Economic Research and Perspectives

Economic Research and Perspectives

The Role of Governance and Innovation in Enhancing Medium- and High-Tech Exports: A Quantile Regression Approach in Developing Countries

Document Type : Original Research

Authors
Avin Yousefi 1
Fahmideh Fattahi 2
1 Master's degree in Information Technology Management, E-Business Major, Department of Humanities, Payam Noor University, West Tehran Branch, Tehran, Iran
2 PhD in Economics, Department of Economics, Faculty of Economics and Management, Urmia University, Urmia, Iran
10.48311/ecor.2025.115451.0
Abstract
Abstract
The aim of this study is to examine the impact of governance indicators, innovation, gross domestic product (GDP) per capita, tariff rates (TARIFF), and oil rents (OILR) on medium- and high-tech exports (MHTE) in 37 developing countries over the period 2000–2023. Quantile regression is employed to analyze the data and assess the effects of the explanatory variables across different quantiles of technology exports. The results indicate that government effectiveness (GOVR) has a positive and statistically significant effect on technology exports, with a stronger impact at higher quantiles, whereas the rule of law (RULR) exhibits a negative and significant effect that intensifies across upper quantiles. Innovation indicators, including research and development (R&D) expenditures (RD) and the number of technicians employed in R&D (TRD), also demonstrate positive and significant effects on technology exports; however, their impact diminishes at higher quantiles and becomes insignificant in the top quantile. Moreover, GDP per capita (GDPP) exerts a positive effect in most quantiles but becomes insignificant in the top quantile, while TARIFF and OILR negatively affect technology exports, being significant in higher and lower quantiles, respectively. Based on these findings, enhancing GOVR, promoting targeted investment in R&D, increasing skilled human resources, reducing trade barriers, and decreasing dependence on natural resources are suggested as key policy measures for fostering technology exports in developing countries. Overall, the findings highlight the importance of efficient governance, innovation, and sound economic resource management in developing technological capacities and enhancing export competitiveness
Purpose/Aims:
Technological innovation and the development of MHTE are among the most important drivers of sustainable economic growth and enhanced competitiveness in the global economy. Since the 1950s, it has been widely recognized that long-term growth cannot be achieved solely through the accumulation of capital and labor; rather, innovation and technological progress play a decisive role in enhancing productivity. Countries that have successfully expanded their technological capacity have not only established knowledge-based industries but also secured larger shares of global markets. In developing countries, which often rely heavily on primary exports, this issue is even more critical, as the expansion of technology exports reflects the ability to transform knowledge into high-value-added products.
Nevertheless, most previous studies have primarily focused on conventional economic variables, such as foreign direct investment and trade openness, while institutional and governance factors have received comparatively less attention. However, governance quality can significantly influence the trajectory of innovation and technology exports. GOVR, through the creation of institutional capacity and efficient policymaking, promotes innovation, whereas, in some cases, strict enforcement of laws may constrain flexibility and innovative activities. In addition, innovation indicators such as RD and TRD reflect the core capacity of countries to produce and commercialize complex technologies. This study employs panel quantile regression, a method that, unlike traditional approaches, does not restrict the analysis to mean effects but instead examines the impact of explanatory variables across different quantiles of the technology export distribution, thereby capturing cross-country heterogeneity more accurately. Accordingly, this research investigates the role of governance and innovation in promoting MHTE in 37 developing countries over the period 2000–2023.
Methodology & Framework:
This study uses panel data for 37 selected developing countries over the period 2000–2023. The dependent variable is the share of MHTE in total industrial exports. The independent variables include GOVR and RULR as governance indicators, RD and TRD as innovation indicators, as well as GDPP, TARIFF and OILR as control variables. Data were obtained from the World Bank. To analyze the relationships, the study applies panel quantile regression, which makes it possible to assess the impact of explanatory variables across different quantiles of the technology export distribution.
Findings:
The results indicate that GOVR has a positive and statistically significant impact on MHTE, with a stronger effect observed at higher quantiles. This finding suggests that countries with higher levels of GOVR benefit more in the upper segments of the technology export distribution, as efficient policymaking, institutional stability, and support for economic activities enhance export capacity. In contrast, the RULR exhibits a negative and significant effect that becomes stronger across higher quantiles, suggesting that stricter legal constraints and higher compliance costs may reduce firms’ flexibility and innovative activities in countries with more advanced technology export profiles.
With respect to innovation, R&D expenditure exerts a strong and positive effect in lower quantiles, implying that at early stages of technological development, increased R&D investment directly promotes technology exports. However, this effect weakens and becomes insignificant at higher quantiles, indicating that at more advanced stages of technological development, R&D spending alone may be insufficient unless accompanied by appropriate institutional and policy support. TRD demonstrates a positive and significant effect across most quantiles, although its magnitude declines at higher quantiles, suggesting that the contribution of specialized human capital decreases beyond a certain threshold.
GDPP has a positive and significant effect in the middle quantiles, reflecting the role of economic growth and higher income levels in facilitating technology exports. However, this effect weakens and becomes negative at higher quantiles, possibly due to a shift toward domestic consumption or non-export-oriented activities. Tariff rates negatively affect technology exports, with stronger effects observed at higher quantiles, indicating that trade restrictions hinder access to advanced technologies and intermediate inputs. OILR also have a negative impact, which is mainly significant at lower quantiles, suggesting that reliance on oil revenues reduces incentives and capacity for innovation-driven and technology-based exports.
Discussion:
The findings indicate that the development of MHTE depends on a combination of institutional and economic factors. GOVR plays an important role in providing the institutional environment necessary to support technology exports, whereas strict legal constraints may limit firms’ flexibility and innovative activities, particularly in countries with higher levels of technological exports.
The results related to innovation suggest that the effects of R&D investment and specialized human capital vary across different stages of technological development. These factors are more effective in the early stages, while at higher levels of technological exports, their impact becomes more limited and requires complementary institutional reforms and supportive policy conditions. In addition, macroeconomic and trade-related factors highlight the importance of economic structure and trade policies in shaping technological export performance.
Conclusion & Implications:
Overall, the results suggest that promoting MHTE in developing countries requires strengthening GOVR and creating an institutional environment conducive to innovation. Investment in R&D and the development of specialized human capital are particularly effective at early stages of technological development; however, at more advanced stages, these efforts should be complemented by institutional reforms and trade policies aimed at reducing tariff barriers. Furthermore, economic diversification and reduced dependence on OILR are essential conditions for advancing technology exports in developing countries.

Keywords
Government Effectiveness
Medium- and High-Tech Exports
Quantile Regression R&‌‌D Expenditure
Rule of Law
Subjects
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