Technological Diffusion, Absorption Capacity and Export Performance: An Empirical Analysis from the Selected Developing Countries

Abstract

A country's absorption capacity plays a key role in attracting technological diffusion and improving its export performance. This study aims to investigate the role of technological diffusion and absorption capacity in expanding export performance in developing countries. The study uses panel data from developing countries from 2000 to 2020. The results of the fixed-effect analysis reveal a significant, positive role for both technological diffusion and absorption capacity in a country's export performance. The inflow of technology into a country results in technology spillovers and the transfer of advanced knowledge and skills into production. This advanced technology and production knowledge boost both productive capacity and volume, enabling countries to increase exports. Moreover, absorption capacity plays a key role in increasing export performance in developing countries. The results of the study indicate that technological diffusion positively affects export performance initially as absorption capacity increases.  Unfortunately, absorption capacity in developing countries does not meet world standards, which is why technology adoption and export performance are lower. The study suggests that countries take the necessary measures to improve their absorption capacity by adopting new technologies and increasing exports.