Productivity, R&D spillovers and trade

That innovation and diffusion of technology drives long run productivity growth is by now commonly accepted. The crucial question is how. For instance, what is the role of own R&D in the firm, industry or country, as opposed to R&D done elsewhere? Is the former a precondition for rapid productivity growth, or is it possible to prosper by exclusively relying on imported technology? These are questions of high theoretical and practical importance. But the answers are not so clear yet. In fact, as we will show in the next section, the existing evidence points in very different directions. Can this conflicting evidence be reconciled to give a consistent picture? This is the question we address in this paper. We do this in two steps. First, we consider the different theoretical approaches, the empirical relationships they entail, and the related evidence. Then we present a comprehensive data set, consisting of 1974 - 1992 annual data for 14 countries and 22 manufacturing industries, which we use to discriminate between some of the most popular arguments in this area, and to explore the reasons behind some of the conflicting evidence presented in the existing empirical literature. We discuss the findings and implications in the concluding section