The role of R&D in high-technology trade: An empirical analysis

Conclusion This paper attempts to establish the relationship between the level of R&D activities of a country and its trade performance in high-technology products. Empirical evidence based on the limited data used in the paper shows that this relationship appears to be quite significant. An analysis of the implications of this relationship reveals that the low level of R&D in Canada is due to, among other factors, the prevalence of foreign ownership of Canadian manufacturing industries, and the resource-based characteristic of the Canadian economy. Given the nature of foreign-owned firms, the paper suggests that countries should not rely on them as a crucial instrument in the creation of an indigenous capacity to produce high-technology products which are competitive at the world level. Instead, domestic policies aimed at the development and nurturing of the countries' own scientific and technological skills are required. The views expressed in this paper are those of the author. They should not be construed as the official views of the Ministry of State for Science and Technology of the Government of Canada. Research assistance provided by Tom Wudwud and Penny Robinson is well appreciated. The author, however, is responsible for any omissions or errors that remain.