Impact of innovation and high-tech trade on national competitiveness and employment structure

According to the present trend, developing countries are progressively becoming the leading high-tech exporters. Growing high-tech exports from emerging countries has prompted concerns about their participation in the lowest fragment of the global value chain. Participating in the lowest segment may delay the catch-up process for developing countries and prolonging the income convergence between economies. As argued by the literature, innovation activities are not extensive at this stage. Hence, it may not be a requirement for high-tech export. Furthermore, statistics demonstrate a decrease in high-tech exports from developed countries, despite significant innovative investment. Hence, this leads to the questioning of the role of innovation in high-tech exports. Despite the anticipated gains of high-tech trade, the competitiveness of high-tech exporters remains low. Also, the reduction in employment is noticeable along with the increase in high-tech trade. Drawing upon this scenario, this research aims to study the role of innovation on high-tech trade and the implication of high-tech trade. This research is using a sample of 20 major high-tech exporting countries. The time span for this study is from 2007 to 2016. This research has three specific objectives. The first objective of this research is to analyse the impact of innovation on the high-tech trade. Departing from the existing literature, this study also examines the impact of innovation on the extensive margin of high-tech trade. The empirical analysis is conducted based on the gravity model of trade. Empirically, an increase in domestic research and expenditure (R&D) expenditure by one percent will induce high-tech exports value to grow by 0.34 percent and numbers of exported products by about 0.08 percent, respectively. The second objective of this study is to examine the impact of high-tech trade on national competitiveness. The empirical analysis was done using panel data estimation technique including