The Role of R&D Expenditures on High Technology Product Exports: A Panel Causality Analysis for OECD Countries

Abstract

High-technology exports have become one of the most important components of international trade in recent years due to their high added value. In the context of the globalising economy, there is no doubt about the impact of research and development spending on high-tech exports, which are also advantageous in terms of competitiveness. This study examines the nexus between high-tech exports (HTECH), research and development expenditures (RD), trade openness (TRADE), and gross fixed capital formation (GFCF) for selected 22 OECD countries within a model using a panel dataset over the period 1996-2021. In this study, the new version of the Granger causality test by Juodis, Karavias and Sarafidis (2021) developed by Xiao et al. (2023) was used to test the causality between high-technology product exports and R&D expenditures in OECD countries. The empirical findings show a bidirectional causal link between high-technology exports and R&D expenditure. Additionally, a bidirectional causality relationship was found between high-tech product exports and the gross fixed capital investments and trade openness added to the model as control variables. As a result of the analysis, it is concluded that policymakers should increase investments in R&D activities, allocate more resources from the national income to these activities, and implement incentive policies such as tax reductions, low-interest loan opportunities, educational arrangements for the supply of qualified labour, and the provision of physical infrastructure for technological developments.