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How special is the special relationship?: using the impact of R&D spillovers on UK firms as a test of technology sourcing

By Rachel Griffith, Rupert Harrison and John Van Reenen

Abstract

How much does US-based R&D benefit other countries and through what mechanisms? We test the "technology sourcing" hypothesis that foreign research labs located on US soil tap into US R&D spillovers and improve home country productivity. Using panels of UK and US firms matched to patent data we show that UK firms who had established a high proportion of US-based inventors by 1990 benefited disproportionately from the growth of the US R&D stock over the next 10 years. We estimate that UK firms’ Total Factor Productivity would have been at least 5% lower in 2000 (about $14bn) in the absence of the US R&D growth in the 1990s. We also find that technology sourcing is more important for countries and industries who have "most to learn". Within the UK, the benefits of technology sourcing were larger in industries whose TFP gap with the US was greater. Between countries, the growth of the UK R&D stock did not appear to have a major benefit for US firms who located R&D labs in the UK. The "special relationship" between the UK and the US appears distinctly asymmetric

Topics: HB Economic Theory
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 2004
OAI identifier: oai:eprints.lse.ac.uk:711
Provided by: LSE Research Online

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Citations

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