chapter  5
Advanced knowledge infrastructure for economic development
Pages 13

Building further on the earlier theoretical approach, this chapter emphasizes the need to build structures for the production and use of knowledge, which require explicit investment and often involve high initial costs. This draws on findings that physical as well as high-technology infrastructures are significantly correlated with knowledge and technological capability building. We code this collection of physical and scientific infrastructure as “knowledge infrastructure”. Governments of fast followers as well as latecomer countries have employed a wide array of instruments to build knowledge infrastructure in order to compensate for institutional gaps and failures that characterize underdevelopment. These countries have emulated the experiences of the more advanced industrial countries such as the USA and Germany where public support for industrial development had been crucial for their long-term competitiveness.2 There is a preponderance of evidence that the state in East Asia regards knowledge infrastructure building3 as a crucial mechanism where the market under-provides investment, for instance for R&D (due to appropriability and uncertainty concerns) and provision of subsidized credit for small and medium enterprises (SMEs) among others (Mathews, 2000; Amsden, 1989, 2003). Knowledge infrastructure covers a wide range of economic services such as metrology and R&D services, while physical infrastructure comprises energy supply, water, telecommunication, transport systems (roads, railways, airfreight, etc.). Modern infrastructure is characterized by a number of economic and technical characteristics, which include “scale, indivisibility, multiple use and generic functions”, all of which distinguish it from other forms of capital.4