Capital Imports, Innovation Finance and New Comparative Advantage in Small Countries

Innovation is an important driver for national growth and value in many small countries. Growth in such countries is necessarily associated with exports and other international business activities. Capital imports have always played an important role in the development of export in small and developing countries. In the development economic analysis (that have dealt primarily with Latin America) in the 1960s, the focus was on the accumulation of physical capital through foreign direct investment (FDI) as was accounted for by Balassa (1965). In today's global high technology sector we observe a process in which the flow of sector specific capital - such as the type of high-risk capital that is provided by venture capital (VC) funds - partially displaces the traditional FDI as source for exports-generating capital