Innovation Is Not Enough: Complementary Capabilities and Export Upgrading — Global Product-Level Evidence with an Application to Thailand

Gianluca Santoni, Daria Taglioni, Fabio Artuso and Julian Clarke

No 11447, Policy Research Working Paper Series from The World Bank

Abstract: Integration into global value chains can drive rapid industrialization without necessarily building the technological capabilities needed for sustained upper-middle-income growth. Using Thailand as a diagnostic case and global country–product–year data, we link PATSTAT patent and citation records to HS6 trade flows through a probabilistic technology–product concordance and derive a structural-gravity measure of export capability. Three findings emerge. First, Thailand’s established manufacturing export base coexists with an innovation base concentrated in applied, downstream activities rather than upstream and science-intensive technologies. Second, innovation intensity is positively associated with exports and export capability, particularly in digital and semiconductor products. Third, in the log-export interactions, this relationship is stronger where human capital and logistics perform better and, in several technology-intensive product groups, where policy uncertainty is lower. Evidence from Thai electric-vehicle and electronics producers identifies certification, customs and logistics, documentation, skills, and dependence on external partners—rather than tariffs—as practical constraints on capability deepening. Although the results are descriptive rather than causal, they show the complementary conditions under which technological accumulation is more closely connected to export upgrading. For middle-income economies, the challenge after entering global value chains is therefore to build the domestic capabilities and institutions needed to move beyond assembly and sustain productivity growth.

Date: 2026-09-14
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