Middle Innovation Trap

Abstract

T he middle income trap requires strategies for building technological capabilities to overcome it. This study focuses on the development patterns of two types of technological capabilities: implementation and concept design. A conceptual approach developed from evolutionary economics and innovation systems literature is constructed to distinguish between the types of technological capabilities and how they develop. The approach is mainly applied to the cases of Korea's development and it highlights the differences in developing implementation and concept design capabilities.The findings of the study emphasize the need for the development of concept design capabilities, which requires (i) setting challenging targets, (ii) developing human resources, infrastructure and knowledge accumulation, and (iii) using an incremental process of trial-and-error and course correction. More broadly, sociocultural institutions may need to be changed to accommodate higher risk-taking but also require different approaches to change. The study extends the concept of technological capabilities by emphasizing the concept design capability that requires trial-and-error beyond R&D activities.

Addressing societal challenges through the simultaneous generation of social and business values: A conceptual framework for science-based co-creation

“…The focus on interactions involving individuals and not only organisations means that the conceptualisation of co-creation places a strong emphasis upon enhancing our understanding of the influence of incentives, micro-foundations of capabilities and skills, leadership, motivation, commitment, relationship building and management, and so on that are specifically conducive to interactions between individuals coming from different backgrounds to simultaneously generate social and business values across science, technology, and society itself (Lee et al 2019;Paradkar et al 2015;De Silva et al 2020). During co-exploitation projects, diverse actors (both private organisations and public administrations) often create separate and independent (i.e., independent of actors' organisational associations) social or physical structures (e.g., accelerators, social innovation labs and living labs, among others) supporting the alignment of social and business goals.…”

Escaping the Middle Innovation Trap: Case Studies of Two Successful Spin-off Companies from a Malaysian Research University

“…While the failure to commercialise is the typical outcome of the presence of "valley of death" and "middle innovation trap", it differs in the causality of the failure. In the case of the "valley of death", the failure is mainly a financial gap (Markham, 2002) as opposed to the "middle innovation trap", the failure is due to experiential gap; tacit expression and accumulation of knowledge of trial and error (Lee et al, 2019).…”

“…The term 'middle income trap' describes a situation where a middle income nation, for example, in South East Asia like Malaysia and Thailand (Kanchoochat and Intarakumnerd, 2014) have used the latecomer's advantage where at the first stage of economic development, low-cost labour from the agricultural sector is shifted towards the higher productive manufacturing sector which increased its cost competitiveness and productivity due to rapid adoption of foreign technology and knowledge. However, as the economy hits middle income, the latecomer's advantage disappears; at the same time, rents are diminished by competitors who are equipped with lower labour cost and advanced technology as well as facilities; thus gradually slows the growth (Lee et al, 2019). The advent of "middle income trap" has researchers expanded the concept to "middle technology trap" and "middle innovation trap" as its causality (Gill and Kharas, 2015).…”

“…The perspective of looking at middle income trap from the prism of innovation can be summarised as the state of being trapped due to the inability to transition from the implementation capability to the design capability of the country (Figure 1). Figure 1: Conceptualisation of the middle innovation trap within the middle income trap framework (Lee et al, 2019) According to the proponents of middle innovation trap, all product and service productions require two types of capabilities that are important to the consumer, (i) the design capability to outlay the required specifications and functionality of the product, and (ii) the implementation capability to produce the product and deliver them (Lee et al, 2019). In a national level of economic development, both of these phases require substantial investment where a developing country began its development with the implementation capability to manufacture products that are based on the concept designs imported from developed countries, e.g.…”

“…As the country improves its implementation capability and starts to perform concept design successfully, it will reach the upper level of the middle income economic boundary. If the country accumulates sufficient design capability, it will become a high-income country, thus escaping the middle-income trap (Lee et al, 2019).…”