Increasingly, a small number of low-wage countries such as China and India are involved in innovation -- not `big ideas …' innovation, but the constant incremental innovations needed to stay ahead in business. We provide some evidence of this new … innovation in low-wage countries. We explain why levels of involvement in innovation vary across low-wage countries and even …

Innovation depends on exporting and, in particular, on scale and competition in export markets. We develop a theory … featuring (1) quality-segmented markets, (2) step-by-step innovation that moves firms forward along the quality ladder, and (3 …) escape-the-competition motives for innovation. We derive four predictions about the impact on innovation of scale and …