No 2015/2 Capabilities, Competitiveness, Nations

Abstract

This paper discusses the role of capabilities and competitiveness for the economic growth of nations. The capability concept is commonly used in analyses of firms, however, as this paper shows, it may also be used at the level of nations. Capabilities at the national level may be defined broadly as "social capabilities", as done by the economic historian Moses Abramovitz, or more narrowly as "technological capabilities" as suggested by for instance the development scholar Lin-Su Kim. The paper discusses the relationships between these two dimensions of capabilities and examines recent empirical evidence on this matter for a group of 114 countries worldwide on different levels of development. It also considers the relationship between capabilities and competitiveness, and analyses the effects of capability change and other aspects of competitiveness on economic growth on data for the period 1995-2013. The final section presents the conclusions from the study and raises issues for future research.