I. International Knowledge Spillovers
The most direct link between globalization and growth arises when knowledge acquired in one country can be used to facilitate research in another. Scientists exchange ideas when they meet at international conferences. Knowledge flows in the course of business transactions and in other human interactions. And learning from abroad can occur without personal contact via publications and reverse engineering. Helpman (2004) reviews a body of empirical research that finds evidence of substantial international knowledge spillovers. At the same time, Coe and Helpman (1995), Eaton and Kortum (1999) and others have found that international knowledge spillovers are far from complete, leaving room for further integration of the world economy to raise knowledge stocks around the globe. Romer (1990) developed a model in which knowledge accumulated in the course of con ducting R&D raises the productivity of future innovation efforts. Grossman and Helpman allowed for international knowledge flows, whereby either the knowledge stock that determines productivity in inventing new products reflects experience both at home and abroad, or else quality upgrading builds on past research successes in all countries. International knowledge spillovers tend to accelerate growth in all countries, as the cost of further innovation declines in every country with advances made elsewhere. Grossman and Helpman (2014) posit an arbitrary pattern of partial knowledge spillovers, whereby research experience in each country contributes somewhat to R&D productivity elsewhere, but not as fully as it does to R&D productivity in the country where the research was carried out. They find in the context of a one-sector model that an increase in the extent of spillovers from an arbitrary country to any other raises long-run growth rates everywhere in a many-country world economy. In much of the literature, the scope for international knowledge spillovers is taken as exogenous. But trade and foreign direct investment (FDI) may be conduits for knowledge transmission. Firms in an importing country gain ideas about new products and new techniques from their suppliers. Similarly, firms in an exporting country acquire information by discussing product specifications or receiving ex post feedback from their customers abroad. And multinational corporations transfer knowledge about products, processes, and management methods to their foreign affiliates. This information may become available to indigenous firms that observe their operations or hire their former employees. Indeed, Coe and Helpman (1995) and Keller (2010) provide evidence that a country’s bilateral trade volume with a particularly partner helps to explain the extent to which R&D productivity in the country benefits from the partner’s prior research experience. Baldwin et al. (2005) and Keller (2010) find similarly for FDI.