Trade network and international R&D spillovers

Abstract

Following Coe and Helpman (International R&D Spillovers, EER, 39, 859-887, 1995), the literature on the trade-related channels of international knowledge flows has flourished. Departing from Coe and Helpman's tenets on the proportionality of trade and productivity spillovers and thus relaxing the implicit assumption that the knowledge transferred internationally is physically embodied in the exchanged products, we test whether relatively strong bilateral trade relationships are significantly associated with important international R&D spillovers. Notably, we focus on refined measures of bilateral trade that account for country size, time-invariant pair-specific factors and time-varying country-specific factors. By distinguishing closer and more distant trade partners without weighting their R&D stocks for the bilateral trade flows, we show that trade is indeed an international transmission channel of knowledge even when distance and other pair specific time-invariant factors are taken into account.International R&D spillovers, Total Factor Productivity, International trade network