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Trade and innovation are closely intertwined and mutually beneficial. Trade allows new technologies to move more freely around the world, benefitting more firms and more people. This process increases the size of the market both for the innovator and for those who acquire and apply the innovation. And that in turn stimulates competition and more innovation. This is true not only of products, but also of the processes used to produce goods and services, firms’ business practices and organisation, as well as marketing and distribution systems.
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Chapter 10 continues this analysis by discussing the link between trade and innovation. Trade influences the diffusion of new technologies, but it also influences the factors that promote innovation in the first place.
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