Business Cycles, Technology and Exports

Abstract

This article shows -- on both conceptual and empirical grounds -- the importance of business cycles in affecting key relationships between innovation and international performance. While periods of upswing are characterized by a well-documented 'virtuous circle' between innovation inputs, new products and export success, during downswings most of the positive relationships and feedbacks tend to break down. The findings of Guarascio et al. (2014) on the long-term relationships between R&D, new products and exports are confirmed and qualified with major novelties. But when the period of analysis is split between periods of upswing and downswing -- following Lucchese and Pianta (2012) -- significantly different relationships emerge. The empirical test is carried out for the period 1995-2010 at the industry level, on 21 manufacturing and 17 service sectors; country coverage includes Germany, France, Italy, Spain, the Netherlands and the United Kingdom, representing a very large part of the European economy.

Keywords: Business cycles, Innovation, Export, Three Stage Least Squares.

JEL Classification: F41, F43, O31, O33, C3.