International technology diffusion and economic grwth: Explainingthe spillover benefits to developing countries

Technology spillovers offer great opportunities for economic growth to developing countriesthat do little, if any,R&D activity. This paper explores the extent to which thesecountries benefit from foreign technology, the diffusion mehanisms involved, and the factorsthat shape their absorption capabilities. Results based on a non-stationary panel of 55 developing countries indicate that the benefits are quite substantial: a ten-percent increasein foreign R&D stock is tanslated into more than a two-percent increase in aggregate productivity.Of the diffusion channels considered, imports appear to be more conducive to R&D spillover. In addition, developing countries that enjoy larger benefits tend to exhibitlarger stock of human capital, more openness to trade and foreign activities, and strongerinstitutions. These North-South R&D spillovers, although larger than previously suggested,appear less strong than North-North spillovers, adding tthe general literature on economicdivergence between developed and developing countries. © 2011 Elsevier B.V.