Assessing intra-OIC green trade linkages: an insight from the perspective of technological innovation using structural gravity model

The global community faces the challenge of protecting the environment while maintaining trade-driven economic growth. This study analyses the impact of technological innovation on green trade (GT) and identifies the major determinants among Organisation of Islamic Cooperation (OIC) nations from 1994 to 2024. It uses a structural gravity model which incorporates multilateral resistances that changes over time and incorporate the impact of GDP and population (size variables). The increasing trend in green exports across OIC nations accentuates a collective emphasis on environmental sustainability, often spurred by diversification away from traditional fossil fuel-based exports. Gravity estimates further emphasise the importance of technological innovation for GT at both regional and development (income) levels. The proxies of technological innovation, patents, researchers in Research and Development (R&D) and expenditures on R&D, play a pivotal role in improving competitiveness and influencing the dynamics of GT. However, disparities in innovation capacities between wealthier and poorer OIC nations magnify the influence of technological differences on GT. Rich OIC nations are more inclined towards investment in R&D to enhance green trade practices. Further findings reveal that foreign direct investment (FDI) and infrastructure significantly improve GT, while renewable energy consumption deters it. Similarly, green finance, the environmental performance index, and monetary freedom have a positive impact on GT, while the exchange rate shows the opposite. Correspondingly, GT is hindered by high political instability and low regulatory quality. These results are used to conduct a SWOT analysis to examine the prospects of the GT among OIC nations. Policy makers need to be cautious of investing in inward FDI in green technological initiatives. Moreover, resilient and harmonized regulatory frameworks would attract investments in green technologies. Promoting political stability can reduce diplomatic uncertainty. These findings support policymakers, researchers, and OIC governments in pursuing sustainable development goals.