Abstract This ehapter is intended to provide empirie al evidenee on the relationship between teehnologieal innovation and international trade using firm-level panel data in Egypt to study the dynamies of the relationship between partieipation in international trade markets and absorptive capacity. In order to do so, we take the teehnologieal innovation proeess as absorptive capacity and eonsider two faeets of teehnologieal innovation: ereation and absorption. Our results show that both ereative and absorptive capacity has an important effeet on the deeision to trade in developing countries.