Trade and Innovation

Abstract

TRADE AND INNOVATION -SYNTHESIS REPORT byNobuo Kiriyama, OECD Trade and Agriculture Directorate Innovation is critical to creating new sources of growth. Trade is one of the framework conditions that can strengthen innovation in the business sector, as set out in the OECD Innovation Strategy in 2010.This paper broadly sets out three channels through which trade affects innovation. First, imports and foreign direct investment (FDI) as well as trade in technology serve as channels of technology diffusion. Second, imports, FDI and technology licensing contribute to intensifying competition, which can affect incentives for innovation. Third, exports can affect innovation as it serves as a learning opportunity and gives incentives for innovative activities.The benefits of technology diffusion depend not only on the channels of diffusion but also on the absorptive capacity (that is, the capacity to assimilate and apply new information), which covers a number of policy agendas that go beyond typical trade policy issues. Multilateral trade liberalisation, including both tariff and non-tariff liberalisation as well as protection of intellectual property, contributes to ensuring the link between trade and innovation that are discussed in this paper.

Cardiac Arrest or Dizzy Spell

“…Such policy action is warranted because trade is an important engine of growth, in a context where growth and productivity performance in many countries has been poor. Trade, and the related expansion of global value chains, boosts growth through increased productivity by improving resource allocation, increasing scale and specialisation, encouraging innovation activities, facilitating knowledge transfer, fostering the expansion of more productive firms and the exit of the least productive ones (OECD, 2000;Nicoletti et al 2003;Westmore, 2013;Melitz and Ottaviano;, Kiriyama, 2012Bloom et al 2016;Taglioni, 2016). Policy action to restore growth in world trade intensity might be expected to raise mediumterm total factor productivity growth on average by around 0.2% per annum (Figure 3), based on recent OECD estimates of the effect of trade intensity on productivity (Égert and Gal, 2016).…”