No. 5/2009: LOOKING ABROAD, BUT LAGGING BEHIND: HOW THE WORLD TECHNOLOGY FRONTIER AFFECTS SOUTH AFRICA. Torfinn Harding and Jørn Rattsø Abstract: Industrial sector technology growth must be understood in the context of the international technology development. We study South African manufacturing industries and let the US represent the world technology frontier. The industrial sector linkages between domestic and frontier technology shocks are estimated using panel-data for the period 1970 – 1995. The results show that industrial performance in South Africa is related to the world technology frontier and consequently existing studies of technology overlooking the international context have omitted variable bias. We find that South Africa industries respond to the technology gap to the US, but that the industries are lagging behind. The analysis explains prolonged stagnation in this middle income country and rejects catching up to the frontier.