Columbia International Affairs Online: Working Papers

CIAO DATE: 09/2014

Trade and Innovation in Global Networks—Regional Policy Implications

Dieter Ernst

May 2014

East-West Center


This Think Piece explores how integration into international trade through global networks of production (GPNs) and innovation (GINs) might affect a region's innovation capacity. As regions across the globe are progressively integrated into those global networks--some certainly more than others--these regions are all faced with a fundamental challenge: How might progressive integration of its firms into GPNs and GINs affect learning, capability development and innovation? Will network integration unlock new sources of industrial innovation? Or will it act as a poisoned chalice that will sap and erode the region's accumulated capabilities?

The paper presents illustrative examples of how "ubiquitous globalization" increases the diversity and complexity of GPNs and GINs, and briefly discusses the underlying systemic pressures and enabling forces. In order to capture the gains for innovation that a region might reap from global network integration, the paper suggests moving from a one-way analysis of the external impacts on a region's innovation capacity to an analysis of two-way interactions. The paper concludes with Policy Implications and highlights Unresolved Issues for Future Research, including the critically important issues of spillover employment effects and inequality.