Innovation in low- and medium-technology industries

Abstract

The role of low- and medium-technology (LMT) firms and industries in modern economies is complex and frequentlymisunderstood. Significantly, the title of Hatzichronoglou’s (1997) widely used revision of the OECD classification of sectors and products refers explicitly only to high technology.By implication, the remainder of the economy is known by what it is not (high technology) and what it does not do (spend more than five percent of revenues on research and development). Arguably, this has contributed to an unfortunate tendency to understate the importance of technological change outside such R&D-intensive fields as information and communications technology (ICT) and biotechnology. Although their products and production processes may be highly complex and capital intensive, LMT enterprises are often regarded as being somewhat old-fashioned or even passé. In comparison to high-tech industries, their markets are generally mature and may be slow-growing and subject to over-capacity and high levels of price competition. During the globalisation movement of the past few decades, some LMT activities have been prime candidates for relocation from highly industrialised to newly industrialising economies. When they manage to survive in older economies, LMT sectors acquire unfortunate tags such as ‘rust belt’. Nevertheless, LMT sectors are central to economic well-being.