| What is the theme of the next era for the world’s Newly Industrialized Economies (NIEs)? The experience of the NIEs’ growth since 1950 can be attributed to two common tracks:First, they all experienced a period of about twenty years or even longer period of rapid growth, and the implementation of similar development pattern-"Chasing Pattern" in which there were planned large scale investment and foreign capital introduction, weaker market competition, weaker protection of IPR, more intensive government subsidies. Second, the growth process of most NIEs suddenly slow down while they still far away from the international frontier. According to Gill and Kharas (2007), most NIEs will fall into the middle-income trap; According to Kehoe and Meza (2012),the future of Chasing strategy in most NIEs is stagnation.The fundamental driving force of economic growth is technical progress. The underlying cause of the "middle-income trap" or "stagnation" in most NIEs is that the "Chasing pattern" has become largely ineffective during gradually small technological gap. However, these economies failed to smoothly turn to new technical progress pattern and the corresponding incentive mechanism. This article tries to discuss the effect of "Competition pattern" of technology progress in an extended Schumpeterian growth framework, which can provide theoretical basis and new insight for the NIEs to avoid the "trap", narrow the gap and eventually catch up with the international technological frontier.Specifically, the main research results are obtained as follows:For the first time, this article divide the world into three types of economies, which are far from the frontier economies (FFEs), the Quasi-frontier economies (QFEs) and the frontier economies (FEs). This division provides a quantitative reference for the conversion of the technological progress pattern of the developing economy and the adjustment of various incentive policy of technological progress. We argue that when one’s per capita productivity-as proxy for technology level-reach two fifths of the United States and more than, it can be considered that the country has change it from FFEs to QFEs.In the quasi-front stage, expand innovation effect caused by market competition will go beyond the catching up effect caused by technology gap, become to be the fundamental driving force to circumvent technological " catch-up trap", speed up technological progress, and finally catch up with the world technology frontier. We show that for the economy far away from the international technological frontier, the Chasing pattern of technology progress can bitterly promote the convergence of technology gap, but may meet the "technological catch-up trap" when they reach the more advanced stage of technology, which then cause the "middle income trap". However, expanding the market competition now can encourage enterprises to turn to the competing pattern of technological progress, to avoid the "technological catch-up trap" and improve the rate of technological progress.Step-progress intellectual property protection will produce dynamic demonstration effect, which can resolve the long-standing " Nordhaus trade-off’between the protection of intellectual property rights and market competition. In the step-progress IPR protection system, every enterprise on lower technology ladder have incentive to increase R&D, promote their technology ladder. In addition, when the technical level of enterprises were close to the frontier, expand competition will cause "beyond competition effect" which stimulate enterprises to increase R&D, then step-progress IPR protection system will enlarge "beyond the competition effect", further stimulate enterprises to increase R&D efforts. Now there are complementary relationship between protection of intellectual property rights and market competition.Foreign-funded firms enter non-frontier economies will generate spillover effect and competition effect, spillover effect become weaker as technology gap become small and competition effect is nonlinear. When the technology gap is reduced to a certain critical value, the competitive effect of foreign enterprises will play a an increasingly prominent role in promoting the technological progress in non-frontier economy especially in QFEs. Based on an empirical study of the Chinese data, we found that the technical progress effect Of foreign-funded enterprises may appeared Inverted "S" type rather than the traditional understanding of "U" type.Subsidy policy can gets more incentive effects of innovation if it implemented in a competitive way, but when the degree of market competition surpass a certain limit, Ongoing subsidies would reduce the sensitivity of enterprises to the industry competition pressure, and cause the risk of "production only in order to obtain subsidies" and overcapacity. The core conclusion of this article is that there exists the "Optimal Space" for industrial policy which based industry characteristics. If industrial policy deviate more from the optimal space, the policy effect would expected to be inefficient.
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