DP7503 International Trade, Foreign Direct Investment, and Technology Spillovers

Author(s): Wolfgang Keller

Publication Date: October 2009

Keyword(s): Intra-firm trade , Learning-by-exporting , Multinational firms , Tacit knowledge , Technological externalities , Technology diffusion , Total factor productivity

JEL(s): F1 , F2 , O3 , O4

Programme Areas: Development Economics , Industrial Organization , International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP7503.asp

This paper examines how international flows of technological knowledge affect economic performance across industries and firms in different countries. Motivated by the large share of the world's technology investments made by firms that are active across borders, we focus on international trade and multinational enterprise activity as conduits for technological externalities, or spillovers. In addition to reviewing the recent empirical research on technology spillovers, the discussion is guided by a new model of foreign direct investment, trade, and endogenous technology transfer. We find evidence for technology spillovers through international trade and the activity of multinational enterprises. The analysis also highlights challenges for future empirical research, as well as the need for additional data on technology and innovation.