Middle Innovation Trap

Abstract

The 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.