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Industrial Development Report 2016

The Role of Technology and Innovation in Inclusive and Sustainable Industrial Development

image of Industrial Development Report 2016
This report looks at how technology and innovation achieves inclusive and sustainable industrial development (ISID). Its main finding is that ISID is feasible and technology can simultaneously serve all three dimensions of sustainability, including economic, social and environmental. Rapid inclusive and sustainable industrialization can happen more frequently provided that policymakers firmly steer the industrialization process with opportune policies and avoid past mistakes. In some cases, the spread of technology has not materialized in concrete growth opportunities because of the lack of technological capabilities. Innovation needs to be supported by interventions strengthening the process from invention to adoption, as capabilities are developed and high tech manufacturing sectors are created, seeing higher rates of sustainable growth.

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Technological change, structural transformation and economic growth

Four stylized facts can describe how technology and innovation drive economic development and growth. First, the abilities of a country to use existing technology and to innovate determine its economic performance in the long run through structural change. But because developing new capabilities to use and assimilate technology is very hard, the convergence of living standards between countries has generally been very slow or even absent. Only a few countries have moved from relative poverty to relative development. The rich developed countries have high levels of technological sophistication and account for the large majority of investment in science and technology, primarily research and development (R&D). Poor countries have much lower technological capabilities and invest much less in R&D.

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