Skip to main content
Article thumbnail
Location of Repository

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


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:
Provided by: LSE Research Online

Suggested articles


  1. (2002). 50More details of the matching between the datasets can be found in
  2. (2001). Are knowledge spillovers international or intranational in scope? Microeconometric evidence from the U.S. and Japan”, doi
  3. (2000). Columns (3) to (5) are estimated by System-GMM (one-step robust standard errors).
  4. (2000). Econometric modelling strategy In the main text we compare results from two alternative approaches to deal with these problems, a GMM method
  5. (2003). Estimating Production Functions using inputs to control for unobservables" doi
  6. (1989). In the UK most firms did not report R&D expenditure before
  7. (2002). Industry level data - R&D Spillover pool The domestic and foreign spillover pools were constructed using the OECD’s Analytical Business Expenditure on R&D dataset (ANBERD,
  8. (2004). International Technology Diffusion", forthcoming, doi
  9. (1990). Notes: Vertical axis is the “productivity premium” for UK firms with strong inventor presence in the US between
  10. (1996). Olley Pakes with endogenous R&D Olley and Pakes doi
  11. (2001). Pottelsberghe de la Potterie doi
  12. (1996). R&D Spillovers and the Geography of Innovation and Production"
  13. (2000). Regional innovation: in search of an enabling strategy"
  14. Table A1: Location of citing and cited inventors: non self-citations Cited country: UK USA Other Total Citing country:
  15. Table A2: Location of citing and cited inventors: non self-citations to patents that have been applied for within the previous three years Cited country: UK USA Other Total Citing country:
  16. (2004). The spatial dimension of patenting by multinational firms in europe," Journal of Economic Geography, doi
  17. (1986). Ti623) is a vector whose elements are the proportion of patents over the 1975 to 1989 period in each of 623 (labelled N-class) technology classes in the USPTO. PROXij is the uncentered correlation. Compared to the original Jaffe
  18. (2004). We take two approached to dealing with firm R&D. First, we consider estimates of the standard OP algorithm and include R&D as an exogenous variable.59 Secondly, we follow Thomas Buettner’s

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.