Academic journal article Advances in Competitiveness Research

Determinants of Levels of High Technology Exports an Empirical Investigation

Academic journal article Advances in Competitiveness Research

Determinants of Levels of High Technology Exports an Empirical Investigation

Article excerpt

ABSTRACT

High technology contributes to rapid growth by changing the key factors of success. It has now emerged as the major source of wealth generation as opposed to the resource-based industries that dominated the twentieth century. Recent data in high technology trade shows that a small number of countries such as the USA and UK show increasing surpluses, while most other countries tend to show chronic deficits. Existing studies on high technology trade tend to focus on advanced countries and are often devoid of empirical examination. This paper develops a model of the determinants of high technology exports, which is tested on a sample of 55 developed and developing countries. It is hypothesized that high technology exports are a function of a country's level of inward foreign direct investment, home demand conditions and technological infrastructure. Using factor analysis and multiple regression, the study examined the effects of these variables on high technology exports. Some important implications flow from the results. First, inward foreign direct investment has a significant and positive effect on high technology exports. For many developing countries with limited indigenous technological capability, foreign multinationals have played a major role in providing the requisite expertise to enable them to export a variety of high technology products. In Malaysia and Singapore, foreign multinationals have set up advanced manufacturing, design and development capabilities, thus allowing them to export a whole range of high technology goods.

Second, sophistication of buyer needs play an important role in influencing a nation's high technology exports. This variable which is taken on a scale of 1-7 measures the extent to which a country's buyers are knowledgeable, demanding and buy innovative products. The results indicate that there is a strong positive relationship between sophistication of buyer needs and high technology exports. Thus, the existence of sophisticated buyers pushes companies to employ advanced technologies in order to remain competitive.

Third, the results also show that national technological infrastructure contributes to enhance high technology exports. A nation's stock of technological infrastructure is critical to competitive success in knowledge intensive industries. In short, these results indicate that success in high technology exports depends on a number of factors including inward FDI in sophisticated industries, demanding local buyers and a developed technological infrastructure.

INTRODUCTION

High technology is often used to refer to firms and industries whose products or services embody advanced and innovative technologies. Such firms have in common a reliance on advanced scientific and technological expertise and are often identified by high research and development expenditures (Keeble & Wilkinson, 2000). In this study, high technology is operationally defined to cover products that fall under sections 84-92 of the harmonized tariff classification. The harmonized tariff classification system which is now adopted by many countries is a commodity description and coding system that defines goods according to their essential character (Seyoum, 2000). High technology products include aerospace, computers, software and related services, consumer electronics, semiconductors, pharmaceuticals, scientific instruments and electrical machinery (OECD, 1990). In the context of this study, the terms "technology-based products," "advanced-technology products" are also used to denote high technology goods. The term "competitiveness" is defined as the nation's ability to produce and distribute goods in the international economy in competition with those produced in other countries. A good measure of national competitiveness in high technology is the presence of substantial and sustained exports in the high technology sector (Seyoum, 2004).

High technology sectors contribute to rapid growth in both manufacturing and services by increasing the overall efficiency of labor and capital. …

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