Technology Transfer and National Efﬁciency: Does Absorptive Capacity
Michael Danquah, Bazoumana Ouattara and Peter Quartey
This paper explores the moderating effects of absorptive capacity on the role of technology transfer in explaining
cross-country differences in national efﬁciency. We used data from 18 sub-Saharan Africa countries over the period 1970–2010
and adopted a stochastic frontier approach. The empirical results show that the coefﬁcients of the interaction terms for measures
of technology transfer (trade and machinery imports) and absorptive capacity (relative R&D) are negative and statistically
signiﬁcant. This suggests that absorptive capacity positively inﬂuences the degree to which technology transfer affects the
efﬁciency of countries in sub-Saharan Africa.
Technical efﬁciency and innovation are means for enhancing productivity and economic growth. Generally, the expectation of
productivity gains has been the basis for promoting policies and investments aimed at domestic technological achievements.
Technical efﬁciency is a process whereby an economy is able to adopt and adapt already existing technology from world
technology leaders and successfully apply it domestically. Only a few research and development (R&D) intensive countries,
particularly the developed organization for economic co-operation and development (OECD) countries, produce most of the
world’s capital; the rest of the world just imports this equipment that embodies new technology. For instance, the United States,
Japan, Germany, France, and the United Kingdom accounted for about 60 per cent of world total R&D expenditure in 2007
(UNESCO, 2009). The good news is that many developing countries, including sub-Saharan Africa (SSA) countries, are
exposed to these wide ranges of technological opportunities which are critical for increasing their economic competitiveness,
productivity and economic growth. It is, however, important to distinguish between the factors that dictate the extent to which an
economy is exposed to external technologies on the one hand and the efﬁciency with which it absorbs them on the other hand. For
virtually all developing countries, the domestic pace of technological achievement and national efﬁciency is determined mainly
by the speed with which these already existing technologies are adopted, adapted, and successfully applied domestically, and
done so throughout the economy (Bamiro, 2007; Pe
Among the most important channels through which developing countries, including SSA countries are exposed to foreign
technologies are trade, machinery and equipment imports, and contacts with highly skilled diaspora members and with other
information networks, including those of academia and the media. Trade is one of the most important mechanisms by which
embodied technological knowledge (in the form of both capital and intermediate goods and services) is transferred across
countries. Imports of technologically sophisticated goods help developing countries raise the quality of their own products and
the efﬁciency with which they are produced (see Handoussa et al., 1986; Oyejide, 2007). For developing countries like SSA with
low R&D intensity, trade openness and exposure to foreign competition provide powerful inducements to adopt more advanced
Maintaining an open environment to such ﬂows is critical for accessing technology at least cost. However, no matter how
compellingly useful a technology may be, the process by which it spreads within a country can be lengthy. The extent to which
these ﬂows are translated into national efﬁciency depends on the technological absorptive capacity of the host economy.
Michael Danquah, Department of Economics, University of Ghana, Legon, PO Box LG 57, Accra, Ghana; tel: þ233(0)204195602, e-mail:
firstname.lastname@example.org. Bazoumana Ouattara, University of Manchester, Oxford Road, M13 9PL, UK; tel: þ44(0)161 306 6688, e-mail:
email@example.com. Peter Quartey (corresponding author), Department of Economics, University of Ghana, Legon, PO Box LG 57,
Accra, Ghana; tel: 233(0)244522350, e-mail: firstname.lastname@example.org.
African Development Review, Vol. 30, No. 2, 2018, 162–174
© 2018 The Authors. African Development Review © 2018 African Development Bank. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.