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Empirical studies on international trade highlight the role of innovation on international exchange but do not capture the effect of technological innovation when unobservable common factors (UCFs) are considered. This paper examines the long‐run relationship between technological innovation and international exchange using panel data for eight African countries over the period 1981–2013. The non‐stationarity and cointegration between technological innovation, international exchange, public investment, real gross domestic income and foreign direct investment were examined, controlling for cross‐sectional dependence and heterogeneity between countries. The results suggest that technological innovation in Africa remains low after controlling for UCFs, while public investment, real gross domestic product and foreign direct investment have significant impact on international exchange. Moreover, the results from the homogeneous and heterogeneous estimates, with and without UCFs, show that ignoring UCFs is likely to bias the coefficients. These findings reveal that African countries should invest more in public infrastructures and research and development to upgrade their capability To play an active role in the international market. [ABSTRACT FROM AUTHOR]

Traditionally, China and North Korea have been described as 'blood brothers' because of their common socialist ideological ground. Since 2000 the basis of their relationship has shifted from one-sided economic support by China into strategic and mutual cooperation. In this paper, we analyse changes in their relationship by examining two specific points: first, China's growing investment and trade in North Korea, and second, close linkages of regional development strategies between the two countries. While the prevalent discussions around North Korea and its relations with China concentrate on geopolitical issues, this research shed more light on geoeconomic engagement between China and North Korea. This paper argues that it is crucial to grasp how China and North Korea perform geoeconomic calculations toward each other and how this affects geopolitical conditions. [ABSTRACT FROM AUTHOR]

Pacific Asia has looked to direct foreign investment (DFI) to achieve economic growth and technological catch-up, and Japanese multinational corporations (MNCs) have responded massively. This paper evaluates Japanese MNCs as a source of industrial learning and technological transfer in the region, drawing from a large research literature and from the authors’ own surveys of Japanese DFI in the electronics sector. Japan's historic learning-based approach to industrialisation is captured by the flying geese metaphor of structural transformation. As an explanation of the transfer of technological know-how from Japan to Pacific Asia, however, the flying geese model is problematical. This paper reflects on the effectiveness, problems and dilemmas of Japanese MNCs in transferring such know-how to the region from a political economy perspective summarised as a ‘reverse product cycle model’. This model portrays DFI as a ‘bargain’ between Japanese MNCs and host countries, and which becomes more difficult to negotiate as DFI moves from low-skilled manufacturing to more innovative activities. The bases for this hypothesis relate to the increased complexity of industrial know-how and the conflicting motivations between MNCs and host countries in early stages of the product life cycle. In practice, however, this ‘bargain’ has developed differently among Asian countries, and we illustrate these differences by comparing the experiences of South Korea, Taiwan and Malaysia. [ABSTRACT FROM AUTHOR]

This paper argues that while the North American Free Trade Agreement (NAFTA) has been successful in fostering trade between the parties and in serving as a model for subsequent free trade agreements, it has not realised its potential. This results from the free trade format itself as well as the unwillingness of the parties to go beyond the free trade format and their refusal to deal with new trade and security issues within NAFTA. [ABSTRACT FROM AUTHOR]

The paper explores the relationship between FDI and economic growth in eight transition countries - EU candidates - in the period 1994-2001. Surprisingly, statistically robust negative causal relationship between FDI and growth emerged implying that FDI hampered their real convergence with EU. This result can be explained by the form of FDI. In the observed period, acquisitions were the predominant form and the proceeds of the sales were spent on consumption and imports rather than enhancing productive assets. Indeed, current account and FDI were strongly linked; the bigger the inflow of FDI into a country, the higher its current account deficit and foreign debt. Small size of the host countries and concentration of FDI in trade and finance could weaken productivity spillovers while increased efficiency of the acquired firm could be more than offset by the reduction of economic links with local firms. FDI would also not automatically increase competition as it could force small emerging local competitors out of business. While foreign trade increased through FDI, multinationals contributed more to imports than to exports. Finally, while FDI might support human capital formation, this type of spillovers simply does not seem to be very relevant. [ABSTRACT FROM AUTHOR]