Trade and Innovation Performance of Mexico after NAFTA

The main argument of this paper is that the missing link between trade liberalization and high growth rates in Mexico has been the absence of innovation from firms. This hypothesis builds on a growing body of research which shows the relationship of the capacity to innovate, particularly in the private sector, with economic growth and productivity improvements. This means that constant underinvestment in R&D, rather than just being a problem resulting in low levels of innovation output (such as patenting) is a barrier to achieving sustained economic growth.