The Effect of Technological Innovation on International Trade

39 Pages Posted: 18 Dec 2010

See all articles by Laura Marquez-Ramos

Laura Marquez-Ramos

Jaume I University - Department of Economics

Inmaculada Martínez-Zarzoso

University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences; Jaume I University - Department of Economics

Date Written: 2010

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.

Keywords: Technological innovation, international trade, gravity model, potential and realised absorptive capacity

JEL Classification: F10

Suggested Citation

Marquez-Ramos, Laura and Martínez-Zarzoso, Inmaculada, The Effect of Technological Innovation on International Trade (2010). Economics: The Open-Access, Open-Assessment E-Journal, Vol. 4, 2010-11, Available at SSRN: https://ssrn.com/abstract=1726880 or http://dx.doi.org/10.5018/economics-ejournal.ja.2010-11

Laura Marquez-Ramos (Contact Author)

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

Inmaculada Martínez-Zarzoso

University of Goettingen (Gottingen) - School of Law, Economics, Social Sciences ( email )

Germany

Jaume I University - Department of Economics ( email )

Campus del Riu Sec.
E-12071 Castellon
Spain

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