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Journal Article

No. 2010-11 | April 08, 2010
The Effect of Technological Innovation on International Trade. A Nonlinear Approach PDF Icon

Abstract

In this paper, the effect of technological innovation on sectoral exports is analysed using a gravity model of trade. The technological achievement index (TAI) and its four components, creation of technology, diffusion of old innovations, diffusion of recent innovations and human skills, are used as proxies for technological innovation. The two first components are considered proxies for knowledge acquisition and assimilation (potential absorptive capacity), whereas the last two are taken as proxies for knowledge transformation and exploitation (realised absorptive capacity). We hypothesise that the effect of technological innovation on trade could vary according to the technological achievement by generating a non-linear relationship between technological innovation and trade. Our findings indicate a positive and non-linear effect of technological innovation on export performance, which indicates that there are thresholds for positive signs to occur. To foster exports, countries have to consider not only acquisition and assimilation capabilities, but also transformation and exploitation capabilities once a minimum level of potential absorptive capacity has been achieved.

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JEL Classification

F10

Citation

Laura Márquez-Ramos and Inmaculada Martínez-Zarzoso (2010). The Effect of Technological Innovation on International Trade. A Nonlinear Approach. Economics: The Open-Access, Open-Assessment E-Journal, 4 (2010-11): 1—37. http://dx.doi.org/10.5018/economics-ejournal.ja.2010-11

Assessment

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