Technology Gap Approach To A Dynamic Change In World Machine Tool Markets: A Panel Data Analysis

This paper applies the technology-gap trade theory to explaining radical changes in the competitive positions of countries in world machine tool markets over the last three decades. It develops the notion that the innovation gaps in machine tools among countries led to the intercountry differences in the competitive performance in the sector as well as in its user sectors. Since competitive advantage largely depends on a capability to improve, create and apply technology to market competition, a higher innovative performance in one country than another is closely related to a higher export performance. A higher innovative performance in machine tools is also associated with a higher competitive performance of the large areas of its user sectors, due to sectoral interdependences and externalities generated by machine tool innovations. The results of empirical investigation through a panel data analysis show that the international gaps in machine tool innovations appeared to have a positive significant relationship with the differences in the export performance of both the machine tool sector and its user sector across countries.