Biotechnology in an intermediate economy: demand and supply in Portugal
"Intermediate economies" like Portugal typically face a "small country" squeeze in international competition, trapped between the scientific and technological strength of more advanced industrial countries on one side and the cost competitiveness in more established industries of newly industrialising countries (NICs) on the other. The role of developing high technology sectors such as biotechnology in such intermediate economies is controversial. Static comparative advantage arguments, such as can be drawn from neoclassical economics or strategic management approaches, suggests that these industries should be left to the advanced countries to develop. Dependency theories and similar argue that this would leave intermediate economies vulnerable and probably underdeveloped. In this paper, we argue that the way forward is that intermediate economies should pursue the development of high-tech sectors so as to fend off both dependency and the cost challenges from NICs, but should structure their development so that they are oriented to their main national users, which are likely to be in their own traditional areas of industrial strength. We demonstrate from the first statistical analysis of a large-scale survey of Portuguese firms that indeed demand factors largely explain both actual and potential use of biotechnology in Portugal, but supply factors such as raising indigenous technological capabilities in the field are linked with those user industries.
Keywords: biotechnology, intermediate economy, demand and supply