Innovation has become a key factor of production, driving and sustaining firms’ productivity and competitiveness. Despite the growing importance attached to innovations, existing studies have produced different results on the factors driving firm-level innovations. This study investigates the factors driving innovations in the service and manufacturing sector firms in Thailand. The study tests proposed hypotheses using cross-sectional data on a sample of 613 firms from the World Bank enterprise survey of 2016. Our empirical results show that specific aspects of the business environment, such as policy instability, legal institutions, corruption, and informal competition, negatively influence non-technological innovations. Contrarily, we find that formal training, foreign technology licenses, research and development have marginal and additionality effects that positively enhance both technological and non-technological innovations. We provide practical implications for firm managers and policymakers in Thailand on adaptive measures to improve the business environment to make it conducive for firm-level innovations.

This article examined the impact of exchange rate volatility (ERV) and trade policy uncertainty (TPU) on bilateral trade flows between Thailand and its major trading partners using a structural gravity trade model. Panel data from 2000 to 2023 were used for the analysis. The model coefficients were estimated using two econometric methods: Poisson pseudo-maximum likelihood (PPML) and ordinary least squares (OLS). Controlling for time-varying and country-specific effects, the findings point to a heterogeneous effect of volatility on bilateral trade. For a sample of countries with strong economic integration, volatility is associated with increased trade. However, volatility harms trade flows in the absence of countries with regional ties, indicating that countries lacking such connections may experience decreased trade efficiency and increased transaction costs. Additionally, TPU from domestic and partner countries has a negative effect on trade flows. The study further found that distance and common borders facilitate trade flows. The analysis contributes to the literature and enriches the discussion on the effect of volatility and TPU on trade using the gravity model.