How Does Foreign R&D Affect Oecd Export Competitiveness?

This study is motivated by the observation that there are two East Asian countries, South Korea and China, emerging as major R&D players in the world during the past two decades. In addition to spillovers originated from the traditional R&D countries, the present study incorporates both direct and indirect spillovers from South Korea and China into the determination of the export performance of the OECD countries. The theoretical justification for the linkages of trade-related spillovers to export competitiveness is outlined in the theoretical model extended from [Keller, W (2004). International technology diffusion. Journal of Economic Literature, 42, 752–782.]. Our empirical investigation is focused on assessing the association of spillovers with both the capacity and technological content of export. To this end, the empirical model linking R&D spillovers to a composite measure of export competitiveness is constructed. Our results indicate the persistence of the two East Asian major R&D players in influencing the export capacity and technological content of the OECD countries. The results in turn suggest that maintaining a close relationship with South Korea and China can mitigate the competitiveness–dampening effect resulting from the R&D activities of large industrialized countries.