Technology improvement and diversification
Technological development refers to the systematic use of scientific, technical, economic, and commercial knowledge to meet specific business objectives or requirements. To achieve these objectives, research and development (R $ D) are necessary. Only a small number of countries in the world have done much in the improvement of technology.USA, Japan, and South Korea form a small percentage of these countries. Questions like how a country can accumulate and develop its innovative capabilities, what obstacles they encounter in the process, and how to identify gaps in technology come into place(Bell and Pavitt, 1992).the above questions will be addressed in the following part of this essay. Research conducted showed that only a few countries could develop technologically, and those who focus on technology-oriented production tend to grow faster. Also, the relatedness of production and technology greatly affects the speed of technology growth in countries.
The process of accumulating and developing innovative capabilities in a country starts with the country’s firm’s capacity to accumulate and develop new technologies. Several factors are known to affect a firm’s incentives to diversify in particular technologies. For example, cases where diversification/specialization may be triggered by firms’ attempts to move towards more profitable positions, which can be motivated either by inter-industry differences in the rates of returning to R&D investment. A firm’s risk mitigation process may also influence technological advancement and diversification in a firm that will greatly affect a country’s technology. High initial investment and prior capabilities are also determinants in a firm’s ability to accumulate and develop new technologies. With the above and some individual country’s endowment, such as quality of capabilities, different countries develop their innovation at their pace, some faster, some slower. The whole process is faced with challenges such as lack of capital to be used in the advancement of technology, lack of resources and human resources, production of goods which are not technology-oriented in some countries, and so on. For instance, only well-endowed countries like the united states have been able to improve their technology.it is suggested that nations to develop technology should lay down a firm strategy towards achieving the same.
In knowledge relatedness, most firms focus on technology improvement and diversification due to some reasons. To produce a certain product, technology is applied. This justifies that technology diversification is more important than product diversification since the latter is dependent on the former. The knowledge of relatedness is broad and can be divided into three categories: knowledge proximity, knowledge commonality, and knowledge complementarity. In a nutshell, technological relatedness is due to learning processes (unintended in terms of spillovers and intended in local learning). Knowledge links (due to the scope, complementarity or generic nature of knowledge).for some period now, relatedness among technological fields have been measured using the Scherer’s (1982) method which was based upon a classification of R&D outlays by the industry of origin and industry of use of the resulting products and processes. More recently, an alternative approach has been adopted by Jaffe, who measured technological relatedness among a sample of US firms by looking at the distribution of their patents over 49 technology fields. Also, in the very recent past, bibliometrics has been used in measuring knowledge relatedness. Knowledge relatedness is important to firms, and the entire country.it is a strong driver in industrial diversification. According to research conducted, knowledge relatedness has a positive influence on the probability that a new industry specialization develops whose result is robust and holds s across all regions under investigations. Another advantage of relatedness is that its influence on the probability of new industrial specialization depends on the information capacity: relatedness is a more important driver of diversification in regions with a weaker innovation capacity. To conclude, relatedness is a key factor in affecting a firm’s technological diversification.