Globalization of R&D and economic development

Ever since the evolution of Italian city-states during the Renaissance and the Dutch and German cities in the 16th and 17th centuries, the concept and success of a modern economy have been based on geographical borders that make specialization possible, i.e. allow for the creation of economic clusters enhancing welfare. Economic theory has been based upon the principle stated by Adam Smith, according to which there is a positive link between welfare and the size of a market, because a larger market allows for greater specialization and thus also contributes to the increase of productivity and improvement of living standards . In this context, both the enhancement of the competitive advantages of indigenous companies and the selection of locations for FDI are based increasingly on particular economic and technological factors. This makes part of the traditional policies and strategies supporting economic development obsolete or, leaves them without the intended impact. Yet it is obvious that a target of public policies should still be to support the modernization of the economy based on a vigorous private sector

Keywords:

modern economy , FDI , traditional policies