Frontier Technology and Absorptive Capacity: Evidence from OECD Manufacturing Industries

In this paper, we examine the three facets of technology: its creation, dispersion and absorption. We investigate whether differences in absorptive capacity help to explain cross-country differences in the level of productivity. We utilize stochastic frontier analysis to investigate two potential sources of this inefficiency - differences in human capital and R&D - for nine industries in 12 Organization for Economic Co-operation and Development (OECD) countries over the period 1973-91. We find that inefficiency in production does indeed exist and it depends upon the level of human capital of the country's workforce. Evidence that the amount of R&D an industry undertakes is also important is less robust. Copyright 2006 Blackwell Publishing Ltd.