This article shows – on both conceptual and empirical grounds - the importance of business cycles in affecting key relationships between innovation and international performance. While periods of upswing are characterized by a well-documented 'virtuous circle' between innovation inputs, new products and export success, during downswings most of the positive relationships and feedbacks tend to break down. The findings of Guarascio et al. (2014) on the long-term relationships between RD country coverage includes Germany, France, Italy, Spain, the Netherlands and the United Kingdom, representing a very large part of the European economy.