Knowledge, Technology and Complexity in Economic Growth (2024)

Co-Chairs: Ricardo Hausmann (Director, Center for International Development and Professor of the Practice of Economic Development, Harvard Kennedy School of Government) and José Domínguez (Professor of Structural Engineering, School of Engineering, University of Seville).

The application of complexity science tools to the study of society allows for the analysis of phenomena that have been hard to identify and analyze with more traditional tools, especially in the field of Economics, which in the absence of these tools has tended to work with relatively low dimensional representations of reality. But the increasing availability of more detailed information of social phenomena makes it particularly useful to use tools that can exploit this informational richness. This opens up fascinating new horizons on almost all fields of knowledge in the social sciences.

In economics, it is widely accepted that technology is the key driver of economic growth of countries, regions and cities. Technological progress allows for the more efficient production of more and better goods and services, which is what prosperity depends on.

However, the mechanisms through which technology is developed, adopted and used in production are complex. Their more detailed analysis can allow for new findings that could have important impacts in many areas of policy, including science policy, research and development, industrial policy, and both national and regional development policies. In fact, the concept of technology itself as well as the individual and social capabilities required for its development ca now be studied at a much more fine-grained level leading to potential contributions that may impact higher education, job creation and economic growth. Clearly, there are links between education, research and development, innovation and economic activity that are part of the process we aim to uncover.

Knowledge, Technology and Complexity in Economic Growth (1)

The recent shift towards open innovation has resulted in increased flows of knowledge and new types of cooperation between education institutions, research organizations and business. Top corporate R&D investors worldwide lead the development of many emerging technologies. This is evident from an examination of the technology fields in which these companies intensified their inventive activities in the recent years and the contribution of top R&D investors to the overall development of these fields. Top corporate R&D investors accelerated their inventive activities in areas such as engines, automated driving systems, big data, artificial intelligence, 3-D printing and information and communication technologies.

It is necessary to remember that the two main ingredients for the development of new technology are codified knowledge in the form of theories, frameworks, scientific papers, patents, recipes, protocols, routines and instruction manuals and tacit knowledge or knowhow, which is acquired through learning by doing in a long process of imitation and repetition and which exists only in brains. The development of science, technology, innovation and production require both codified and tacit knowledge but the codifiable component of science and technology get registered, respectively, in the form of scientific publications and patents, and these are grouped into categories. Scientific publications, patents, industries, occupations and products are proxies of scientific knowledge, technological development, economic activity and human skills.

They form what is known as a multiplex network with six kinds of nodes where geographic location represents the last one. Understanding relations within each layer, e.g., the knowledge space, the patent space, the industry space, the occupation space, the product space and the country (or location space); and across layers should shed light on the foundations of countries economic development and the policies to be implemented in all of these areas to promote it.

Policies towards science, technology and innovation (STI) would benefit enormously from a deeper and more detailed understanding of the 6-fold multiplex that this research wants to uncover. What are the detailed connections between areas of science, as captured by journal publications and patents. What forms of human collaboration are necessary for the authorship of papers and patents? And for national and local authorities: What are the connections between a local effort in science and local innovation? What are the backward linkages of industrial diversification on the local capacity to create patents and scientific papers? Which occupations are key to facilitate the diffusion of industries to particular locations and what are the educational profiles of those occupations? What is the role of human mobility and the attraction of talent in the successful development of STI?

To sum up, this study group pursues three purposes:

  1. To analyze empirically the nature of the partnerships and ecosystem relations that underpin scientific and technological progress and its manifestation in the development of new industries, the appearance of new products and the formation of new teams of people with different and complementary occupations. To do this, we will carry out a research agenda to uncover these connections.
  2. To develop tools in order to assess the position of each country and region in the multiplex and its evolution over time in order to evaluate their “adjacent possible” in a way that can help them plan their efforts towards progress.
  3. To expand the dimensions that the quantitative tools of CID’s Atlas of Economic Complexity can offer its worldwide users, thus allowing policymakers, corporations, STI participants and the broader public to benefit from the results of the research.
Knowledge, Technology and Complexity in Economic Growth (2024)

FAQs

Why is technological knowledge important for economic growth? ›

Technological progress is recognized as the source of long-term economic growth because it raises output per worker and enables an economy to produce more with the same amount of capital and labor.

How does technology affect economic growth? ›

Technology can affect growth by increasing productivity and expanding markets for goods and services. For example, improvements in agricultural technology have led to increased yields per acre and greater food security.

What is the contribution of knowledge in economic growth? ›

Therefore, knowledge contributes to economic growth directly through the production of final goods and indirectly through output from the research sector. The endogenous growth model has been extended by a number of researchers.

What is the relationship between economic complexity and economic growth? ›

In the academic paper where Hidalgo and Hausmann introduced their concept of 'economic complexity', they noted that the correlation between the ECI and GDP per capita is very robust; and they showed that, beyond this, the ECI actually predicts economic growth after statistically controlling for other baseline country ...

Why is information technology important to economic growth? ›

Businesses can reduce costs, streamline processes, and increase efficiency. The main impacts of information technology on the economy are e-commerce, marketing tactics, facilitation of globalization, job insecurity, and job design. E-commerce is the buying and selling of products over the Internet.

What is the role of technological innovation in economic growth? ›

However, it has currently reached a consensus on the understanding that technological innovation is the core driving force of economic growth. Technological innovation and economic growth interact as both cause and effect, mutually promote and contain each other, and also form a two-in-one relationship.

How does technology improve productivity and economic growth? ›

Technology Increases Productivity

When a nation develops new technology, it applies this new understanding to the production of goods and services in order to produce more output per unit of input. In other words, workers can produce goods and services faster, better, or cheaper.

How has information technology impacted the economy? ›

The information technology (IT) sector makes an outsized contribution to the U.S. economy as a leading exporter that creates high-paying jobs, including for non-college-educated workers, while producing highly innovative products and services that drive broad-based growth, counteract inflation, and improve people's ...

Why is increased technological knowledge for a nation important for growth? ›

Why is increased technological knowledge for a nation important for growth? It allows the nation to be more productive in goods and services that it produces. Increased technological knowledge causes simultaneous increases in human capital and physical capital.

What is the contribution of knowledge economy? ›

This component of the economy relies greatly on intellectual capabilities instead of natural resources or physical contributions. In the knowledge economy, products, and services that are based on intellectual expertise advance technical and scientific fields, encouraging innovation in the economy as a whole.

What led to the growth of knowledge economies? ›

The advancement of a knowledge-based economy occurred when global economies promote changes in material production, together with the creation of rich mechanisms of economic theories after the Second World War that tend to integrate science, technology and the economy.

Why is it important to be knowledgeable about the economy? ›

Economic literacy also gives people the tools for understanding their economic world and how to interpret events that will either directly or indirectly affect them. Nations benefit from having an economically literate population because it improves the public's ability to comprehend and evaluate critical issues.

What is economic complexity technology? ›

As an academic field, Economic Complexity studies the geography and dynamics of economic activities using methods inspired in ideas from complex systems, networks, and computer science.

What is the complexity theory of economics? ›

Complexity economics sees the economy — or the parts of it that interest us — as not necessarily in equilibrium, its decision makers (or agents) as not super-rational, the problems they face as not necessarily well-defined and the economy not as a perfectly humming machine but as an ever-changing ecology of beliefs, ...

What are the benefits of economic complexity? ›

Economic complexity is important because it is a strong predictor and driver of future economic growth and reveals the trajectory of future growth. Countries with a higher level of complexity than their GDP would predict are more likely to grow faster in the future(Hausmann et al., 2013).

Why is technological progress important in economics? ›

Technological progress can be an important factor in a country's economic growth because it helps a nation produce more through the use of better technology on the input side of the production equation.

What is the role of technology in the economic theory? ›

Technological advancement is considered a key driver in evolutionary economic theory, co-evolving through the interaction of firms and industry structures and supporting governing institutions (Hall & Rosenberg, 2010).

What is the role and importance of technology transfer to the economy? ›

Technology transfer serves to join research with real world products that can provide benefits for society, solutions to problems and, at the same time, generating profit that can be used to fund further research and development.

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