Director del Departamctito de Estudios Econ6micos en El Coiegio de la Fromera None, Mexico, Direcci6n: Blvd. Abelardo L. Rodriguez 2925. Zona del REo. BC.
. MENDOZA AND V f a O R H. TORRES, aOBALIZATION AND TECHNOLOGICAL GROWTH: A M O O a FOR-.., PP. 137-1S4-
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GLOBALIZATION AND TECHNOLOGICAL GROWTH A MODEL FOR TECHNOLOGY DIFFUSION IN MEXICO
1996-2000 JORGE CDUARDO MENDOZA* AND VICTOR HUGO TORRES**
Abstract
1. Introduction
The stucJy shows thai the scneraOon of innovations presented a moderate increastns wend in Mexico during the penod 1996-2000. However, rherewas a diversence process betvs-een national and foreign innovation. The results of a panel data model showed a positive effect of the existins human capital v/ithin each state on the innovation process. The variables representins the impaa of out-of-the-statc innovation and the stock of foreian knowledge showed a nesative effect on the process of innovation of tf>e states When including boOi the slock of foreign innovation and Oie out-of-the-state stock of innovations, the productivity of human capital decreased.
Several theoretical and empirical studies have analyzed the problem of technological change. The analysis of the determinants of innovation has developed based on economic growth theory. Solow (1956) pointed out the importance of technological change in the rate of growth of the economy. Following that approach, Romer (1990) set up a model including technological innovation as endogenous variable, by assuming that it was a function of human capital devoted to research and development and of the stock of knowledge.
Keywords: Industrtalization, manufacturing and industries, choice of technology, measurement of econorrec growth, aggresate Dtoductjvity. Clasifficatlon JEL: 014,031,033 Reobido. 9 de octubre de2CX)3. Envtado a dictarnen: S8 de octubre de 2003. AceptadO: 22 de enero de 2004.
Other studies that have contributed to the theoretical aspects of the analysis of technological change are Jones (1995) and Aghion y Howitt (1998). However, only a few studies have focused on the empirical analysis of technological change. Among those papers two stand out. The first, by Lucas (1988), introduced the concept of human capital, although he did not present any specific conclusions regarding the relationship technology-growth. The second, by Barro and Sala i Martfn (1996). presented a growth model with human capital as an explanatory variable in the convergence process. Recently, Porter et al. (1999) and Stern et al, (1999) have focused on the empirical analysis of technological change. The first paper estimated the production function of
" Director del Departamctito de Estudios Econ6micos en El Coiegio de la Fromera None, Mexico, Direcci6n: Blvd. Abelardo L. Rodriguez 2925. Zona del REo. BC. 22320. Mfixico. US Address : P.O. Box "L". Chula Vista. CA, 91912-1257, USA. Email: . Llneas de Invesiigacidn: Crecimiento Econrtmico Regional. Mercados de Trabajo, Industria Maquiladora. Publicaciones; "Specialization. Agglomeraiion anii Urban Manufaciuring Growth in the Northern Border Cities of Mexico", Journal of Borderlands Studies. Vol. 16. No. 2, 2002, ~Educaci6n, Experiencia y Espccializacidn Manufacturera en Ia Frontera Norte de Mexico". Comercio Exterior. Vol. 52. No. 4. abrii de 2002, "Un Modelo de Externalidades para el Crecimiento Manufacturero Regional". 1999. Estudios Econdmicos. El Coiegio de Mexico, Vol. 14, No. 2. julio-diciembre del 2000. • • Universidad Aut6noma de Guadalajara. Llneas de investigaci6n: Eeonomia Regional. Crecimiento Econ6niico e Innovaci6n Tecnol6gica, Publicaciones: "Innovaci6n tecnol6gica y Crecimienio regional en Mexico". Revi.sta Mexieana de Eeonomia y Finanzas. Tecnot6gico dc Monterrey, Vol. 1, No. 3. septiembre de 2002. Dirccci6n: El Coiegio de la Frontera Norte, Autopista Tijuana-Enscnada km. 18 San Antonio del Mar, Baja Calirornia, tels: 01(664)316321, Fax; (66) 313556 e-mail: .
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ECCMOMICC innovation proposed by Romer, with the objective of understanding the positive influence of both the human capital devoted to research and the technological spillovers on economic growth. Stern ei al. proposed the concept of national capacity as a synthesis of the theoretical work of Porter, Nelson (1993) and Romer. Under this approach microeconomic factors emerge from the cluster activities. The studies regarding technological globalization have mainly focused on the empirical process, with few contributions from the theoretical perspective (Estay, 1995). Studies have been published on the process of globalization and its influence on the regions within a country (Ddvila, 1995) and (Manchdn, 1995) and its relationship with the process of technological innovation (Ddvila, 1995) and (V^Idez, 1995). There are also studies related to the fragmentation of technological innovation among different countries, according to the strategies of the multinational firms located there. During the decade ofthe eighties, several papers focused on the evolution of science and technology in Latin America. They pointed out the dispersion of research and development spending and patents production among developed and developing economies (Sagasti, 1987). Other studies researched technological capacity, considering that technology transference is a factor that increases the national capacity to generate technology and stressed the need for developing a broad base of researchers who can contribute to the production of patents (Segal, 1987). Finally, another paper has stressed the importance of inventions as a dynamic engine of economic activity (Tsur, 1989). Inventions are the result of applied technology, which is derived from scientific knowledge. It also underlined the potential of patents as instruments for developing technology. It is important to stress that those papers acknowledge the relevance of technology in regards to economic growth by regions. However, they do not analyze the phenomenon with a formal and consistent theoretical framework. For the case of Mexico, there is a tendency to produce empirical studies regarding technological change. Adi-
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tionally, those studies have not address innovation activity as a crucial element for the economic growth of the country. One such study focuses on innovation at the national level, by analyzing statistical information ahout patents (Aboites, 1999). The present paper seeks to analize national innovation activity from a regional perspective, within the context of the globalization of technology. When analyzing the technological innovation in Mexico, three characteristics stand out: a) There is a high sensibility of both the foreign and domestic itinovations to the business cycle. b) Foreign innovation showed an increasing trend during the decade of the nineties. c) There is a decline in the rate of growth of national innovations, in the same period. Taking into consideration the characteristics of technological innovation in Mexico, the present paper analyzes the interrelationship of both the foreign and domestic innovations and estimates the impact of technological globalization on the domestic capacity to produce innovations. The context of analysis incorporates regional dynamics in the process of innovation by assuming thai technological innovation is developed under a framework of regional relationships. 2. The globalization of the technological innovation 2.1 Innovation and foreign patents in Mexico The liberalization of the Mexican economy was characterized by the rapid growth of foreign patents (see Graph 1). The annual average growth of foreign patents in Mexico from 1980 to 2000 was 5.5% (Table 1). In particular, during the period 1995-2000 the foreign patents requested increased to an average growth rate of 16.8%, as a result of the technological globalization process and the increasing presence of direct foreign investment in the manufacturing activities (Table 2).
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Graph 1 Patents requested by foreigners in Mexico 1980-2000 14000 12000 10000 8000 6000 4000 2000 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 Years Source: Own elaboration with dau from Table 12.
Patents of US origin make up the largest share of those arriving to Mexico. In 1980 the US participated with 48.3% of the foreign innovations. Moreover, in 1994 that share increased considerably to 62.3% of the total patents (Table 3). From a legal point of view, an important factor encouraging the flow of foreign patents to Mexico was its incorporation into the World Intellectual Property Organization (WIPO). That institution implemented a patent cooperation treaty (PCT) in 1995. That agreement allows foreign patents to enter all signing countries within a more secure legal framework. As a result, the multinational enterprises of the industrialized countries have developed strategies for extending legal and market protection to their technological innovations in order to prevent the expansion of new local competitors. The increasing flow of patents into the Mexican economy has resulted in a higher technological capacity because the introduction of new products has enlarged the stock of knowledge available to research and development activities. However, the rapid growth of foreign patents has also determined a gap between the Mexican economy and the economies that have developed technology innovations. This technological gap decreases as a result of the positive impact of technological spillovers on other economic sectors, and on the other hand, increases because of difficulties in adopting foreign knowledge.
Finally, it is important to point out that, in 1991, the foreign patents in Mexico were concentrated on the chemical and metallurgic industries (35.7%). Other important receptors of technology were the industrial and consumer goods, and the electricity sector, with shares of 18.7%. 16.7% and 8.8% (Table 4). In 1999. the shares of patents were concentrated in the electricity and consumer goods sectors. 2.2 National innovations and patents
In Mexico, the domestic generation of technology, as measured by the number of requested patents, decreased during the last decade. The aggregate production of innovations presented an annual average rate of growth of 2% for the period 1980-2000. The number of patents requested by Mexican nationals decreased from 665 in 1980 to 431 in 2000 (Table 5). It is worth noting that during the period 1985-1990 the rateof growth of patents was positive (1.3%). In contrast, from 1990 to 1995 the rate of growth of patents became negative at -6.8 (Table 1). However, the next 5 year period (1995-2000) was characterized by a rapid process of economic liberalization and reactivation, but even so, the rate of growth was stagnant, while foreign patents experience very rapid growth (see Graph 2). Graph 2 Patents requested by residents of Mexico 1980-2000 aoo
1980 1982 19&4 1S86 198S 1990 1992 1994 1996 1998 2000 Years Source: Own elaboration with data Irom Table 12.
In order to evaluate the interaction of the inputs required to develop technological change, it is important lo analyze the impact of human capital. In the present study, this variable is specified as the number of researchers that belong to the National Research System (SNI).
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ECOMOMICO In 1991 and 1992 the rates of growth of members of the SNJ were 7.9% and 7.3% respectively. However, during the period 1993-1995 negative rates of growth were experienced, probably impacted by the economic recession. During 1997-1999 the growth rate recovered its dynamism to levels above 7%. Even though its growth trend showed clear fluctuations, the positive growth of researchers for the period 1991-1999 could be positively affecting the innovation process (Table 6). Patents are important indicators of technological change. The accumulation of the stock of innovations can be mainly observed through the accumulated stock of patents. For the case of Mexico the growth of the patent stock has been decreasing as a result of the diminishing number of national patents requested. Thus, the annual rate of growth of patents decreased from 38.4% in 1982 to 3.7% in 2000 (see Table 6). It is assumed that the larger the stock of patents the greater is the access to knowledge by researchers and their productivity in the innovation process. 2.3 Regional innovation structure and dynamics The structure of the regional production of innovations reflects the diversity of this activity in the Mexican economy and the existence of different conditions under which the innovation process is undertaken. Its implications are exhibited in the heterogeneous contribution of the states to the innovation process.
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with greater technological innovation. On one hand, the possibility of positive effects of technological spillovers among states could encourage the production of innovation in comparatively weaker regions. However, the disparity in the technological change at the regional level suggests the lack of interaction among innovation activities in the states of Mexico. This phenomenon could be the result of the restrictions to inter-regional technological spillovers. Apparently, the innovation process in Mexico has been characterized by a limited relationship between the availability of human capital potentially able to participate in research and development activities and the production of patents. Therefore, the higher number of researchers (SNI) has not implied, in many cases, a greater rate of technological innovation growth. According to information on SNI researchers, there exists a high possibility that those researchers have a tendency to move to regions with better conditions in terms of technological infrastructure and access to knowledge. The highest concentration of researchers for the year 2000 have been located in Distrito Federal, state of Mexico, Morelos, Puebia, Jalisco, Guanajuato and Baja California. Since 1996, Baja California, Estado de Mexico, Morelos and Puebla have increased their stock of human capital (see Table 8). 3. Theoretical aspects of the innovation process under the globalization of technology
In the year 2000, the regions that had a larger participation in the process of national innovation were Distrito Federal (with its greater technological infrastructure), state of Mexico, Jalisco, Nuevo Leon, Puebla and Queretaro. with shares greater than 4%. The states with lower shares were Aguascalientes, Baja California, Baja California Sur, Campeche, Chiapas, Durango, Guerrero, Hidalgo, Michoacan, Nayarit and Oaxaca (see Table 7).
This approach to the evaluation of the impact of the globalization of technology on the production of innovation in Mexico is based on the endogenous economic growth model developed by Romer (1990). This approach considers that technological innovation is a function of new knowledge or ideas that, in turn, are endogeneized, since they depend on the human capital devoted to research and development and on the existing stock of knowledge.' Therefore, according to
The importance of the diversity of innovations among states is related to the fact that regions with weaker technological innovations can be affected by those regions
' A = 8H ^ A is ihecnological change, where A « AA, depends on the flow of new ideas. A is the stock of ideas. The parameter 6 represents ihe human capital research productivity. A non-rivalry environment is assumed (A ean be used by all the researchers).
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this model, there are spillover effects from the stock of ideas, which can be used by the human capital in the production of new ideas. The conclusions derived from the Romer model are that, in equilibrium, the rate of growth of per capita production g , the rate of growth of capital per worker g^, and the rate of growth of ideas g^, increase at the same rhythm. Therefore, production growth depends on the production of ideas, which in turn depends on the number of researchers. The other important implication is related to the positive effect of ideas spillovers on the average productivity of researchers (6), which can allow for a growing expansion of innovation even if the number of researchers remains constant. Porter ei al. (1999), developed a model based on Romer's approach to evaluate the effect of domestic innovation spillovers (within each country) and international spillovers (from the rest of the world). He relates the international patents to a national production function of ideas and considers that there are few national patents that, in a given point in time, are new or at the cutting edge at the international level, and only the ones that go beyond the knowledge frontier are relevant at the international level. For that reason, the stock of international ideas has a double effect. On one hand, it has a diffusion effect on the national growth of technology, and on the other hand, it also functions as a barrier or negative diffusion due to the existence of technological competition to be on the cutting edge of technology. However, the assumption of non-rivalry and partial exclusivity remain, which imply that national reserachers have access to the international knowledge in their own country. By the same token, this assumption is also applied to the world stock of knowledge. The increasing stock of knowledge acquired within a country implies that another country could not patent it, although it can have access to it. In that sense there is a competition to patent year by year and there are different propensities to patent.
3.1 Tke model to evaluate tke impact of international patents at tke regional level The model for the evaluation of the impact of foreign patents on the national production of patents at the state level is based on a national production function of ideas:
Where: A
= growth of new ideas, including the ones discovered in other countries and that lwve not been used in country j
H
A
= human capital devoted to research and development = accumulated production of national ideas in the state s
V -
A -1
= stock of ideas discovered in other states of the country that have not been discovered in the state s (out-of-state innovation)
Ax
= stock of foreign ideas
Therefore, the production of innovation results from the interaction between the innovation within each individual state and from out of the states. When the parameters show the following characteristic vj; > p, the impact is positive, and it would be negative if vj( < p. In order to take into account the effects of the globalization of innovations, a variable representing the stock of international innovations is included. Its impact can be divided into two parts. The first one is positive and it derives from the effeft of diffusion that the stock of international ideas has inA. However, there is a barrier effect or negative diffusion when the new ideas in the country are not new at the international level (a < v). It is assumed that there is a non-rival or partial exclusivity environment, which implies that the human capita! has access to the stock of international knowledge both in the state A* j and in the rest of the regions that make up the national economy A^/^.
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ECOMCMICO The present study is based on the following hypotheses: The regional human capital devoted to research and development at the state level (H^,) has a positive influence on the production of regional patents. This implies thai the research effort undertaken in Mexico is an important factor leading to the increase in technological innovation. ^ •
"
The stock of regional individual patents (A^) has a positive effect on the regional production of individual patents. Therefore, there are innovation spillovers from knowledge acquired previously in each region, which is used by researchers to generate new ideas. The stock of out-of-state patents (A^) has a negative impact on the production of regional individual patents. This is caused by barriers to the diffusion of knowledge acquired by the states, which in turn reveals a weak link between the innovation activities among the states and problems of adaptation and technology transfer. The stock of foreign patents (A^) has a negative effect on the production of regional individual patents. Thechnological globalization, expressed by the increasing production of foreign technological innovation, seems to be related to limited national innovation activities and problems in the diffusion of intemational knowledge.
4. The empirical model of technological change The theoretical model presented above is based on the use of patents as a proxy for innovation activities. The data from patents has frequently been used as an economic indicator in applied economic research (Grilichez, 1990). Moreover, the use of patents as a proxy for technological knowledge has been accepted by empirical researchers such as Romer (1990). Jones (2000), Porter et al. (1999) and Stern et al. (2001). However, it must be acknowledged that patents are an imperfect indicator of technological innovation, since not all innovation is patented. Since the states of Mexico showed different rates of growth in the production of innovation, it is important to be able to estimate the impact of innovation activity
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at the regional level. The estimation ofthe econometric model will be based on a fixed effects panel regression applied to a cross section database that encompasses several years. By estimating a production function using states as decision units, we will be able to evaluate the national production of innovation as a result of the state innovation activity. The empirical model extends the methodology proposed by Porter (1999) to analyze the evolution of regional technological innovation in Mexico by estimating the following two empirical equations: inPats st = Sf + Ys + >-lnH M. + tplnA « +
(U
Where Pats^ represents the innovation produced and patented in the period t in all the states of Mexico in the year /, H^^, is the human capital devoted to the production of ideas (research and development) for each of the states of Mexico isn the year t, H^^^ is the stock of innovation accumulated (requested patents) that have been discovered in other states of Mexico and that have not yet been discovered in the state 5, in the year / (out-ofstate patents). There are two dummy variables to control for state and year. They are introduced to take into account the differences in the propensity to patent resulting from the different industrial composition of states y'r , and also to evaluate the variation of that propensity over ihe years 6 *', In Pats st = 6 ^ t •*• ^ s ^
(pInAst + ( v - P ) A - s t
Ast a ) AX SI
Where AX_^ is the stock of foreign innovation (foreign patents requested) that flow to Mexico and affect the state s in the year t. The impact of this variable, at the regional level, is calculated as the ratio of foreign patents requested to the total of all patents requested in the state. In order to be able to evaluate the effects of the globalization of technology on the innovation growth at
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the state level over a period of years, we chose to apply a fixed effects panel economieric model to a cross sectional and times series database.
4.1 DataBase The number of patents by state was obtained from the matrix of patents requested from 1991 to 2000, published by El Consejo Nacional de Ciencia y Tecnologia (Conacyt), The stock of patents at the state level and the stock of patents of the rest of the states were constructed from the data of patents at the state level. The proxy of human capital devoted to research and development was obtained from the data of the Sistema Nacional de Investigadores (SNI) by state, for the year 1996 and 2000.' The SNI classifies its researchers into the following groups: physics and mathematics, medicine and health sciences, biology and chemistry, humanities and behavioral sciences, agricultural sciences and engineering. Even though it is not possible to disaggregate human capital by activity and region at the same time, it is important to stress that the researchers dedicated to research and development in those sciencies (excluding social sciences), make up a large proportion of the members of the SNI (Table 9). Finally, the foreign patents requested information is published by Conacyt and includes data beginning withl963. 5. Results The innovation activity showed a continuous decline in the period studied, in a context of globalization of technological innovations. By estimating the parameters of the production function of innovation, this decline can be explained at the regional level, according to the endogenous growth theory.
^ The SNI stands for the National Researchers System and il was created by Conacyt in order lo organize the researchers in the couniry and to strengthen the scientific and technological research of the country.
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