At several points we have mentioned the role of government in the processes by which technological capabilities in microelectronics are acquired.⁶⁴ This role is no less important in determining the types of innovations that flow from these capabilities and it is exercised broadly in two (often closely related) ways. The first is indirect, through the influence of the country's overall development strategy, and the second is in the form of direct interventions.⁶⁵ We shall discuss each of these in turn.

3.3.4.1 The role of development strategy

One extremely important aspect of development strategy is that large countries have a much greater potential for independence from international trade than small countries. This distinction has powerful implications for the pattern of technical change in general and of innovations in microelectronics in particular.

For example, large 'inward-looking' developing countries have the opportunity to produce a set of innovations that is more appropriate to local circumstances and needs than technologies imported from advanced countries. Achieving this possibility, however, often seems to be hindered by the high degree of protection behind which the technological capabilities themselves are created. India's protected microcomputer industry is an important, albeit perhaps somewhat extreme, example of this problem. In that case, 'so much protection' was granted to the local microcomputer manufacturer that there was no incentive for this firm to produce products that were in any sense appropriate to local needs. In the Brazilian microcomputer case, a more favourable outcome of protection seems to have emerged: 'Despite sometimes higher prices than those in the developed countries, products are more appropriate to the local needs because they are designed to match local requirements' (Tigre, 1983, p. 173).

These examples highlight the possibility that microelectronics innovations in 'inward-looking' developing countries may be appropriate in some dimensions (such as adaptations to the local environment) but inappropriate in others (such as cost). And both examples raise the crucial policy question of how to secure innovations that are appropriate in all relevant dimensions. This is apparently unlikely to occur either with excessive protection, or (for a different reason) with too little (or no) protection.

Small countries, as noted above, are generally much more dependent than large countries on international trade.⁶⁶ It is sometimes argued that the need to conform to international export standards robs these countries (such as the East Asian NICs) of an incentive to generate appropriate innovations. Fransman's (1986b) study of CNCMT producers in Taiwan and Japan, however, suggests that there may be important ways in which this view fails to capture the reality of the innovation process in 'outward-looking' developing countries. Using a four-dimensional index of product quality, he tries to 'quantify the price and quality differential that existed between Taiwanese CNC machine tools and the best quality competing product in export markets' (Fransman, 1986b, p. 1391). He concluded that the mean price differential was 70%, while the quality differential ranged from 82 to 93 % of the performance of the best competing machine. Thus, the adaptive innovations evolved by Taiwanese producers enabled purchasers of these machines to obtain a somewhat diminished performance (relative to the best competing product), but for a more than proportionate reduction in price. The explanation of this pattern of innovations seems to be that Taiwanese producers are competing principally in the less exacting markets of other developing countries (ibid., Table 5B) and in those markets in developed countries that are highly sensitive to price.⁶⁷

These few examples are probably enough to suggest that the pattern of innovation in microelectronics is not any simple derivative of a country's development strategy. These examples also raise the issue of precisely which technical capabilities are required for appropriate innovations. For many such innovations (which are often incremental or adaptive in character)⁶⁸ it would seem, for example, that a full 'own-capability' in microelectronics (in the form of domestic production of semiconductors) is neither a necessary nor a sufficient condition.

3.3.4.2 Direct government interventions

The question of whether microelectronics capabilities can be used to promote the welfare of those who live in poverty (mostly in the rural areas) in the Third World arises more directly in regard to institutions owned by the state itself. For, while privately owned firms respond only indirectly to government policies, the state intervenes directly in many areas of most developing countries (such as telecommunications, health, education, and so on).⁶⁹ For many of the poorest people in these countries, it is only in such areas that any direct contact with new microelectronic technologies may conceivably come about. To understand the effects these technologies have on income distribution, it is of the utmost importance to recognize the numerous innovations in the public domain that have been designed expressly to make this contact possible.

One example is described by Hobday (1986b) in a study of the Research and Development Centre of Telebras (the Brazilian Telecommunications Administration). He shows how a small-scale, low-capacity, public exchange system for rural and low-density urban use evolved (among numerous other innovations) out of the research activities of this Centre. Another example is the Project for Strengthening Health Delivery Systems in Central and West Africa, which uses microcomputers 'to improve regional and national disease surveillance, health and demographic data systems, and to integrate these systems into national health planning systems' (Munasinghe et al., 1985, p.121). Further examples can be drawn from the ongoing research area known as technological 'blending', which in a narrow sense refers to the possibility of combining elements of new and traditional technologies, but which, more generally, deals with applications of new technologies in traditional sectors (see Bhalla et al., 1984; Bhalla and D. James, 1986, 1988; Rosenberg, 1988). Among the most interesting cases that this research has uncovered are the System for Computer-Aided Agricultural Planning and Action to assist rubber small-holders in Malaysia and the use of electronic load-controllers in micro-hydro projects in a number of tropical developing countries.⁷⁰

The major question that arises from these direct applications in the public sector is whether (and under what circumstances) they are likely to be replicable on a scale that is significant at the macroeconomic level of developing countries. The answer to this question will depend in part, of course, on the purely technical ease with which these types of applications can be made (see Rosenberg, 1988). But the answer will also depend heavily on political factors, and in this regard much can be learned from the available literature that attempts to explain why so many past efforts to secure more appropriate technologies appear to have been unsuccessful. A major finding of this literature is that past failures are 'to a considerable extent ... the consequence of the political economy of the required policy changes' (Stewart, 1987, p. 295). More specifically, 'many of the policies necessary to promote AT [appropriate technology] would strongly conflict with the interests of dominant groups' (ibid., p. 295).

Two conclusions for policy may be drawn from this overall finding (ibid.) and both of them would appear to condition in a powerful way the feasibility of microelectronics innovations that are designed to benefit those groups living in poverty in the Third World. The first is that any widespread introduction of appropriate technologies will not normally occur without a fundamental shift in political power in favour of these groups.⁷¹ The second is that there is (nevertheless) likely to be scope for particular interventions in specific country circumstances depending, for example, on the degree to which processes designed to assist certain disadvantaged groups also threaten the interests of the dominant groups in society.