International Trade Innovations - Essay Example

Engine of long-run economic growth. This means that a nation's economic prosperity depends in large part on its capacity for innovation, for which technological innovation is a key driver in advanced countries Empirical evidence, however, suggests that some industries are more innovative than others. Hence, it would be desirable from a public policy perspective to identify and promote sectors displaying both a high innovation rate and, in an increasingly competitive international economy, a high degree of international competitiveness (Henisz, 2000).

It is frequently argued that the high-tech industry sectors, in contrast to low-tech sectors, satisfy both conditions, with the implication that public policy should be directed to enhancing the performance of high-tech sectors. As the author of a recent OECD working paper has put it, ' technology is a key factor in enhancing growth and competitiveness in business'. Furthermore, he argues that: indicators of technological characteristics. . other sectors.If this is true, both government policy and firm strategy need to be informed by reliableindicators of technological characteristics.

Again, in Hatzichronoglou's words, 'in order to analyze the impact of technology on industrial performance, it is important to be able to identify those industries and products which are most technology-intensive, through criteria allowing the construction of special internationally harmonized classifications'. This approach lift up at least two important issues. The first is whether such classifications can be meaningfully constructed given both the intractability of the concepts involved and difficulties in data collection.

A second issue is the basic assumption that policy emphasis should be placed on technology-intensive industries because they have a greater impact on growth. In this paper, we argue that while it may be possible to construct indices of technological intensity that are useful for some purposes, the ones that are currently in use and proposed are of limited scope. This is a reflection of the technicalities involved in formulating and operationalising the indices, but it also reflects problems in the underlying premise, namely that technology-intensive sectors are more growth-inducing than low-tech sectors.

Innovation RateFurther insight into the conditions defining high- (or low-) tech industries could be aimed by taking into account the rate of technological innovation, defined as the proportion of businesses undertaking technological innovation in a given industry. To illustrate this approach, the following typical description is useful:A high-technology industry is, loosely speaking, an industry in which the success of companies depends largely on their ability to keep up with rapid innovation