Endogenous Innovation in the Theory Essay

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They buy more goods from local businesses, can afford more luxuries, and this encourages the growth of local enterprises. The spillover effect must be strong enough for this to work, however. Thus, it may be necessary for the government to fuel the economic development of local production through tax relief and to carefully select certain types of foreign investment to emphasize in its 'recruitment efforts' to ensure that the nation does not simply remain a source of cheap labor. Accumulation of capital is important, but the capital must be used to improve the minds of the populace and the infrastructure of the nation. Still, to achieve this objective, openness rather than protectionism is essential. The downturn in global fortunes may mean that cheaper labor costs are even more desirable on the part of multinationals so allowing such investment to prevent the nation from being even more stricken by economic contraction is more essential than ever before.

Allowing foreign enterprise to come into the nation and keeping government regulation to a minimum remains advisable, except in the very limited case of businesses that might threaten unique arenas of local development. Foreign businesses bring in knowledge as well as Euros and dollars. Developing the knowledge base of technology in the minds of the populace is can only be achieved through exposure -- and this can be fostered by the educational programs of the foreign enterprises for managers as well as in the nations' schools. (Agreements to fund study abroad at foreign universities may also be possible through corporations that take an interest in improving the knowledge of its local managerial force).

Some theorists of development argue that there is a fundamental contradiction between two models of economic progress -- one stressing technological development, the other stressing the accumulation of capital in the pockets of citizens and the coffers of the nation.

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Bu provided that the commitments of businesses in invest in individuals is a factor when considering what types of enterprises should be welcomed into the nation, foreign investment can be a boon to the developing world in both financial and human capital. Yes, to critics of free trade, it should be conceded that simply infusing more cash into a nation is not enough. To really generate long-standing growth and development, the citizens must be able to rise to managerial and executive positions, in both foreign and local enterprises. Technological advances make businesses more productive, and technology is a critical component of surviving in the global marketplace and becoming a vital economic player on the world stage, not merely remaining a subsidiary source of inexpensive labor. Local businesses can only generate such technology if the population becomes educated.

Human capital is ultimately the source of a nation's greatest riches -- even land-poor nations like Japan and Great Britain thrive because of the quality of the workforce. Technology cannot be relied upon to simply seep into a nation -- it must be actively recruited and allowed to foster, and investment is one way to accomplish this. Human capital-rich nations generate technology, and the richness and efficiency technology generates creates growth. To transform a developing nation into such a rich nation requires information from outside of its borders through a combination of the right types of foreign investment and businesses, foreign non-government organizations (NGO) s, and a commitment of….....

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