International trade, innovations and technological achievement in countries.
Burinskiene, A.
1. Introduction
International trade became increasingly important for studies in
the post-war period. Without international trade, few nations could
maintain the adequate standard of living. With only national resources
being available, each country could be able to produce the limited
number of goods. International trade allows the involvement of the
enormous variety of resources and their worldwide accessibility. It also
facilitates the distribution of the wide range of goods produced in
different parts of the world.
Technological innovations are the engine of growth. Some population
might argue that technology is driven only by science, which is largely
independent of economic incentives. But the commercial exploitation of
new scientific ideas (such as aircraft, machine tool, semiconductors,
etc.) always requires investments. Only, when scientific idea has
commercial value, it will be attractive for private companies. According
some studies, companies invest in new technology when they have seen the
opportunity to earn profit. The trade itself may help with technological
dissemination, if foreign exporters suggest the ways to use technology
and importers see how using new technology local products can become
more attractive to consumers in their country.
Because of innovations higher capacity has to be introduced to
support international trade. For example, air transportation carries an
insignificant amount of freight (0.2% of total tonnage) compared with
maritime transportation but its importance is much more significant in
terms of the total value (15% of the value of global trade). Air
transportation is the fastest and due to this about 70 times more
valuable goods carried than with maritime transportation and about 30
times more--than with land transport (in case of electronics).
The freight transport system composed of modes, infrastructures and
terminals spans across the globe. It insures a physical accessibility to
support international trade in terms of capacity, efficiency, and
security. Due to innovations--improvements in the modes and
infrastructures--higher capacity and throughput has been introduced.
Ports are particularly important in such context that they are gateways
to international trade through maritime shipping networks. Decreasing
transport costs do more than increasing trade; they could also help
change the location of economic activity.
Information technologies (ICT) have played a role by facilitating
transactions for international business operations faster. This is
particularly important since customer finalizes the financial
transaction upon delivery; no need to wait several weeks due to the long
distances involved.
These innovations basically changes products and services put on
trade, the way (process) a given products are moving between countries
and organisations, and replaces organisational routines with a new ones
(behaviour). The growth can be achieved with horizontal innovations
(increase in the number of varieties) and vertical innovation (the
quality improvement of existing products).
Due to this, there is the growing number of empiric researches
where authors seek to analyse relationship between innovations and
international trade.
The study is organised as follows: in the first part of the study
the concept of innovations is presented, later on the theoretical models
mentioned in different theories are analysed, and finally the technology
achievement's measure is introduced and the empiric study is
shortly presented. In the first part of the study deeper understanding
of innovations is provided. Herein different models (dynamic and static
ones) are presented seeking to introduce technological change into the
theory of world trade. These models cover open innovations,
producer-centred and user-centred innovations, company-level
innovations, horizontal and vertical innovations, etc. Also models,
which are dedicated to the change of trade costs and their impact to
companies' process and product innovation decisions, are reviewed.
Later on the technology achievement index (TAI) is introduced in
the paper. Also the achievement in e-commerce as advanced trade
technology is analysed in the empiric part of the study. Based on study
results countries are ranked.
The study is based on historical method, comparative, and empirical
analysis.
2. The Concept of Innovations
Innovation is a distributed process across many actors, companies
and organizations, and is influenced by regulation, policy, and social
pressure. Thinking widely, first, innovation is the part of a wider
system; second, innovation has to be seen not only as product or
process, but also interrelationship between these two has to be
recognized--for example, incremental product and process improvement
over the 16 years from 1880 to 1896 led to fall the price of light bulb
around 80%, and this ensured its wide spread among users; third,
innovation, which fails to meet user needs, may not be accepted; fourth,
production of products or services, which the market doesn't want,
or designing processes, which don't meet the needs of end user, and
will get resistance during diffusion. The better understanding of
economic influences on innovation or vice versa is important in
formulating public policy towards international trade (Park, 2010).
Talking about the way for each innovation, technology push and pull
is considered. If technology eventually found its way to the marketplace
(when we call this "technology push"), but if the market
signalled needs for something new which then drew out new solutions to
the problem and necessity becomes the mother of invention (when we call
this "need pull"). Sometimes one of them ("pull" or
"push") will dominate, but successful innovation requires the
interaction between them both (Tidd, 2006).
Technological innovations are arguably the most powerful
determinant of economic future. The improvement in the Western standard
of living during the past would not have been possible without technical
innovations.
Based on historical experience, it is hard to predict when big
changes take place. But they involve the convergence of the number of
trends, which results into a "paradigm shift" where the old
order is replaced. For example, according "techno-economic paradigm
shift" the change impacts whole sectors or even whole societies.
Innovations take place within the set of rules which are and
involve actors who adopt the innovation by doing what they do (talking
about product, process, behaviour, etc.) but better (Tidd, 2006). Later
on actors will continue with the new technology, which, first, may
represent a different basis for delivering value e.g. telephone vs.
telegraphy; second, may reduce benefits for old technology because the
standard is just changed (when the combined effect has to be not
underestimated); third, may involve completely new markets, which
players have to see and not to ignore; fourth, new technology has to be
picked up until it is not too late (technological leaders pick-ups
product available in the market, other players have at best to be the
fast followers).
The diffusion of innovations is unique. The diffusion for some
innovations is faster, for others--slower. By analysing the diffusion of
innovations in enterprises, the following types of enterprises may be
distinguished (Fig. 1):
1) Technological leaders. They are among the first companies to
introduce innovations and share common experiences with other
enterprises;
2) Potential technological leaders. They face especially high costs
for the introduction of technology;
3) Dynamic technological adopters. They devote more attention to
the analysis of advantages and opportunities before adopting the
innovation;
4) Technologically marginalised. This group consists of small
enterprises that install innovations in the last stage.
In terms of percentage, the number of technological leaders is low;
meanwhile the number of dynamic technological adopters--high.
[FIGURE 1 OMITTED]
The processes of the diffusion of innovations must be consistent.
In order to achieve that innovation were recognized by the
technologically marginalised companies, technologies are to be sometimes
modified to facilitate their application to a major extent.
In different countries national advantages in natural resources
help traditional industries to show technological advantage in new
product fields. Resource-based theory of innovation assumes that company
has access to various internal resources and competences to interact
with environment in which they operate. The position of firm depends on
its historical internal learning process, strategic future decisions,
past successes, and failures. This suggests possible future directions
for the company which include actual patterns of product innovation,
organisational learning, financial investments, and technology
achievement in country.
The international patterns of innovative activities have long
recognized the important influence. International difference in prices
can help generate very different pressures for innovation (e.g. the
effects of different petrol prices on the design of automobiles in the
USA and Europe); local natural resources may also create opportunities
for innovation; also local private and public investment activities
create innovative opportunities.
These days more companies carries innovative activities outside
their home country (in the 1990s, only 12% of the innovative activities
were carried outside home country by the world's largest 500
technologically active companies) (Tidd, 2006).
3. The Models of Innovations
Both the transfer of technologies to less developed countries and
technological innovations in developed countries play an important role
in determining changes of world trade over time. Small attention of
theorists was attracted seeking to introduce technological change into
the theory of world trade. Some explanations were given by Krugman
(1994). He mentioned that existing models well suit for the analysis of
technology one-for-all changes, but fewer suits to the analysis of
on-going technical changes. For example, traditional models are oriented
to the increase of efficiency in production for a given range of goods.
Other--product cycle models investigate the development of new products.
The simplest model of innovations is presented by Grossman and
Helpman (1991), which analyses the role of innovation on growth. The
model assumes constant returns to scale. Under the assumption of
increasing returns of capital when all other main features of the
Grossman-Helpman model are unchanged, analysis shows that assumption of
constant returns is "unrealistic" since innovation has
"realistic" economic effects (Guarini, 2009).
The model of innovation, presented by Krugman (1994), involves the
pattern of international trade, which is determined by the continuing
process of innovation and technology transfer. Model is developed for
innovating North and non-innovating (imitating) South. In North new
products are introduced and produced immediately, but in South the
technology is adopted with the lag. This lag gives the rise to
international trade based on some interesting implications. Each product
is exported when first introduced in North because of its monopoly
position to South. After some time new goods become old goods and can be
produced in both: North and South. There are also some assumptions in
model: (1) Wages are higher in North because of monopoly position, even
if labour productivity is the same in both regions; (2) Living standards
are higher in North; (3) North exports new products and imports old
products, when wage difference between North and South is significant.
The technology transfer from North to South will have negative
effect in North (temporary reduction in northern welfare). If north
extending the range of new goods, the demand of products (produced in
North) increases. The any given relative price rises and workers'
real wage in terms of output rises as well. Since developed North
countries constantly innovate, new industries are emerging there. In
case of capital reallocation from North to South, the relative income of
South workers rises. But if the relative price of northern product
rises, capital moves back (from South to North). This presents the
continuing process of innovation and technology transfer.
Further it is interesting to know the effect technology transfer
has. The change of the number of products produced and the change of
production location have effect on world productivity. This effect shows
that innovation through the increase of the range of goods influence the
increase of real world productivity. It also affects the distribution
between South and North regions (Korner, 2011).
Zon et al. (1997) transform the Krugman model in three ways. First,
it is interpreted that in North there are the high-tech sectors, which
produces new variety of goods. These goods can be produced using
high-skilled workers only. When in South produce low-tech variety of
goods using low-skilled workers. Second, low-skilled workers (which
aren't mobile) can be replaced with high-skilled workers (which are
mobile within economy) and they can produce low-tech goods. Third, the
rate of imitation depends on the behaviour of entrepreneurs who switches
from high-tech to low-tech production technology.
Northern firms develop new final-goods varieties and products in
North, and plans cost-reduction over their infinite life-times in South.
Some countries, often through the activities of MNEs, have become active
(such as S. Korea, Taiwan) in horizontal innovation (increase in the
number of varieties) and others (such as China, India) in vertical
innovation (quality improvement of existing products). They are even
classified into horizontal innovations of final and intermediate goods,
and vertical innovations of final and intermediate goods. Consumers
benefit from accelerated vertical innovation but may lose from
accelerated horizontal innovation.
The factors which make a country to become receptive to the
technology embodied in foreign goods are closely linked, among others,
to the degree of openness to import in the country, what means its trade
and financial liberalisation, as well adequate institutional settings.
Hence, the more a country is able to absorb foreign knowledge and
improve upon technologies conceived in other countries, the more it will
gain competitiveness, and the more it will benefit in terms of its
long-run growth rate of income (Cavallaro & Mulino, 2007).
The "technology gap" model of international trade. A
simple model developed to present the relationship between technology
and trade. Basically it is Ricardian model which implies the
characteristics of countries and products: countries are ranked by the
level of technology and products are ranked by "technology
intensity". Then each country gets a niche on the scale of products
which is appropriate to its position as technology leader (Krugman,
1994). The effect of technological progress is analysed in both cases:
progress in advanced country that widens "technology gap"
between it and another country, and progress in a less advanced country
that narrows the "technology gap". In the first case, the
technological progress of leader opens up greater opportunity to
international trade. Technical advance means the rise of export for the
advanced country and gains from progress abroad for the less advanced
country; real incomes in both countries rise. In second case, the
"catch-up" step by follower tends to hurt the leader by
eliminating the gains from international trade.
Authors focus on vertical innovations and derive the impact of
"catch-up" process on import and export demand functions. The
way for lagging-behind country to become competitive in international
markets depends on its ability to "catch-up" technologically
with more advanced countries. This ability is more important rather than
trade gains from progress abroad.
It is stated in theory that there are various channels through
which technology can be transmitted across countries. one channel is
related with the diffusion of technology. Technology is embodied in
capital and intermediate goods so the direct import of these goods is
one channel of transmission. These countries, which have faster growth
in TFP, import more from the world's technology leaders. One note
about EU new states members to be added. The new members are very
different from the old ones. The new member regions are catching up
technology standards of Western Europe, they are dynamic with fast
rising incomes (Baldwin & Wyplosz, 2009).
Cavallaro & Mulino (2007) built model where technology
"catch-up" process is driven by international knowledge spill
overs and facilitated by the integration of markets.
A gravity model. A model that has been widely used to study the
determinants of trade is the gravity model. The gravity model is
augmented by authors Martinez-Zarzoso & Marquez-Ramos (2005). Herein
variables are used to analyse the impact of technological innovations
and transport infrastructure on international trade. Authors have
analysed the relationship between trade, technological innovation and
geography. Seeking to analyse how technological innovation transforms
the geography of trade, they tested empirically how the innovation and
geographical factors influence international trade. Martinez-Zarzoso
& Marquez-Ramos (2005) study results support the hypothesis that
countries tend to trade more when they are "closer" from a
technological point of view. Authors also analysed if technology has any
effect on geographical distance in a more globalised and integrated
world. Study results showed that the development of information
technology has lowered the effect of geography on trade, e.g. distance
on trade; this means that the development of technological innovation
means that long distances are less important nowadays than in the past.
Marquez-Ramos & Martinez-Zarzoso (2010) studied the
relationship between technological innovation and international trade
(in particular, the effect of technological achievement on exports).
Authors analysed the effect of technological variables on sectorial
exports. They investigated also the existence of possible nonlinear
relationship, since the effect of improved technological innovation on
trade could be different in countries (it depends on technological
achievement). Study findings showed that non-linear relationship exists
as the expected; positive effect of technological innovation on export
performance is confirmed. "U-shaped" relationship is found
between export and the creation of technology; also between export and
the diffusion level of old innovations. Positive effect of technological
innovation on exports received for the countries which classified as
technological leaders (according TAI) and potential leaders. An
inverted--"U-shaped" relationship is found between export and
the diffusion of recent innovations; also between exports and human
skills. Therefore, the low and high level of these components leads to
lower exports, whereas an intermediate achievement leads to higher
exports.
Overall, the creation of technology, according Marquez-Ramos &
Martinez-Zarzoso (2010), fosters international trade in all countries;
the TAI shows only the size of the effect. of course, the contribution
of single country to export varies, e.g. countries with the intermediate
diffusion of old innovations export the less.
Some models are dedicated to the diffusion. These are demand side
models and supply side models. Demand side models focus on demand side
of the diffusion process, and ignore supply side factors. While, supply
side models emphasize the relative advantage of an innovation, the
availability of information, the reduction of barriers to use, and
feedback between developers and users.
The Probit model takes the population of potential leaders and
adopters. It assumes that potential leaders and adopters have different
threshold values for costs or benefits, and will only adopt beyond some
critical or threshold value. In such cases differences in threshold
values are used to explain different level of adoption. This suggests
that higher number of similar potential leaders and adopters helps to
have faster diffusion. In the Probit model potential leaders and
adopters know the value of adoption, but delay adoption until the
benefits are sufficient. However, it is unrealistic to assume that they
have perfect knowledge about the value of innovation.
Therefore, Bayesian models of diffusion allow potential leaders and
adopters to hold different beliefs regarding the value of the
innovation, which they may revise according to the results of trial
tests of the innovation. Because these trials are private, imitation
can't take place till other potential companies can't learn
from the trials. This suggests the idea that better informed potential
leaders and adopters may not necessarily adopt innovation earlier than
the less well informed once, which was the assumption of earlier
diffusion models.
The simple epidemic model--the model that was the earliest created
and still often is used. It assumes that the spread of innovations
depends on geographical proximity of existing and potential leaders and
adapters. This model highlights the communication and the provision of
clear technical and economic information. However, the epidemic model
has been criticized because it assumes that all potential leaders and
adapters are similar or have the same needs. Due to this, the Bass model
of diffusion was modified seeking to include two different groups of
potential adapters: innovators, who are not subject to social emulation
and subsequent imitators, they are not innovating themselves. The
presented Bass model is still highly used in economics.
The choice between the last two models depends on the
characteristics of innovation and the nature of potential leaders and
adapters. The simple epidemic model provides a good fit to the diffusion
of new processes, techniques and procedures; whereas the Bass model well
fits for the diffusion of consumer products. However, the mathematical
structure of the epidemic and Bass models tends to overstate the
importance of differences in adapter characteristics, but tends to
underestimate the effect of macroeconomic and supply side factors. In
general, both of these models are dedicated for diffusion, but they are
used when the total potential market is known, this means that they are
more oriented to the modifications of existing products and services,
rather than for totally new innovations.
The dynamic models of innovation. Innovation is reflected to the
variety and quality of either final goods or intermediate inputs.
Findlay (1978) developed dynamic model, which includes technology
transfer between high-technology country and low-technology country. The
model is based on single idea that new technologies are diffusing,
because old machines are anyway depreciating. Authors mention that
technology and trade are interlinked.
Looking at process and products innovations the AU model describes
the patterns associated with their life cycles. Model comes with an
empirical observation that the development of product and process vary
not only with each other but also over the time. At the beginning of new
product life cycle, product innovation occurs and is driven in part by
the active participation of leading end users. This product's
improvement is delivered very rapidly, but over the time still requires
some learning from innovating company. There are three phases. The
period of rapid innovation is called "fluid" phase. As product
innovation slows down, process innovation accelerates and reaches peak
in next phase, which is called "transitional" phase. This
phase starts with the rapid rise of product demand. Market competition
between companies requires product's improvement in quality and
reduction in price. During this phase the industry becomes concentrated
but producing companies don't reach profit and start struggle to
get the advantage of economies of scale. During the last phase, which is
called "specific" phase, processes becomes capital intensive
and neither product nor process can be easily changed due to their
interdependence. Innovations become ever more incremental. In such
environment changes are more difficult; industries are vulnerable to
breakthroughs that reset the cycle.
The evolution of more realistic dynamic models of innovation is
still on-going. Formal dynamic models of technological innovation are
relatively underdeveloped; and existing models are typically quite
aggregate and don't separate product from process innovation. There
is a clear need for the dynamic models, which reflect company-level and
industry-level causal factors and to provide other insights.
They have to be dedicated for the complex systems of disruptive and
discontinuous events that involve different networks of actors and
sources.
open innovations and models. Economic history also holds the
examples of open innovation. A system under which innovation is
non-proprietary and occurs under free and open development conditions
(it is an alternative or complement to proprietary innovation). In most
open innovation settings, goods or inputs are actually available for
free. Chesbrough (2003) argues that open innovations may be a more
profitable than closed innovations at some time. He provides the number
of case studies, where companies like Merck, Xerox, Intel, IBM, and
Proctor & Gamble, etc. found that given open access to their
technologies helped to create opportunities for further innovation and
commercialization and to achieve increase in overall value of their
technologies. Let's start theoretical analysis from the Saint-Paul
(2003) model. Here the technology for creating it is available for free
(in the public domain); no licensing or royalty fees are associated with
it. Supplier then charges only the marginal costs associated with
manufacturing the good. one especially useful feature of Saint-Paul
(2003) model is that the model incorporates both closed and open
innovations. other theoretical models that focus on only one type of
innovation miss out on the joint interactions; for example, open source
communities may generate proprietary innovation, when the overall
technical change is ambiguous. According Harhoff et al. (2003)
theoretical model, the chance that innovation will be widely adopted
increases when other factors are held as constant (Park, 2010).
Models, which include producer-centred and user-centred
innovations. The growing number of researches focuses on these both
models. Empirical studies have found that many successful products,
which were promoted to goods market by producers (such as sports
equipment, scientific instruments, medical applications, and ICT), were
actually developed by users. In addition, innovating users often were
not taking the advantage of available intellectual property protections
or innovation subsidies.
Evidence has been rapidly growing towards users, which rather than
producers, usually create and modify goods to serve their own needs.
Users can be either companies or individuals that expect to benefit from
using an innovative technology. In contrast, producers expect to benefit
from selling it. Producers and end users can have different
relationships to different innovations. For example, Boeing is the
producer of airplanes and the user of machine tools. In such case,
Boeing is a producer and end user (innovator) (Hippel & Jong, 2010;
Hippel, 2005).
Models, which include company-level innovation. These models
generate insights into the nature of innovation and decision making
requirements at the level of company, pointing important links between
innovation process and other the most important processes.
These models cover the introduction of new or improved product,
process or service to the companies. Since the 1950s till 1990s there
are five generations of these models. The first decade was characterised
by successive waves of technological innovations. R&D push is
highlighted in these models. The second decade stands out for market
pull. The market is full of ideas and provides direction to research and
development (R&D) activities. The third decade involves push or
pull-push combinations. During fourth decade the integration between
R&D and production is emphasized. Last decade involves
customers-centred innovations and attention to corporate flexibility and
speed of development (time-based development). Increased focus on
quality and other non-price factors. This decade is famous because of
the development supported by advanced information technology (Hobday,
2005).
Schmidt-Tiedemann (1982) concomitance model divides innovation into
three spheres: exploration, innovation and diffusion. The term of
concomitance is used to show how different business functions (R&D,
sales, and distribution, etc.) accompany and interact with each other
during innovation process.
Abernathy and Clark developed model describing such phases:
initial, continuous, and fluid phases during which two dimensions are
considered:
1) the target (what will be new technology and for whom it will be
dedicated),
2) the technical--how technology will be created and delivered
(Tidd, 2006).
The Wheelright and Clark (1992) funnel model shows how ideas are
selected and how innovation portfolio could be managed. The model
incorporates feedbacks from one stage to another during phases are such
as: idea generation, overall design of product, and rapid focused
development.
Waterfall and spiral software development models are also widely
known and provide guidelines how to manage process through software life
cycle.
Utterback and Abernathy model highlights the changing character of
relationship between product and process innovations when company grows,
volume increases, market matures, and industry structure evolves. This
model involves industry standard to product innovation in early stage,
and later paves the way to process-centred innovation when volume grows
(Bresson & Townsend, 1981). Changes from unit production to mass
production and to continuous process are very important, when the
relationship between product and process innovations is considered. For
example, process intensive phase is never reached and product design
stage is not touched at process level. Also high costs are the attribute
of unit production. Moving from unit production to mass production
learning has significant role (Hobday, 2005).
Linear stage model describes how companies (maybe entire
industries) are moving from one stage to another: from R&D activity
to production, or from early to late stage if product life-cycle is
considered.
Naive stage model has the view to innovation as one discrete
activity followed by another isolated activity (each activity or stage
are isolated); the feedback loop between stages is not taken into
account in such model.
Atkeson & Burstein (2010) build the model used to measure the
impact of international trade on firms' product and process
innovations' decisions. The reduction in international trade costs
can have a substantial impact on individual company's decisions to
exit, export, and invest in R&D activities seeking to improve the
costs or quality of existing products and create new ones. There are two
effects included into model: the first is the direct effect, which is
due to the change of trade' costs and their impact to
innovation's decisions; the second is indirect effect that arises
from the changes in companies' decisions (towards process and
product innovations) caused by the change in trade costs.
The reduction in trade costs leads to the re-allocation of
production; and investments from smaller, less-productive, non-exporting
companies are re-allocated to larger, more-productive, exporting
companies. This re-allocation does lead to a change in the productivity
of the average company; also the productivity differences across
companies that result into larger increase in the volume of
international trade (Atkeson & Burstein, 2010). Melitz (2003) model
(involving Pareto productivity) show that the welfare gains from
international trade only depend on the level of trade, which was before
and after the change in trade costs, also on the gravity-based
elasticity of trade describing the changes in trade costs, and
that's it (i.e. other variables of the model shouldn't be
taken into account).
Atkeson & Burstein (2010) analytically study the impact of
change in marginal trade's costs through three special cases. In
the first case, it is assumed that all companies export. In the second
special case, only the most productive companies export; they are able
to choose exit, export, and take process innovation's decisions.
Main results correspond to the model of Melitz (2003). In the third
case, companies have endogenous productivity dynamics which rises with
the application of process innovation, but their exit and export's
decisions are independent from company's size. In the second and
third mentioned cases, it is also assumed that the real interest rate is
zero. Results showed that changes in trade costs have the same impact on
steady-state productivity, in all mentioned three cases.
The extent of companies' export is important and influences
the changes of trade costs. In Atkeson & Burstein (2010) model it is
shown that, in response to a decline in international trade costs,
changes in process and product innovations largely offset. Authors also
find that the dynamic welfare gains from trade, when process innovation
is elastic, are not substantially larger than those gains when it is
not. This is true despite the fact that elastic process innovation leads
to very large dynamic responses of exports and the increase in
firm's size.
Empirical researches show that bigger adjustments in distribution
occur due to the entries or exits decisions of companies in market. Also
results shows that open economy leads to new gains when scale economies
is reached on branch-level (Tybout, 1991). Foreign competition forces
branches, which are below the efficient scale, to exit; foreign
competition improves the usage of new technologies (the increase of
technology's acceptance is seen between industries). Some studies
have included also the maturity of branch before the choice of
technology but still very little has been done. Some researches show
that multinational enterprises (MNEs) buy foreign counterpart seeking to
distribute technology faster than domestic ones (Hallak, 2000).
Authors Navas-Ruiz & Sala (2007) added into their model the
possibility for companies to adopt more costly productive technologies
and showed that the productivity of manufacturing branch increases in
response to lower trade costs. When scale of operations increases
exporters get returns from costly productivity-related investments,
since trade entails a larger access to product markets. The demand to
company's product increases the production capacity of domestic
exporters. In addition this suggests that exporters have to adapt more
innovative technologies (Navas-Ruiz & Sala, 2007).
Finally, it is evident the main assumption typical for all
presented theoretical models--once created innovations are diffused and
adopted immediately and easily. However, in practice, innovations may
sit on the shelf for some time or could have faced some difficulties
during adoption. It would be useful for authors during theoretical
discussions to use the term "successful innovations" or
"successful introduction" talking about new or improved
product, process or service.
4. Technological Achievement in Countries: Empiric Study
Technological innovation can be defined as the countries'
capacity to put new ideas into practice by developing new goods,
services, and processes, which play the key role in international trade
and economic development (Marquez-Ramos et al., 2010).
The United Nations Development Programme (UNDP) presents the
technology achievement index (TAI), which is used to measure how well
each country is creating and diffusing technology and building a human
skill base, reflecting capacity used for the technological innovations.
It is the composite measure of technological progress that ranks
countries on a comparative global scale.
The TAI is calculated from four indicators: (1) the creation of
technology, (2) the diffusion of recent technologies, (3) diffusion of
old technologies, and (4) human skills:
1) The indicators for creation of technology are patents granted
per capital unit and royalty and license fees received from abroad per
capital unit.
2) The diffusion of recent technologies is calculated from the
number of Internet hosts per capital unit and the share of
high-technology & medium-technology exports as the percentage of all
exports.
3) Indicator for the diffusion of old technology is telephones
(land line and cellular) per capital unit and electricity consumption
per capital unit.
4) Indicator of human skills is calculated based on the average
number of years of schooling and the gross enrolment ratio at the
tertiary level in science, mathematics, and engineering.
Many elements can be used to present technological achievement in
country, but a composite assessment is more easily made based on a
single composite measure than big range of different measures.
The index is calculated as the simple average of these four
indicators. The indicators in each dimension are given equal weight, and
the dimensions are given equal (one-quarter) weight in the final index.
This means that the diffusion of technology is given more weight since
two of the four indicators deal with this.
The TAI is presented for 68 countries. For other countries, data
were missing or unsatisfactory for one or more indicators, so the TAI is
not measured (as it could not be estimated).
The countries are classified in four blocks as shown by the
existence of a gap between the last country in one group and the first
country in the next group (according Martinez-Zarzoso &
Marquez-Ramos, 2005; Archibugi & Coco, 2002).
First group consists of Technological leaders (TAI is above 0.5).
This group includes countries with a high capability to create and
sustain technological innovations.
Second group--Potential Technological Leaders (TAI is from 0.35 to
0.49). Group includes countries that have invested in all four
dimensions (creation of technology, diffusion of recent innovations,
diffusion of old innovations and human skills. Scores are derived as an
index relative to the maximum and minimum achieved by countries in any
indicator of above mentioned dimensions), but have been less innovative.
Third group--Dynamic Technological Adopters (TAI is from 0.19 to
0.34). Countries in this group try to achieve growth from the adoption
of technology and in their level of development (Table 1).
Fourth group--Technologically Marginalised (TAI is below 0.19). The
last group consists of marginalised countries: many African countries
belong to this group. It is difficult for them to gain access even to
the oldest technologies; so low technological achievement level is
associated to low income levels (UNESCO, 2010).
All countries need to have the capacity because the ability to
apply technology can't be fully done without the capacity allowing
adapting products and processes to local conditions (Desai et al.,
2002). All mentioned factors: the availability of human capital, the
structure and flexibility of trade and financial institutions, the
degree country's openness to foreign trade impact the TAI in
specific country.
As the TAI is also incomplete and technological achievements are
more complex in countries, it is impossible to reflect the full range of
technologies--from manufacturing to transport to trade technologies.
In addition, the achievement in advanced trade technology is
involved into study; particularly the achievement in e-commerce
technology is measured by author. E-commerce is quite new technology. It
provides more opportunities to conduct transactions and encourage the
development of new forms of trade. E-commerce can be described as the
usage of electronic networks (Internet and electronic data interchange
(EDI) networks) for buying and selling goods. In literature quite often
the broader term is used. E-commerce is considered as a concept for
trade based upon products and services that are being marketed,
contracted, and paid for over the Internet (Bergendahl, 2005).
E-commerce is considered, as employment of electronic networks for
simplifying and expediting the purchase-sales process of goods
(Sarapovas, 2005). This means also that the usage of e-commerce
technologies is the main factor, determining the perspectives of
international trade development.
During research the achievements on e-commerce technology are
examined for 2599 multinational enterprises (MNEs) from trade industry
of 157 foreign countries. In general, results show that MNEs are more
advanced than national enterprises. Results showed that e-commerce
technologies are applied in 65 countries (from 157 world countries). The
average rate is 18% for selected countries.
In order to avoid test errors, the application practices of
e-commerce technologies are presented only for those countries where the
number of trade enterprises, which are included in Planet Retail (2008)
database, is significant. For this research non-random sampling is used.
The sample size is determined by using on-line calculation. The results
were showed that confidence interval is equal to 3.14%.
Based on results, countries are selected accordingly:
Technological Leaders (when the application of e-commerce
technology between MNEs is above 23%). Top three Technological Leaders
are Sweden (rate is 33%), UK (33%), and Japan (29%).
Potential Technological Leaders (the application of e-commerce
technologies between MNEs is from 12% to 22%). Most of the countries,
which apply e-commerce technologies, fall under this group.
Dynamic Technological Adopters (when the application of e-commerce
technologies between MNEs is less than 11%).
Technologically Marginalised (the e-commerce technologies are not
applicable by MNEs in the country). 92 countries fall under this group.
Finally, TAI results were compared with achievements on e-commerce
technology in different countries. The comparison of both: TAI and the
application of e-commerce technologies is conducted to reveal how TAI
represents the application of e-commerce technology in countries; also
to classify countries into groups representing difference in
technological achievement.
In the literature these main methods, which can be used for the
classification of countries, are presented:
1) estimation methods. The criteria used for estimation vary and
may include the TAI growth, size, etc. Countries could be evaluated on
the basis of several criteria; later the markets with similar scores are
grouped. These methods are used when is impossible to give an accurate
picture using only statistical evidence.
2) historical methods. Different political, economic,
technological, and social indicators are used with their historical
values seeking to identify and group countries, which have different
achievements' levels.
Based on historical method it was noted that the application of
e-commerce technologies differs in various countries.
Finally, the achievements in e-commerce are compared with TAI for
34 countries and these countries are classified into such 6 groups:
1) Absolute Technological Leaders: Finland, Sweden, Japan, United
Kingdom, Norway, France;
2) Technological Leaders in TAI but Potential Technological Leaders
in e-commerce: USA, Netherlands, Canada, Germany, Ireland, Belgium, New
Zealand, Austria;
3) Absolute Potential Technological Leaders: Spain, Italy, Czech
Republic, Slovakia, Greece, Portugal, Poland, Mexico, Slovenia;
4) Dynamic Technological Adopters in TAI and Potential
Technological Leaders in e-commerce: Brazil, India, Columbia, Tunisia;
5) Potential Technological Leaders in TAI but Dynamic Technological
Adopters in e-commerce: Hungary, Malaysia;
6) Absolute Dynamic Technological Adopters: Thailand, El Salvador.
The results of empiric study show that some countries are ranked
higher according TAI and lower in the application of e-commerce
technology or vice versa. In absolute cases it's evident that
technological achievement is stable in the country. Absolute
technological leaders have huge capacity allowing the application of
technology in recent decades.
There are some countries that have successfully used technology for
sustained economic growth and for equitable development. The results
show the high levels of commitment to the diffusion of technology
usually through the population and the development of human skills.
Second, countries, which adopted very pro-active policies and provided
many incentives for businesses to train their workers, have invested
lots of money into the diffusion of technology. Third, there are
countries where diffusion of technology has not been widespread, and
capacity has not been translated into to any significant level (such
cases could be met for large country with very large population). This
shows that country dilutes its strengths for technological achievement.
Finally, the technical advances raise the export for the advanced
country and gains from progress abroad for the less advanced country.
5. Conclusion
Overall, the creation of technology fosters international trade in
all countries, independently form their technological achievements. of
course, the contribution of single country to export varies, e.g.
countries, which have higher diffusion of new innovations, export more
and countries, which have higher diffusion of old innovations, export
less. Looking from this perspective the better understanding of these
effects is important in formulating public policy towards international
trade.
However, some innovations are incremental, which diffusion can lead
to large gains in international trade.
Talking about countries, there are some countries that have
successfully used technology for sustained economic growth and for
equitable development show the high levels of commitment to the
diffusion of technology usually through the population and the
development of human skills. Second, there are countries, which adopted
very pro-active policies and provided many incentives for businesses to
train their workers, have invested lots of money into the diffusion of
technology. Third, there are countries where diffusion of technology has
not been widespread, and capacity has not been translated into to any
significant level (such cases could be met for large country with very
large population). This shows that country dilutes its strengths for
technological achievement.
The results of empiric study helped to rank countries into six
groups. Some countries are ranked higher according TAI and lower
according the application of e-commerce technology or vice versa. In
absolute cases it's evident that technological achievement is
stable in advanced country. Absolute technological leaders have huge
capacity allowing applying technology in recent decades. The technical
advances raise the export for the advanced country and gains from
progress abroad for the less advanced country.
In general, presented models dedicated for diffusion, are used when
the total potential market is known, this means that they are more
oriented to the modifications of existing products and services, rather
than for totally new innovations. Finally, it is evident the main
assumption typical for presented theoretical models--once created
innovations are diffused and adopted immediately and easily. However, in
practice, innovations may sit on the shelf for some time or could have
faced some difficulties during adoption. It would be useful for authors
during theoretical discussions to use the term "successful
innovations" or "successful introduction" talking about
new or improved product, process or service.
The evolution of more advanced dynamic models is still on-going.
Formal dynamic models are relatively underdeveloped; and existing models
are typically quite aggregate and don't separate product from
process innovations. There is the clear need for the dynamic model to
reflect company-level and industry-level causal factors, and to provide
more insights.
The research is limited and not covers the costs and benefits of
innovations of different stakeholders. As it is the complex systems of
disruptive and discontinuous events that involve different networks of
actors and sources, for the next step the incentives and constraints
that exist at the level of the company, economy and international trade
have to be considered. So, this is the objective for further research.
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Authors' data: Dr.soc.sc. Burinskiene, A[urelija]; Vilnius
Gediminas technical university, Faculty of Business Management,
Sauletekio ave 11, LT--10223, Vilnius, Lithuania, EU,
aurelija.burinskiene@vgtu.lt
This Publication has to be referred as: Burinskiene, A[urelija]
(2013) International Trade, Innovations, and Technological Achievement
in Countries, Chapter 48 in DAAAM International Scientific Book 2013,
pp. 795-812, B. Katalinic & Z. Tekic (Eds.), Published by DAAAM
International, ISBN 978-3-901509-94-0, ISSN 1726-9687, Vienna, Austria
DOI: 10.2507/daaam.scibook.2013.48
Tab. 1. The Technology Achievement Index (TAI).
Source: UNESCO (2010)
Leaders
Rank Country TAI
1 Finland 0.74
2 USA 0.73
3 Sweden 0.7
4 Japan 0.7
5 S. Korea 0.67
6 Holland 0.63
7 UK 0.61
8 Canada 0.59
9 Australia 0.59
10 Norway 0.58
11 Germany 0.58
12 Ireland 0.57
13 N. Zealand 0.55
14 Belgium 0.55
15 France 0.54
16 Austria 0.54
17 Israel 0.51
Potential Leaders
Rank Country TAI
18 Spain 0.48
19 Italy 0.47
20 Czech Rep. 0.47
21 Slovenia 0.46
22 Hungary 0.46
23 Slovakia 0.45
24 Greece 0.44
25 Portugal 0.42
26 Poland 0.41
27 Bulgaria 0.41
28 Malaysia 0.4
29 Mexico 0.39
30 Croatia 0.39
31 Romania 0.37
32 Costa Rica 0.36
33 Chile 0.36
Dynamic adopters
Rank Country TAI
34 Uruguay 0.34
35 Thailand 0.34
36 S. Africa 0.34
37 Trinidad & Tobago 0.33
38 Panama 0.32
39 Brasil 0.31
40 Philippines 0.3
41 China 0.3
42 Bolivia 0.28
43 Peru 0.27
44 Columbia 0.27
45 Tunisia 0.26
46 Jamaica 0.26
47 Iran 0.26
48 Paraguay 0.25
49 El Salvador 0.25
50 Ecuador 0.25
51 Syria 0.24
52 Egypt 0.24
53 Dominica 0.24
54 Zimbabwe 0.22
55 Algeria 0.22
56 Indonesia 0.21
57 Hondurus 0.21
58 Sri Lanka 0.2
59 India 0.2
Marginalised
Rank Country TAI
60 Nicaragua 0.19
61 Pakistan 0.17
62 Senegal 0.16
63 Ghana 0.14
64 Kenya 0.13
65 Tanzania 0.08
66 Nepal 0.08
67 Sudan 0.07
68 Mozambique 0.07
World Average 0.4
