Journal of Evolutionary Economics

, Volume 26, Issue 4, pp 765–784 | Cite as

Global dynamics, capabilities and the crisis

  • Jan Fagerberg
  • Martin Srholec
Regular Article


The financial crisis started in 2007–8, initially in the US, but its consequences have been felt throughout the global economy. However, its effects were far from uniform. While parts of Asia and Africa continued to grow fast, Europe experienced a large set back. This paper emphasizes three important factors: differences across countries in technological development; differences in capacities to exploit the opportunities offered by technology; and differences in the ability to compete in international market. A formal model, based on this approach, is developed and applied to data for 100 countries in the period 1997–2012. Empirical indicators reflecting the various factors are developed, a dataset constructed and econometric estimates of the model performed. The results are used to explore the factors behind the slowdown in economic growth, with a particular emphasis on the continuing stagnation in Europe. A major factor turns out to be the increased financialization of the economy. The negative effect of the growth of finance prior to the crisis is especially pronounced for the countries that suffered most during the crisis.


Technological capabilities social capabilities competitiveness economic growth crisis 

JEL Classification

E11 F43 O30 



Financial support from the VINNOVA Core Funding of Centers for Innovation Systems (project 2010–01370 on ‘Transformation and Growth in Innovation Systems: Innovation Policy for Global Competitiveness of SMEs and R&I Milieus’), Czech Science Foundation (project P402/10/2310 on ‘Innovation, productivity and policy: What can we learn from micro data?’) and Czech Academy of Sciences (institutional support RVO 67985998 and agenda ‘Strategie AV21’) are gratefully acknowledged. Earlier versions of the paper were presented at the 15th ISS Conference, 27–30 July, 2014, Jena, Germany, the 2013 Eu-SPRI Forum Conference on Management of Innovation Policies, 10–12 April, 2013, Madrid, Spain and the Joint UNU-MERIT/School of Governance Seminar, 6 June 2013, Maastricht, Netherlands.


  1. Abramovitz M (1986) Catching up, forging ahead, and falling behind. J Econ Hist 46(386):406Google Scholar
  2. Abramovitz M (1994a) The origins of the postwar catch-up and convergence boom. In: Fagerberg J, Verspagen B, von Tunzelmann N (eds) The dynamics of technology, trade and growth. Edward Elgar, Aldershot, pp 21–52Google Scholar
  3. Abramovitz M (1994b) Catch-up and convergence in the postwar growth boom and after. In: Baumol WJ, Nelson RR, Wolf EN (eds) Convergence of productivity – cross-national studies and historical evidence. Oxford University Press, Oxford, pp 86–125Google Scholar
  4. Arcand J, Berkes E, Panizza U (2015) Too much finance? J Econ Growth 20:105–148CrossRefGoogle Scholar
  5. Castellacci F, Natera JM (2011) A new panel dataset for cross-country analyses of national systems, growth and development (CANA). Innov Dev 1:205–226CrossRefGoogle Scholar
  6. Cecchetti SG, Kharroubi E (2012) Reassessing the impact of finance on growth, BIS Working Paers No 381, Bank for International Settlements, July 2012Google Scholar
  7. Conference Board (2014) Total economy database. January 2014,
  8. Cornwall J (1976) Diffusion, convergence and Kaldor’s Law. Econ J 86:307–314CrossRefGoogle Scholar
  9. Darvas Z (2012) Real effective exchange rates for 178 countries: a new database. Working Paper 2012/06, Bruegel, 15 March 2012 (Update, 26 June 2014);
  10. Université catholique de Louvain (2014) EM-DAT: The OFDA/CRED International Disaster Database. Brussels,, download on 8. 8.2014.
  11. Easterly W (2001) The lost decades: explaining developing Countries’ stagnation in spite of policy reform 1980–1998. J Econ Growth 6:135–157CrossRefGoogle Scholar
  12. Fagerberg J (1988) International competitiveness. Econ J 98:355–374CrossRefGoogle Scholar
  13. Fagerberg J (1994) Technology and international differences in growth rates. J Econ Lit XXXII(3):1147–1175Google Scholar
  14. Fagerberg J, Srholec M (2008) National innovation systems, capabilities and economic development. Res Policy 37:1417–1435CrossRefGoogle Scholar
  15. Fagerberg J, Verspagen B (2015) One Europe or Several? Causes and consequences of the european stagnation. In Fagerberg J, Laestadius S, Martin BR (eds) The triple challenge for Europe economic development, climate change and governance, Oxford University Press, forthcomingGoogle Scholar
  16. Fagerberg J, Srholec M, Knell M (2007) The competitiveness of nations: why some countries prosper while others fall behind. World Dev 35:1595–1620CrossRefGoogle Scholar
  17. Fearon JD (2003) Ethnic and cultural diversity by country. J Econ Growth 8:195–222CrossRefGoogle Scholar
  18. Gerschenkron A (1962) Economic backwardness in historical perspective. The Belknap Press, CambridgeGoogle Scholar
  19. Heritage Foundation (2014) 2014 Index of economic freedom, all index data. The Heritage Foundation,, download on 13.6.2014.
  20. Kaldor N (1981) The role of increasing returns, technical progress and cumulative causation in the theory of international trade and economic growth. Econo Appl (ISMEA) 34:593–617Google Scholar
  21. Kaufmann D, Kraay A, Mastruzzi M (2014) Worldwide Governance Indicators, on-line. World Bank,, download on 13.6.2014.
  22. Lall S (1992) Technological capabilities and industrialization. World Dev 20:165–186CrossRefGoogle Scholar
  23. Law SH, Singh N (2014) Does too much finance harm economic growth? J Bank Financ 41:36–44CrossRefGoogle Scholar
  24. Li G (1985) Robust regression. In: Hoaglin DC, Mosteller F, Tukey JW (eds) Exploring data tables, trends, and shapes. Wiley, New York, pp 281–340Google Scholar
  25. Maddison A (1991) Dynamic forces in capitalist development: a long-Run comparative view. Oxford University Press, New YorkGoogle Scholar
  26. Metcalfe JS (1988) The diffusion of innovation: an interpretive survey. In: Dosi G (ed) Technological change and economic theory. Francis Pinter, LondonGoogle Scholar
  27. National Science Board (2012) Science and engineering indicators 2012. National Science Foundation, ArlingtonGoogle Scholar
  28. National Science Board (2014) Science and engineering indicators 2014. National Science Foundation, ArlingtonGoogle Scholar
  29. OECD (2014) OECD.Stat. Paris: OECD, download on 8. 8.2014.Google Scholar
  30. Rodríguez-Pose A (1999) Innovation prone and innovation averse societies: economic performance in Europe. Growth Chang 30(1):75–105CrossRefGoogle Scholar
  31. Sachs JD (2003) Institutions don’t rule: direct effects of geography on per capita income. NBER Working Paper No. 9490,
  32. Solow RM (1956) A contribution to the theory of economic growth. Q J Econ 70(1):65–94CrossRefGoogle Scholar
  33. Stata (2005) Stata data management, reference manual, release 9. College Station: Stata Press.Google Scholar
  34. Thirlwall AP (1979) The balance of payments constraints as an explanation of international growth rate differences. Banca Nazionale del Lav Q Rev 32:45–53Google Scholar
  35. UNCTAD (2014) UNCTAD Handbook of statistics 2012, UNCTADstat on-line. Geneva: UNCTAD, download on 16. 10. 2014.Google Scholar
  36. UNESCO (2014) Science, technology and innovation; Data Centre. Geneva: UNESCO Institute for Statistics, download on 8. 8.2014.Google Scholar
  37. USPTO (2014) Extended year set - patents by country, State, and Year Utility Patents (December 2013). U.S. Patent and Trademark Office,, download on 8. 8.2014.
  38. Veblen T (1915) Imperial Germany and the industrial revolution. Macmillan, New YorkGoogle Scholar
  39. Vernon R (1966) International investment and international trade in the product cycle. Q J Econ 80:190–207CrossRefGoogle Scholar
  40. World Bank (2014) World development indicators 2013, World Bank, last updated on 18. 12. 2013, download on 8. 8.2014Google Scholar
  41. World Bank (2015) Quarterly external debt statistics, World Bank, download on 6. 8.2015Google Scholar

Copyright information

© Springer-Verlag Berlin Heidelberg 2016

Authors and Affiliations

  1. 1.Center for Technology, Innovation and Culture (TIK)University of OsloOsloNorway
  2. 2.IKE, Department of Business and ManagementAalborg UniversityAalborgDenmark
  3. 3.CIRCLELund UniversityLundSweden
  4. 4.CERGE-EI, Economics Institute, Czech Academy of SciencesPragueCzech Republic

Personalised recommendations