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Comparing the pace and extent of economic development across the developing regions yields that Arab countries have displaced a weak economic performance over the past 20 years, despite their favorable geo-strategic location and a high density of national and international structural adjustment efforts. Using cross-country regressions, this paper identifies two binding constraints to economic development in the Arab countries of the Middle East and North Africa (MENA): 1) Most countries are not able to apply or adopt existing technologies efficiently and 2) The economically inefficient allocation of resources is rooted deeply in regional political economy structures. These results challenge the scholarly debate, but can help to understand why international structural adjustment programs that focused on privatization and trade liberalization only showed limited success in the MENA region.

The productivity and competitiveness of local firms in non-OECD countries depends as much on technological capacities and successful upgrading as in industrialized countries.However, developing countries undertake very little to no original R&D and primarily depend on foreign technology. Long-term contracts and subcontracting arrangements within global value chains are here very important forms of transnational cooperation and therefore also important channels for technology transfer, especially as the majority of these countries attract only limited foreign direct investment.Drawing on innovation and growth models as much as on value-chain literature, we outline an analytical model for empirical research on local firm upgrading in non-OECD

Innovation is widely recognized as a key driver of sustainable economic development. Governments, international organizations, donors and investors are increasingly interested in evaluating the technological capabilities and innovative capacities in developing countries, but often lack appropriate approaches for such measurement. This paper focuses on innovation and technological progress in the MENA region and discusses the challenges of understanding, expanding and fostering innovative potential in Egypt.