Essays on International Trade and Innovation

This thesis uses data from different levels to explore the topics of international trade and innovation to fill the existing three gaps in the literature: (1) the overall effect of patents on export performance; (2) the bidirectional relationship between export quality and patent intensity, and the moderating role of institutions on this nexus; and (3) the causal effect of funding from the Horizon 2020 program on European firms’ innovation activities. In the first chapter, I use the most prominent tool - Meta-analysis to investigate the impact of patents on export performance based on the results of the empirical studies. Over the past two decades, the nexus between patents and export performance has been widely investigated, and the existing findings are heterogeneous. To have a broad view of this relationship, I extract the estimates from 42 empirical studies conducted between 2005 and 2025, then apply Meta-analysis to obtain the final impact of patents on export activities. The baseline result shows that patents positively affect export performance across the entire sample, as well as in country-level data, sector-level data, firm-level data, and developed countries data studies. After controlling for moderators, the genuine effect remains positive for all studies, country-level data, and firm-level data subsamples, but is insignificant in the sector-level data subsample and the developed countries data subsample. The second chapter examines the bidirectional relationship between export quality and patent intensity moderated by institutions using the three-dimensional panel data of 89 countries from 1999 to 2014 with a Simultaneous Equations Model (SEM), along with Two-Stage Least Squares (2SLS) and Three-Stage Least Squares (3SLS) estimation methods. I found a negative two-way relationship between export quality and patent intensity. Moreover, the findings are confirmed for different types of countries, levels of technology, levels of export dependence, and export quality. As indicated in various studies that institutions not only play an important role in accelerating export and innovation, but they also act as the moderators in the relationship between innovation and international trade and between technology adoption and export performance. However, no prior study has investigated the moderating role of institutions on the impact of export quality on patent intensity and vice versa. Thus, I fill this gap by introducing different interaction terms between institutions (government stability, control of corruption, law and order, and bureaucracy quality) and export quality, patent intensity in the SEM. The results indicate a positive direct impact of institutional quality on export quality and patent intensity. Furthermore, institutions positively moderate the two-way relationship between export quality and patent intensity. A theoretical model is built to show how a firm’s choices between enhancing quality and increasing patenting are two sides of the same coin. The third chapter discusses the causal effect of the Horizon 2020 program on the innovation of European firms. First, a theoretical model is built to show how receiving funds from the Horizon 2020 program affects a firm’s innovation activities and its expenditure on innovation. Then, using data from firms of 9 European countries in 5 waves (2010 - 2018), adopted from the Community Innovation Survey (CIS), I estimate the Difference-in-difference (DiD) with repeated cross-section estimation to investigate the changes in firms’ product innovation, process innovation, organizational innovation, marketing innovation, and expenditure on innovation. The results show that Horizon 2020 subsidies lead to increases in organizational innovation and expenditure on innovation for the whole sample. For Western countries, the results are more remarkable, with 12.6%, 13%, 6.4%, and 3.7% increases in product innovation, process innovation, organizational innovation, and spending on innovation, respectively. Besides, the heterogeneous effects of subsidies are investigated under differences in export orientation, R&D intensity, knowledge intensity, competition levels, firms using different types of IPRs, and different sectors. The findings suggest that the positive impact of receiving funds from the Horizon 2020 on product and process innovation is more pronounced for exporting firms, firms in the Wholesale and retail trade sector, and the Information and communication sector. While R&D-intensive and knowledge-intensive firms show a high increase in organizational innovation.