Technology Progress Path and Catch- up Strategy for Late-Moving Large Countries

Yuan Li (袁礼)1*, Wang Linhui (王林辉)2 and Ouyang Yao (欧阳峣)3

1 Business School, Hunan Normal University, Changsha, China

2 Faculty of Economics and Management, East China Normal University, Shanghai, China

3 Center of Large Country Economy Research, Hunan Normal University

Abstract: Based on the endogenous technology progress framework for late-moving large countries, this paper simulates the effects of market size on technology progress path and technology catch-up, and finds that under the strategy of combining innovation with imitation, the increase of market size will restrain the convergence of economies towards technology frontier and deepen their reliance on imitation. Under the strategy of replacing imitation with innovation, there is a non-uniform U-shaped threshold effect for market size to influence technology progress path and catch-up, and the threshold for the shift of technology progress path lags behind that for technology catch-up. Hence, we should follow technology catch-up as the benchmark and timely adjust our innovation strategy to unleash the advantages of economies of scale for innovation. The innovation-driven development strategy is a choice compatible with China’s changing market size. However, since China remains in a transition from a super-large economy to a super-strong one, the contribution of innovation will decrease at first before increasing afterwards.

Keywords: Technology catch-up, market size, innovation, innovation strategy

JEL Classification Code: O11, O32, O33

DOI: 10.19602/j.chinaeconomist.2022.09.03