Identification of the Technology Frontier

Abstract

The subject of this study is the innovation market. To understand the laws of its functioning, this article introduces the concept of a technology frontier. This is understood as the relative productivity of labor (relative to the technological leader – the United States), the achievement of which makes it justified for developing economies to move from large-scale borrowing of foreign new technologies to their development within the country. The purpose of the article is to determine the specified frontier, for which a simple econometric model based on international statistics for 61 countries is proposed. To improve the accuracy of the calculations, countries were clustered into two groups: advanced, for which the technology frontier has been crossed and their own developments of new technologies prevail, and developing, for which the problem of the technology frontier remains important. The current value of the technology frontier is in the region of 70% of labor productivity in the United States. The comparison with previous estimates shows that this value tends to increase, which creates additional difficulties for the transition of catching-up countries from the mode of borrowing to the mode of creating new technologies. Taking into account the technological frontier allows avoiding both an undue delay in the development of proprietary technologies as well as a premature transition to the creation of innovations while ignoring the possibilities of borrowing.