The impact of technological innovation on international trade patterns: The evidence reconsidered

Abstract

This paper presents some “new” evidence in relation to the role of technical change, in particular industrial innovation, on the international competitiveness of the various OECD countries. Its originality consists primarily of: (a) using a technology output indicator to measure technological performance; (b) presenting and comparing various measures of trade and technological performance for each individual OECD country (with the exception of Iceland); (c) analysing at a relatively high level of product-(industry)-disaggregation the relationship between export performance and technological performance.

At the same time, the very limited scope of the paper has to be emphasized: (a) the analysis is purely static, all the evidence presented relates to one year (1977); (b) most of the results obtained are preliminary, and should be further substantiated by more detailed empirical and theoretical research; (c) as a consequence, little attention has been paid to policy implications which it was felt could only be discussed properly in a later stage.

The paper consists of four sections: a brief review of the state of the art (section 1); a discussion on definitions of “technology-intensity” (section 2); the development of the “best” technology output indicator (section 3); and the empirical analysis itself (section 4).

The following most important results emerge from these various sections: (a) there are serious shortcomings in using average “technology-intensity” as bench-mark for classifying products or industries in technology-intensive or nontechnology-intensive categories; (b) there is a substantial difference between technology-intensity as measured on the basis of a technology input proxy (R&D/Sales), and technology-intensity as measured on the basis of a technology output proxy (patents/value-added). That difference leads to different conclusions as to the trade performance of various countries in terms of technology-intensive and nontechnology-intensive goods (tables 4 and 5, section 2); (c) yet, as between countries the most traditional output and input indicators (the number of patents granted and the amount spent on R&D) seem to be closely related (section 3.1); (d) foreign patenting, in particular foreign patenting in the United States (figs 1 and 2, section 3) is a more reliable technology output proxy than domestic patenting; (e) in terms of technological comparative advantage, as opposed to technology-intensity, it is the small OECD countries, as opposed to the large ones, which seem to base their trade comparative advantage on technological comparative performance (table 7, section 4.1); (f) at the individual industry level, it is found that: (i) for most technology-intensive industries, defined however in a less restrictive way than US R&D-intensities, a close relation exists between technological performance and export performance, and (ii) that as compared to other country-specific “resource” variables technological performance is the most important trade explanatory variable, its elasticity increasing with the technology-intensity of industries (tables 11 and 12, section 4.2).

Space constraints prevented us from presenting the data in relation to the inter-industry and inter-country analysis. These can, however, be obtained from the author.