Understanding Technology and its relationship with Wealth of Nations And firm Specific Knowledge

History of last 500 years of the world suggests that technological progress is crucial for military strength of a nation and its survival as an entity. Not only military, it is crucial for economic progress of nations as well. Due to technological progress, USA, Western Europe and Japan are unable to ensure continued economic progress despite temporary ups and downs.

In domestic market, a nation and its firms, having better and advanced technology can enjoy following advantages :

  • Improved and efficient functioning of various organizations in the nation
  • Technological progress and infusion brings major changes and improvements in the overall functioning of organizations leading to transformations viz. transformation in Banking Sector, Telecom Sector etc.                                                                        
  • Enhanced capability to fight foreign competition and thus retaining control over strategic national economic assets
  • Stability in sales and profits of business firms; stable growth of sales and profits
  • Regular employment generation and high standards of living
  • Lesser probability of occurrence of economic recession and lesser adverse impact of economic recession if it occurs                                                                                             
  • Relative stability in national income                                                                                   
  •  Growth of national economy

In external markets, a nation and its firms having better and advanced technology can enjoy following advantages :

  • Technological competitive advantage
  • Boost to exports
  • Forex earnings through exports
  • Disposal of surplus to external markets thus maintaining stability in domestic prices
  • Monopoly & high prices for hi-tech products in the international markets
  • Earnings from external markets provide additional funds for supporting research & development at home
  • Globalisation of operations leading to benefits of economies of scale of mass production, and cost reduction by procuring low cost resources / inputs from anywhere in the world.
  • Facilitates outbound Foreign Direct Investment (FDI) by domestic firms leading to earnings through captive exports, repatriation of profits, sale of machinery, sale of components and sub-assemblies etc
  • Earnings through technolgy transfer agreements
  • Employment generation & high standards of livin
  • Growth of national economy

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Thus, if every firm within all industries makes use of advanced technology they can work efficiently by reducing costs, lead time and maximizing their profits by achieving economies of scale, thus contributing positively to the GDP of the nation, hence each firm contributes to creating wealth of nations.

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