HCBE Faculty Articles

Determinants of Levels of High Technology Exports an Empirical Investigation


Belay Seyoum0000-0002-8527-6481

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Advances in Competitiveness Research



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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 hightechnology 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 technologyexports. 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 technologyexports depends on a number of factors including inward FDI in sophisticated industries, demanding local buyers and a developed technological infrastructure.





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