Technology, productivity, and job creation

While the development of new knowledge is becoming increasingly important in the emerging knowledge-based economy, the impact of technology on growth, jobs and welfare is determined largely by the way in which technology is diffused, absorbed and used throughout the economy. For technological progress to bring not only higher productivity but also economic expansion and new jobs it is pivotal with conditions which allow for industrial restructuring, entry and expansion of small firms, growth of new industries, launching of new products, and mechanisms accounting for effective upskilling of the labour force. This report points to a decline in public support for research and development (R&D), mainly affecting basic, long-term research, and examines the levelling-off in private sector R&D along with changes in its direction away from basic, exploratory research towards more market-driven and short-term innovative efforts. It explores how the special characteristics of national innovation systems impact on the mechanisms for innovation and diffusion of technology, and examines the rationale for policy in this area. A key challenge for policy makers is to co-ordinate measures so as to