National innovative capacity in East Asia: determinants and evidence from five countries, and particularly from Taiwan

The innovative capacity of a country is the basic driving force behind its economic performance. In 2002, Furman, Porter & Stern (FP&S) developed a methodology for assessing innovative capacity in terms of the national factors that influence the rate of patenting by the country in the United States Patent and Trademark Office (USPTO). They are the first to provide an integrated framework for the measurement of national innovative capacity, which they apply to a panel of 17 OECD countries over the 25 years from 1973 to 1996. My study extends the FP&S approach by applying it to five "latecomer" countries from East Asia, none of which was included in the FP&S study. In this way, this study weights the distinctive contribution of each driver on innovative activity and provides a basis for comparing innovative capacity of the OECD countries with the mechanism of innovation in the East Asian countries (particularly the Tiger countries). -- First, this study adopts the FP&S methodology in relation to the five East Asian countries, by gathering comparable data over a comparable time period. The results here replicate those of FP&S, with some important differences: it is found that fewer national factors influence the rate of patenting in countries that have become innovative only recently, and that their patenting performance is diverging (as opposed to the convergence demonstrated by FP&S). -- Second, this study extends the framework to encompass variables not considered by FP&S, in particular the impact of public sector Research & Development (R&D); the results show that this variable has exerted a significant effect on patenting rates, which reinforces its claim to be considered as part of the innovative capacity of a latecomer country. -- Third, this study provides some empirical and case study evidence of current patenting trends in one of the five countries, namely Taiwan, to illustrate the depth of strategising involved in raising the level of the country's innovative performance and the indispensable role played by the public sector. In these ways, this study sheds light on the process through which a latecomer country is able to close the gap with the more developed countries, by channelling resources towards the raising of its innovative capacity.