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The relationship between research and development (R&amp;D) investment and economic development is well established. Yet, at a global scale, the resource-rich countries of the Gulf Cooperation Council are consistent outliers in this relationship, combining rich-world national incomes with R&amp;D expenditure of developing countries. This paper uses a case study on Kuwait to illustrate a particular form of developmental trap, a version of the resource curse, which makes it irrational for private business firms to invest in R&amp;D and innovation. Based on an analysis of the literature and secondary data, focus groups, and an original survey of large manufacturing firms, we argue that a narrow focus on R&amp;D-led diversification of economic activity ignores the systemic problems faced by Kuwait and, particularly, the unsuitable supply of skills and capabilities provided by the national education and training system.

Systems of innovation, diversification, and the R&D trap: A case study of Kuwait