Technological innovation, terms of trade and geopolitical risk: the Rising Power Trap

This study examines the relationship between technological patents, terms of trade, and geopolitical risk in 23 developed and developing countries over the period 2007–2023. The System GMM method is employed to account for the dynamic panel structure and potential endogeneity issues. The estimated coefficients of technological patents and terms of trade are negative, while their interaction is positive and statistically significant. Marginal effect analyses reveal that the impact of technological patents on geopolitical risk strengthens as the terms of trade increase. The results suggest that the geopolitical effects of technological innovation depend on the relative economic gains generated through international trade. The study refers to this interaction channel as the ‘Rising Power Trap’ and provides new empirical evidence on the economic determinants of geopolitical risk.