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Innovation and trade policy coordination: the role of firm heterogeneity


  • Navas, Antonio

    () (Department of Economics)

  • Sala, Davide

    () (Department of Business and Economics)


Recent studies have concluded that R&D grants can induce firms to export and that exporting and innovating can be complementary activities at the firm level. Yet the trade literature has paid little attention to the scope of innovation policy as a stimulus to both trade and innovation. To investigate this question we rely on a general work-horse model of trade and firm heterogeneity with firm investments in R&D activities. The multiplicity of equilibria together with the interplay of innovation and trade policies uncover novel results. In particular, we show that the effects of either policy depend on the degree of protectionism in a country. Therefore, countries can respond differently to the same policy, and similarly to different policies. In such a context, different governments may face different degrees of freedom regarding how to achieve a given target. This finding leads us to discuss the issue of policy coordination.

Suggested Citation

  • Navas, Antonio & Sala, Davide, 2013. "Innovation and trade policy coordination: the role of firm heterogeneity," Discussion Papers of Business and Economics 18/2013, University of Southern Denmark, Department of Business and Economics.
  • Handle: RePEc:hhs:sdueko:2013_018

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    References listed on IDEAS

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    Cited by:

    1. Antonio Navas & Antonella Nocco, 2016. "Trade Liberalization, Selection and Technology Adoption with Vertical Linkages," Working Papers 2016008, The University of Sheffield, Department of Economics.
    2. Antonio Navas, 2015. "Technology and the dynamics of comparative advantage," Working Papers 2015005, The University of Sheffield, Department of Economics.

    More about this item


    Innovation; innovation policy; heterogeneous firms; technology adoption; trade policy;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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