Globalization and knowledge spillover: International direct investment, exports and patents

This paper examines, within the context of globalization, the impact of the main channels of international trade on domestic innovation, namely outward direct investment (ODI), inward direct investment (IDI), cross-border mergers and acquisitions (M&A) by foreigners, R&D expenditure, exports, and imports. The number of approved Triadic patents serves as a proxy for innovation. The data set contains 37 countries that are considered to be highly competitive in world markets, covering the period 1994-2005. The empirical results show that increased exports and ODI are able to stimulate an increase in approved patents. In contrast, IDI exhibits a negative correlation with domestic patents. Imports are shown not to have a significant impact on international technology spillovers. The paper shows that the impact of IDI on domestic innovation is characterized by two forces, namely the cross-border M&A by foreigners and remaining IDI, both of which are found to be negative.

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