to these developments, every county is challenged to prepare a
strategy to generate, evaluate, disseminate, and act on the knowledge that is
This chapter draws substantively on the invited papers by Baruch (technological innovation and
services), Brooks (technology transfer), Bugliarello (generation, transmission, and diffusion of knowl-
edge), Chaudhari (materials and critical technologies), Colwell (biotechnology), and Mayo (informa-
tion technology), as well as the discussions of the break-out groups. These four chapters, summariz-
ing the findings of the symposium, were drafted by Michael Greene of the National Research
Council's Office of International Affairs and Kristin Hallberg of the Private Sector Development
Department of the World Bank.
17
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Marshaling Technology for Development
needed today. Presently, many international, regional, national, and private enti-
ties are dedicating themselves to this question. For example, the Intemet was
created by the U.S. National Science Foundation and the Advanced Research
Projects Agency (ARPA) of the U.S. Department of Defense precisely to provide
a means of disseminating scientific and technical knowledge. With the additional
efforts of thousands of universities and private entities, it has become the single
most effective medium connecting scientists, engineers, and, increasingly, ordi-
nary people in the world, often at no (perceived) direct cost to the user. The
World Wide Web, which appears to represent the next generation of global
knowledge resources, was a creation of the European Organization for Nuclear
Research (CERN). It too is available to anyone with a computer and a modem,
with no direct charge for the documents available on the system, most of which
have been prepared by universities and private sources. A series of meetings of
the heads of the industrialized countries is planned to coordinate development
and expansion of these networks.
A second and perhaps greater challenge concerns the remedial role of knowl-
edge and technology in ensuring continued human survival. Two hundred years
ago, the Reverend Thomas Malthus noted that populations growing without con-
straint tended to increase exponentially, and he predicted that in a few genera-
tions the human population would exceed and exhaust the available food supply.
That this has not yet happened is largely the result of a package of technologies
known as the green revolution which has increased food production beyond any
predictions, and of other technologies that have extended, found substitutes for,
or protected threatened resources. Even so, hundreds of millions of people are
malnourished, forests and per capita arable land are declining annually, and the
world's population continues to follow an exponential curve. It is expected to
double in about another four decades, and no one yet knows how food production
will keep pace this time, how jobs and services will be provided, how territorial
wars will be avoided, and how the environment will be protected. Also unknown
If the human race is to have a future, the global improvement
of economic and social conditions through better knowledge is
imperative. This is a problem that both developing and developed
countries must address jointly. It simply does the world no good in
the long run if individual countries succeed in addressing their
socioeconomic problems at the cost of neglecting such global
problems as the growing depletion of the ecosphere or the
potential for international conflict.
{lEORGE BUGETAREEEO
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GLOBALIZATION OF KNOWLEDGE AND TECHNOLOGY
19
is whether the resources for a growing population will always be found in the
future, whether population can be contained possibly through a combination of
a higher standard of living, new contraceptive technologies, and social changes-
or whether the cycle of crisis and technical fix will repeat itself until finally the
fixes can no longer keep pace. Ultimately, of course, human population growth
will cease.
PATHWAYS TO TECHNOLOGICAL INNOVATION
For developed and developing countries alike, a country's ability to realize
gains in knowledge-based productivity depends on its capacity to tap the global
system of generation and transmission of knowledge through technology transfer,
generate indigenous knowledge through research and development, put that
knowledge to productive use through engineering, ensure equitable and effective
use of that knowledge through social and behavioral research, and organize and
diffuse information. Technology transfer the mechanism for bringing a tech-
nology from one research area of industry to another or from an advanced to a
developing country and putting it into operation in its new environment and
research, development, and engineering the process of conceiving or adopting a
new idea, developing a technology, and adapting it for practical use are gener-
ally considered separate and distinct processes. In reality, however, they are
interconnected. There is a much smaller difference than is generally supposed
between introducing a technology that is new to the world and one that is merely
new in a particular sociotechnical context characterizing a particular manufactur-
ing site and market. For this reason, the process of creating a production system
at a new site can be considered, at least in part, an innovation. The process is
fundamentally similar in developed and developing countries, whether one is
replicating something that has been done before elsewhere or doing something
that has never been done before anywhere. It is the absorption of knowledge into
a system of product or process realization involving design, production, and
marketing to clients and customers that is critical. Yet beginning with the knowl-
edge that the technology has "worked" elsewhere lends a significant advantage.
This view is reinforced by the finding that even in the developed world
research and development represent only a small fraction 10-15 percent-of
the resources required to bring to market a new product incorporating substan-
tially new technology. The other 85-90 percent is so-called downstream invest-
ment-design, manufacturing, applications engineering, and human resource de-
velopment. In fact, about 65 percent of the scientists and engineers in the U.S.
national work force are not even engaged in research and development, but in a
broad spectrum of activities related to these downstream elements. The same is
true in most developing countries, where scientists and engineers carry out little
research and development, and the downstream elements represent an even larger
fraction of the total effort.
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One of the important trends of the last 30 years in the developed countries
has been the increased importance of sources of technical information and ideas
external to the producer, including institutional alliances and "innovation net-
works" (links between users and producers), some of which cross national bound-
aries. The result has been a complex intermingling of competition and coopera-
tion, with some firms cooperating in selected projects while at the same time
competing in others.
These alliances also have brought into relief the roles of the two faces of
technology development, the supply side and the demand side or, put most sim-
ply, "solutions in search of problems" and "problems in search of solutions."
Solutions in search of problems relate to fundamental research and development,
which are the basis of much of our understanding. Problems in search of solutions
are what industry, society, and design engineers encounter in practice. The pro-
cess of technological innovation matches solutions in search of problems, whether
found in the laboratory or the library, to problems in search of solutions. Devel-
opment activities, too, can yield important new technologies. The closer these
activities are to applications, the more productive they may be in the near term.
The proportion of resources dedicated to each type of activity depends on the
technical capacity of a country and the level of fundamental knowledge already
available on the problems of interest. In agriculture and in health, the problems
may be inherently local, requiring substantial fundamental research to produce
enough knowledge to support applied research and development on specific prob-
lems. In industrial technology, the proportion might be changed. Japan in the
twentieth century and the United States in the nineteenth century reached a high
level of technological development with a minimum of fundamental research; the
United States, adopting a different strategy in the twentieth century by increasing
its investment in fundamental research, became the world's leader in both science
and technology.
Another important distinction in technology development is between radical
and incremental innovation. Radical innovation produces new ways of doing
things and ultimately leads to new services or industries the computer and the
flat-screen display are good examples of such innovation. Incremental innovation
is a term applied primarily to relatively small improvements in existing products
and processes or to relatively small extensions of the scope of existing applica-
tions of the product design or technology, which over the long term accumulate to
produce major changes. Most technological innovation is of this type, and much
of it takes place on the factory floor (or clinic or farm) by the users of technology.
In fact, steady productivity growth and the expansion of both the size and techno-
logical scope of markets primarily stem from the cumulative effects of many
apparently minor incremental innovations. Because such innovations are just as
important to economic success in developing countries as in developed countries,
it is important that Third World firms build their technological capacity and
. . . .
engineering capability.
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21
This being said, why is radical innovation a concern at all of developing
countries since most such innovations are created in the industrialized countries
that possess the necessary science and technology infrastructure? The answer is
that both types of innovation, the radical and the incremental, generate new
business opportunities that do not necessarily require the same level of advanced
knowledge and capacity that was needed to create the radical innovation in the
first place. Developing countries with a minimum level of basic education in their
work force and minimum industrial experience may be able to capitalize on these
opportunities quite successfully, often at lower cost than developed countries.
This has been demonstrated many times by the success of several of the newly
industrialized countries in finding niches in the computer and information tech-
nology markets.
In all the niche-type opportunities . . ., the aspiring entrant
must have a fairly thorough understanding of the technological
system in which a potential new niche may lie. This is one reason
why imitation can be said to be the first step towards innovation
but only to the extent that it provides a real window into
an entire technological system.
HARVEY BROOKS
Many of the radical innovations that have the potential to reshape the world
originated in scientific advances made over the last few decades. Some of the
most important advances from the point of view of international development
have been in three specific scientific and technological fields: information and
communications, biotechnology, and materials science. Advances in these fields
have led to technologies that are basic to many different products.
Information and Communications
The rapid rate of progress in information and communications technology
over the past few decades has been called a revolution. The key technologies
underlying this revolution are computing, fiber-optics communications, software,
and silicon chips. Progress in computer technology is measured by processing
speed and memory, progress in fiber optics, and cost per unit of bandwidth. The
costs of computer memory and bandwidth have dropped by a factor of two over
the last five years. Even software-once considered a bottleneck technology
because of quality problems is beginning to advance rapidly in such major
areas as telecommunications, thanks to advanced programming languages and
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reuse of previously developed software modules instead of writing and debug-
ging new ones.
The power of silicon chips is measured by the number of transistors that can
be placed on a chip; a typical chip measures about 1 square centimeter. Each time
the number of transistors on a chip has increased by a factor of a thousand,
integrated circuit functions have radically advanced. The earliest chips held only
one transistor. When research and development placed 1,000 transistors on a
chip, engineers were able to replace analog with more powerful digital circuitry.
About a decade ago, the number of transistors reached 1 million, enabling micro-
computers to perform functions that approximated the mainframes of only a few
years earlier. The present goal is 1 billion transistors per chip, and some people in
the industry predict that will lead to another revolution: the merger of communi-
cations, computers, consumer electronics, and entertainment.
For the greater part of this century, the telecommunications industry and
information highways were paced by the availability of new technologies. But
today, with a wide array of multimedia and information technologies available,
the telecommunications industry is being driven increasingly by customer de-
mand, leaving many possible innovations unexploited. And in another important
trend, the global transfer and assimilation of information technology are com-
bining with political, economic, and regulatory forces to produce, for example,
the move toward privatization of telecommunications in both developed and
developing countries. The result is increased global competition in the provision
of communications products and services, which should result in lower prices,
new products, and response to market pressures, as occurred in the computer
industry.
At the same time, however, there is a worldwide push for common standards
and open, user-friendly interfaces that encourage global networking and maxi-
mum ~nteroperability and connectivity. The evolving international standard for
photonics or lightwave transmission devices such as optical fibers is called syn-
chronous digital hierarchy or SDH. It will enable users to purchase equipment
from many different vendors without worrying about compatibility, and it will
This reengineering of the communications industry
appears to be the next to the last step in the information
revolution brought on by the invention of the transistor. The last
step, and one that may go on forever,
is the reengineering of
society-of how people live, work, play, travel, and communicate
creating a whole new way of life.
JOHN S. MAYO
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GLOBALIZATION OF KNOWLEDGE AND TECHNOLOGY
23
allow vendors in developing countries to compete on an equal basis. But it may
well be that the opportunities opened up by these developments will not fully
appear until the present fluid situation, characterized by intense competition
among large numbers of small suppliers and uncertainty about future directions
affecting many different sectors, crystallizes into a mature industry.
Biotechnology
Biotechnology is defined by the U.S. government as "any technique that uses
living organisms to make or modify products, to improve plants or animals, or to
develop microorganisms for specific uses." It has been employed successfully for
hundreds of years to manufacture medicines, to improve agricultural production,
to produce drugs, and, in the form of fermentation, molds, and bacteria, to pro-
duce food products. Over the last two decades, however, a "new" biotechnology
has been defined as the use of recombinant DNA and other genetic engineering
techniques to produce new organisms and new products. This biotechnology has
enabled researchers to accelerate the rate of innovation and apply new and effec-
tive techniques to new areas and new problems.
Genetic engineering was born in 1944 with Avery, MacLeod, and McCarty's
paper revealing that DNA is the genetic material. This discovery was followed in
1953 by the landmark paper by Watson and Crick describing the helical structure
of the DNA molecule. In 1973, the work of Cohen and Boyer showed how to
transfer a gene from one species to another. Confirmation of genetic engineering
as an industrial technique came only seven years later in the 1980 Supreme Court
decision of Diamond v. Chakrabarty, which allowed microorganisms to be pat-
ented. In 1994, the 1,300 biotechnology companies located in the United States
alone invested $7 billion in research and development. In addition, nearly 400
companies are located in Europe, 300 in Canada, and a few hundred more in the
rest of the world.
A novel feature of the new biotechnology industry in many countries is the
proliferation of small, entrepreneurial start-up companies. But many of these
eventually fail or merge or are bought up by larger companies because of the
unexpectedly slow progress and high cost of bringing products to market. This
competitive situation may prove to be a benefit for the developing countries,
where biotechnology companies have begun to appear, enabling them to form
strategic alliances with more technologically capable foreign companies looking
for new markets.
Biotechnology has a potential impact on many areas of agriculture, health,
industry, and environmental protection. In the United States, biotechnology has
found its greatest use in health and biomedical applications mostly recombinant
drugs, enzyme-mediated diagnostic kits, and designed pharmaceuticals. Some of
the new products likely to affect developing countries are test kits for such
infections as HIV and malaria and recombinant vaccines for some of the world's
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Marshaling Technology for Development
major diseases. Another promising application is gene therapy, which presently
is extremely expensive but could eventually solve such problems as Parkinson's
disease and sickle-cell anemia.
In the developing countries, biotechnology will likely be predominantly ap-
plied to agriculture in the form of transgenic plants, produced by combining the
genetic material and therefore the characteristics or nutritional benefits of
more than one species; biological pest control, in which the pesticide is produced
directly by the crop plant itself; tissue culture for mass generation of desirable
cultivars (and its counterpart in livestock, in vitro fertilization); disease preven-
tion and control in crops and livestock; and new agroindustries for the produc-
tion of fuel or industrial raw materials. At the same time, biotechnology in the
hands of the industrialized countries will produce substitutes for commodities
now providing income or subsistence for developing countries.
Marine biotechnology accounts for only a small fraction of the world bio-
technology market, but it has a high potential for benefiting the developing coun-
tries. Although the oceans presently provide less than 1 percent of the world's
food calories, the demand for seafood is expected to increase by about 70 percent
in the next 40 years. This demand comes, however, at a time when many fisheries
are declining because of overexploitation driven by new harvest technologies. To
meet the increased demand while natural stocks are in decline, world aquaculture
production would have to increase by more than seven times. Biotechnology
could play a vital role in efforts to improve captive management, promote faster
reproduction of species and the production of healthier organisms, and improve
the food and nutritional qualities of the organisms, including the introduction of
new "crops," such as algae and seaweeds, for their nutritional properties. It must
be remembered, however, that aquaculture is energy-intensive by nature, and its
efficiency will be related to the cost and availability of energy.
Among the environmental applications of biotechnology, bioremediation
uses both naturally occurring and genetically engineered organisms to clean up
polluted sites by transforming toxic and other undesirable materials into more
benign or volatile substances. Bioremediation is applied, among other things, to
oil spills, industrial wastes, soil contaminated with TNT or heavy metals, raw
sewage, and polluted bodies of water. Test kits and sensors for environmental
monitoring also are becoming available. This technology is demonstrated quite
visibly in the main square of Jakarta, Indonesia, where a prominent electronic
billboard indicates levels of atmospheric contaminants.
Mining, forestry, energy, and bioelectronics applications of biotechnology
are expanding. Engineered microorganisms to remove ores may increase the
efficiency of mineral extraction while reducing pollution at mine sites. Tissue
culture will assist forest restoration, and the development of alternative biofuels
will slow the destruction of the world's forests while providing an alternative to
petroleum-based fuels. One area in which it is particularly hard to predict future
developments is biologically based electronic components, including computer
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GLOBALIZATION OF KNOWLEDGE AND TECHNOLOGY
25
chips. Recent work indicates that biological systems might be designed to operate
more efficiently and rapidly than semiconductors for some applications.
Materials
Over the last century, science has learned not only how to identify the prop-
erties and structure of materials existing in nature but also how to combine the
atomic elements to produce artificial materials. Using a recently invented scan-
ning microscope, scientists can image individual atoms on a surface and even
move them, one by one, to new locations. This requires resolution and manipula-
tion on a scale of less than a billionth of a meter, the order of the width of one
atom. Similarly, scientists are now able to observe phenomena that span a mil-
lionth of a billionth of a second.
Great advances are being made in developing materials that have the desired
thermal, optical, and mechanical properties, are easy and less costly to manufac-
ture, and are durable or biodegradable. Some of the most promising are found in
those areas where materials science touches informatics and biotechnology. Two
examples are the magnetic resonance imaging (MRI) used in medical diagnosis
and the "intelligent" materials being used in modern prosthetics. In these ex-
amples, the behavior of the materials is controlled by computer or chip so that
they can interact with a living entity. These technologies, which are among the
most sophisticated and expensive in use, have little application at the moment in
most developing countries, mainly because of their costs, but they probably will
be used widely in the next century. Other advanced materials are now finding
application in developing countries as cost-effective replacements for earlier tech-
nologies for example, the use of shape memory alloys for affordable automatic
control, amorphous silicon solar panels for roof-top power supplies, and ad-
vanced magnetic materials for small motor actuators.
No major nation can avoid facing the questions associated
with its semiconductor chip design and! production. Their use
will be pervasive from feedback control in prosthetics to voice
recognition devices used to control such mundane subsystems
as locks in houses, radios, television, scooters, cars, and
computers. Every human family, in some form or fashion, will
own a silicon chip in the near future.
P. CHAUDHARI
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Also promising for developing countries are the technologies at the intersec-
tion of materials and informatics or communications. The steady evolution of the
integrated circuit and silicon chip over the past few decades provides a measure
of improvements in materials technology. The global importance of these tech-
nologies stems from their use in hundreds of applications and their falling costs
and size over time. Even as the earth's human population grows, a future in which
silicon chips are so cheap and ubiquitous that every family owns at least one is
not improbable. Indeed, the size of the markets in number of units could exceed
those for nearly every other manufactured commodity. A companion product is
the flat display, a quickly evolving product employing a wide variety of alterna-
tive technologies. No one yet has dominance in this market, which could embrace
one out of every four families within a decade.
Thus advances in materials science and technology, especially where com-
bined with biotechnology or informatics, will lead to further radical innovations
and will yield new classes of products that will have enormous markets in the
near future. Countries not making these products will be buying them. And, like
many radical innovations, these advances will create a large number of niches in
the market for component and materials suppliers and technical services that may
be filled by developing country firms positioned to compete.
TECHNOLOGICAL CHANGE AND THE GLOBAL ECONOMY
Even though much uncertainty still surrounds the technology revolution, one
thing is highly probable: the speed of innovation in information and communica-
tions, as well as biotechnology and materials technologies, will reshape the world
economy, creating new industries, changing the nature of markets and the sources
of comparative advantage, lessening the importance of geographic boundaries,
and changing the way business is done. Many developing countries will encoun-
ter new opportunities to increase their productivity, incomes, and participation in
world trade. Yet at the same time, these same countries will have to adjust to the
economic and social change brought about by the new technology. Countries that
fail to adjust and use technology to their best advantage probably will fall behind
those that do.
At the level of the individual firm, a knowledge-based global economy will
put a premium on speed; a rapid pace of technological change means that current
knowledge, including the knowledge embodied in human and physical capital,
becomes quickly outdated. Workers may find that the knowledge learned in
school or in early years on the job is not sufficient to deal with new advances.
And as physical capital also becomes obsolete more quickly, firms failing to keep
up with technological advances may find themselves lagging behind their com-
petitors. Some say, in fact, that in the new global economy there will be two types
of firms: the quick and the dead.
Goods previously thought to be nontradables, such as services, will become
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27
commodities via new information and communications technologies. Transborder
services already are the fastest-growing component of both international trade
and foreign investment, opening new export opportunities for developing coun-
tries. For example, many Caribbean countries are exporting services to the United
States, including financial (check clearing, insurance claim processing), commu-
nications (toll-free line answering), and tourism (hotel reservations). In India, the
software industry has been able to take advantage of its low-cost, highly skilled
work force and international communications links to become a major exporter of
software. Even the service components of manufacturing, once embodied in
manufacturing production (for example, design, mapping and geological ser-
vices, and accounting), can be outsourced. In fact, this unbundling of services, by
increasing the measured domestic production and trade in services, largely ex-
plains the rising share of services in the U.S. economy.
In the changing global economy, the new technology will increase competi-
tion and contestability in markets by lowering barriers to entry, reducing the
minimum efficient scale of production, and providing alternative production tech-
niques. Information technology will increase the contestability of service indus-
tries by improving consumer access to information and by opening opportunities
for long-distance services. Some estimates suggest that as much as 10 percent of
the 88 million service jobs in the United States could be contested by long-
distance suppliers under the right set of circumstances. Industries long considered
natural monopolies, such as telephone services, already have become more com-
petitive with the entry of new service providers using new technologies such as
cellular telephones. Eventually, these new market structures will erode existing
regulatory frameworks, making them ineffective, inefficient, or irrelevant.
As barriers to entry and scale economies are reduced or become ineffective,
smaller-scale firms will find that they can compete with larger ones, potentially
flattening the size distribution of firms in both national and international mar-
kets. Information technology can be used to level the playing field among mar-
ket participants for example, by reducing information asymmetries between
buyers and sellers and eliminating the need for middlemen. An example of the
latter: on-line catalogues are beginning to appear on the Internet, and the Home
Shopping Network has been valued at over $1 billion. Another example of this
trend toward exploiting the latest information and communication technologies
is The Limited, a chain of clothing stores for fashion-conscious women in their
twenties and early thirties. Using real-time information from its cash registers,
this firm restocks its stores by automatically ordering garments from suppliers in
China via a satellite communications link. As a result, the firm has dramatically
reduced its turnaround times to about eight days, keeping inventory costs at a
minimum and posing a challenge to its competitors. In industries like The Lim-
ited, then, the mass production of customized products has been made possible
by technology. In this and other industries, firms that have not gone through the
large-scale, mass-production phase of industrial development may find that their
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Marshaling Technology for Development
existing business structures give them a competitive advantage in external
markets.
The world economy, therefore, depends greatly on technological change.
Indeed, many of the leading industries today were unknown or vastly different a
century ago. Also today, for the first time in history, the world is able to produce
enough food to feed all its present inhabitants, even though for a variety of
complex reasons pockets of hunger still linger. Effective health care is reaching
populations that never before have benefited from modern medicine and is a
major factor in the burgeoning population growth the world is experiencing. To
encourage technological innovations, most industrialized countries have estab-
lished national research and development institutions and devised systems or
programs to incorporate innovations, whether domestically generated or not, into
the national productive sector. Many developing countries, however, lack both.
How then can these countries tap into this rich vein of technological change? This
question is the subject of the next chapter.
Representative terms from entire chapter:
industrialized countries
