Trade and Innovation in Services: Evidence from a Developing Economy

48 Pages Posted: 20 Apr 2016

See all articles by Leo Iacovone

Leo Iacovone

World Bank; University of Sussex

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Andrés Zahler

Universidad Diego Portales

Date Written: June 1, 2013

Abstract

Studies on innovation and international trade have traditionally focused on manufacturing because neither was seen as important for services. Moreover, the few existing studies on services focus only on industrial countries, although in many developing countries services are already the largest sector in the economy and an important determinant of overall productivity growth. Using a recent firm-level innovation survey for Chile to compare the manufacturing and "tradable" services sector, this paper reveals some novel patterns. First, although services firms have on average a much lower propensity to export than manufacturing firms, services exports are less dominated by large firms and tend to be more skill intensive than manufacturing exports. Second, services firms appear to be as innovative as -- and in some cases more innovative than -- manufacturing firms, in terms of both inputs and outputs of "technological" innovative activity, although services innovations more often take a "non-technological" form. Third, services exporters (like manufacturing exporters) tend to be significantly more innovative than non-exporters, with a wider gap for innovations close to the global technological frontier. These findings suggest that the growing faith in services as a source of both trade and innovative dynamism may not be misplaced.

Keywords: E-Business, ICT Policy and Strategies, Public Sector Corruption & Anticorruption Measures, Housing & Human Habitats, Commodities

Suggested Citation

Iacovone, Leonardo and Mattoo, Aaditya and Zahler, Andres, Trade and Innovation in Services: Evidence from a Developing Economy (June 1, 2013). World Bank Policy Research Working Paper No. 6520. Available at SSRN: https://ssrn.com/abstract=2287053

Leonardo Iacovone (Contact Author)

World Bank ( email )

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University of Sussex ( email )

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Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

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Andres Zahler

Universidad Diego Portales ( email )

Vergara 210
Santiago, Santiag
Chile

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