Relationship between trade openness, innovation, and total factor productivity in BRICS and D-8 countries
Relationship between trade openness, innovation, and total factor productivity in BRICS and D-8 countries

Summary/Abstract: Research Background: Understanding how trade openness (TO) and innovation interact todrive total factor productivity (TFP) growth is a critical debate. Policymakers in BRICS andD-8 countries require evidence-based insights to formulate strategies that effectively integratetrade and innovation policies.Purpose of the article: The purpose is to assess whether and how TO contributes to TFPgrowth, emphasizing interaction with innovation, and to provide insights to policymakers inBRICS and D-8 countries in formulating strategies that integrate trade and innovation policies.Methods: The study employs robust econometric techniques to address panel data challengesand ensure reliable results. These techniques help to accurately capture the effects of TO onTFP while considering the moderating role of innovation. The study also includes a heteroge-neous analysis to account for differences in the developmental contexts between BRICS andD-8 countries.Findings & value added: The findings reveal that TO positively and significantly impactsTFP, driven by improved resource allocation and access to new markets. Innovation signifi-cantly enhances the productivity benefits of TO, particularly in BRICS. The heterogeneousanalysis indicates consistent TFP improvements across both groups, although the impact ofinnovation varies, reflecting different developmental stages. The positive impact of TO on TFPin both groups highlights the importance of integrating trade and innovation policies. Thestudy underscores the importance of reducing trade barriers and investing in research anddevelopment and patent protection to maximize productivity. These insights offer valuableguidance for policymakers in tailoring trade and innovation strategies for BRICS and D-8countries.

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