The Norwegian paradox is a dilemma of
Norway's economic performance where economic performance is strong despite low
R&D investment.
Description
The
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development (OECD; french: Organisation de coopération et de développement économiques, ''OCDE'') is an intergovernmental organisation with 38 member countries, founded in 1961 to stimulate ...
has described Norway's economic performance as a "
paradox
A paradox is a logically self-contradictory statement or a statement that runs contrary to one's expectation. It is a statement that, despite apparently valid reasoning from true premises, leads to a seemingly self-contradictory or a logically u ...
". Other scholars also refer to it as a "puzzle". The concept has been developed due to the combination of low
innovation
Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed enti ...
and high economic performance in the country. Even when the rents of oil and gas sector are excluded, Norway's productivity and income are among the highest in the world. However, at the same time Norwegian R&D investment has a relatively small share of the country's
GDP
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is ofte ...
compared to other industrial economies.
Theoretical background
The ''Schumpeterian Approach'' plays an important role in the theoretical perspective of innovation-and-growth literature.
Joseph Schumpeter
Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the United States to become a professor at H ...
analysed the role of radical innovations and evaluated the importance of their influences on the economic system. Other scholars such as Freeman and Nelson continued the research by emphasizing the paradigmatic- and sector-specific views of the whole
technological change
Technological change (TC) or technological development is the overall process of invention, innovation and diffusion of technology or processes.From ''The New Palgrave Dictionary otechnical change by S. Metcalfe. •biased and biased techno ...
process combined with the economic growth.
Analysis and critique
Although the concept of Norwegian "paradox" has been used in the literature, other researchers have presented further analysis and critique.
Fagerberg posits that the "''paradox''" should be analysed by combining three interrelated aspects of Norwegian economic development: innovation,
path dependence
Path dependence is a concept in economics and the social sciences, referring to processes where past events or decisions constrain later events or decisions. It can be used to refer to outcomes at a single point in time or to long-run equilibri ...
, and policy. Norway's innovative performance had been scientifically influenced by the ability of Norwegian entrepreneurs, firms, and public sector actors. They were able to understand the hidden opportunities, mobilize resources, adopt current capabilities and develop new ones, and development of appropriate institutions and policies helped to support successful growth.
Furthermore, the historical development of Norway's
national innovation system The National Innovation System (also NIS, National System of Innovation) is the flow of technology and information among people, enterprises and institutions which is key to the innovative process on the national level. According to innovation syst ...
was impacted by path dependence. Norway has not been successful in developing non-resource based industries, yet managed to achieve substantial results in
resource-based industry development and resource-based innovation elaboration. Norway's resource-based sectors have beneficially contributed to developing knowledge and adapting to new challenges. Finally, Norwegian institutions and politics managed to extend a relatively narrow definition of
science, technology, and innovation policy. Due to this, broad perspective of innovation systems was successfully implemented.
Other scholars have suggested different analyses of the Norwegian "paradox". Fulvio Castellacci argued that characterization of Norway's economy as a combination of low innovation and high economic performance is inaccurate; the problem is not with innovative activities yet as it is commonly believed; it is more related to the sectoral composition of the economy.
See also
*
Dutch disease
In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agricult ...
*
Resource curse
The resource curse, also known as the paradox of plenty or the poverty paradox, is the phenomenon of countries with an abundance of natural resources (such as fossil fuels and certain minerals) having less economic growth, less democracy, or worse ...
References
{{Norway topics
Paradoxes in economics
Economy of Norway