Technological Imitation and Innovation in New European Union Markets
33 Pages Posted: 8 May 2010
Date Written: April 2010
Abstract
We analyze the role of imitation and innovation in promoting technological progress in new members of European Union: the Czech Republic, Hungary, Poland and Slovakia. The two modes of technological development - innovation and imitation - are distinguished from one another by identifying the dominant orientation of innovation efforts at the industry level. Specific industry features and the origin, structure and size of foreign direct investments in these countries are utilized for this purpose. The empirical relationship between intra-industrial bilateral trade flows, which proxy the level of technological progress, and innovation expenditures is analyzed using a gravity model. During the estimation stage, we use appropriate instruments to account for the potential endogeneity of innovation to trade. The results reveal the important role of foreign direct investment and multinationals in the technological progress of the region. Specifically, technological progress that is due to innovation is driven mainly by affiliates of foreign firms and multinationals.
Keywords: foreign direct investment, innovation, imitation, international trade, European Union
JEL Classification: C51, F14, F21, O31
Suggested Citation: Suggested Citation
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