The Dynamics of International R & D spillovers

Abstract

Coe and Helpman (1995) among others report positive and equivalent R&D spillovers across groups of countries. However, the nature of their econometric tests does not address the heterogeneity of knowledge diffusion across countries. We empirically examine these issues in a sample of 10 OECD countries by extending both the time span and the coverage of R&D activities in the data set. We find that the elasticity of total factor productivity with respect to domestic and foreign R&D stocks is extremely heterogeneous across countries and that data cannot be pooled. Thus, panel estimates conceal important cross-country differences. The US appears to be a net loser in terms of international R&D spillovers. Our interpretation is that when competitors ‘catch-up’ technologically, they challenge US market shares and investments worldwide. This has implications for US productivity.