The moderating role of economic development level on the innovation-export nexus: evidence from upper middle-income countries

Subject Areas : Economic Development, Innovation, Technological Change, and Growth

Kiumars Shahbazi ¹

1 - Professor, Faculty of Economics and Management, Urmia University, Urmia, Iran, (Corresponding Author), [e-mail]

Received: 2024-11-21 Accepted : 2025-02-25 Published : 2025-03-06

Keywords: Economic Development, Innovation, Exports, International Trade, Panel GMM. JEL Classification: F13, F14, F41, O30, O47.,

Abstract :

This study investigates the impact of exports and economic development on the Global Innovation Index (GII) in upper-middle-income countries from 2011 to 2021 using the panel Generalized Method of Moments (GMM). The primary objective is to assess the learning-by-exporting hypothesis and the moderating role of economic development in the export-innovation relationship. The results indicate that exports positively and significantly influence the GII, supporting the learning-by-exporting hypothesis. GDP per capita, representing economic development, has a significant positive effect. However, economic development moderates the export-innovation link, suggesting that in more developed countries, the impact of exports on innovation is weaker, possibly due to diminishing returns, structural differences, and technological maturity. Additionally, innovation inputs—except for the institutional index—positively and significantly affect the GII. Based on these findings, policymakers can enhance innovation and competitiveness in upper-middle-income countries by facilitating firms' access to international markets, diversifying exports, improving export-related infrastructure, investing in human capital and R&D, and stabilizing exchange rates.

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