Role of policy in innovation and international trade of renewable energy technology: Empirical study of solar PV and wind power technology

To develop renewable energy technologies for sustainable economic growth as well as environmental solutions, firms must consider domestic technological diffusion and foreign trade competitiveness. In this paper, we identify interrelations between domestic R&D and international trade as well as seek to determine the role of renewable energy policies. We estimate the model by using unbalanced panel data, obtained between 1991 and 2008, from 16 countries using solar PV and 14 countries using wind power. The empirical results confirm that international markets may affect domestic R&D of mature technologies more than that of immature technologies, and intensified domestic R&D corresponds to increased exports and imports. This study also shows that wind power is in a virtuous cycle with respect to R&D and exports. In addition, public R&D and tariff incentives are significant instruments for increasing international trade as well as domestic R&D.