South–South Trade in Capital Goods – The Market-Driven Diffusion of Appropriate Technology

Abstract

This article introduces a Special Section addressing technology diffusion as a result of south–south trade in capital goods; taking forward, and updating, arguments from the appropriate technology literature in the 1970s and 1980s. We review capital goods utilised in three sectors of considerable development significance in low- and middle-income economies (agricultural mechanisation in Tanzania, furniture in Kenya and apparel in Uganda). In each sector, southern-origin equipment is distinctive by comparison with northern-origin capital goods. At observed capacity utilisation rates, southern-origin capital goods are economically efficient, accessible and profitable to users, and demonstrably appropriate to operating conditions in these three economies. As a consequence, not only are Chinese-origin capital goods diffusing rapidly in these three economies, but so too are they diffusing in other developing economies. Chinese-origin capital goods now account for almost one-third of all capital goods imports in Africa, Latin America and South-East Asia, and Indian equipment is also widely utilised in many low- and middle-income economies. This suggests a wider significance of our findings and calls for policymakers to harness the opportunities provided by market-driven south–south trade in capital goods.

Abstract

Cet article introduit une section speciale considérant la diffusion des technologies comme étant un résultat du commerce Sud-Sud dans les biens d’équipement ; en prenant en considération des arguments du mouvement des technologies appropriées dans les années 70 et 80 et en les mettant à jour. Nous analysons les biens d’équipement utilisés dans plusieurs secteurs de l’importance considérable du développement dans les pays à faibles revenus et à revenus intermédiaires. La spécificité relative des biens d’équipement originaires du Sud comparé à ceux originaires du Nord est analysée dans trois économies de l’Afrique de l’Est. Nous montrons que les biens d’équipement originaires du Sud sont économiquement efficaces et qu’ils peuvent être vus comme appropriés gràce à leur adaptation avec les dotations factorielles et des considérations plus générales dans ces économies importées. Les biens d’équipement originaires de Chine justifient désormais presque un tiers de tous les biens d’équipement importés en Afrique, Amérique Latine et Asie du Sud-Est et le matériel indien est également largement utilisé dans beaucoup de pays à faibles revenus et à revenus intermédiaires. Ces appels des politiques afin d’exploiter les opportunités offertes par un marché a conduit à un commerce Sud-Sud en biens d’équipements.

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Notes

  1. 1.

    Following established practice, we use the term ‘technique’ to reflect a specific application of principles embodied in a wider set of technological attributes (Stewart, 1979).

  2. 2.

    Nowadays we also use the term manufacture to describe the mechanisation of production that Marx referred to as machinofacture.

  3. 3.

    This is not to say that technological change is confined to improvements in machinery – embodied technology; they also are from changes to organisational (disembodied) technology. However, in this article we are focusing on physical rather than organisational or financial capital.

  4. 4.

    For a formal definition of economic efficiency, see Stewart (1979).

  5. 5.

    As is well known, although widely used, R&D is a poor proxy for innovative capabilities. Among its weaknesses is that it ignores incremental inputs to changing process and product that are not recorded as formal R&D. The relative contribution of these informal and unrecorded incremental changes is almost certainly greater for technologies appropriate to the operating conditions of low-income southern markets than for those aimed at high-income northern markets.

  6. 6.

    Biggs and Justice (2015) refer to the idea of ‘good enough quality’, arguing that engineering specifications of quality are of much less relevance in technology diffusion than the trade-off between quality and price.

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Acknowledgements

The authors are grateful for the helpful comments provided by two anonymous referees.

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Correspondence to Raphael Kaplinsky.

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Hanlin, R., Kaplinsky, R. South–South Trade in Capital Goods – The Market-Driven Diffusion of Appropriate Technology. Eur J Dev Res 28, 361–378 (2016). https://doi.org/10.1057/ejdr.2016.18

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Keywords

  • inclusive development
  • induced innovation
  • appropriate technology
  • south–south trade
  • capital goods