More specifically, this paper focuses on three main questions: (1) Does trade promote
innovation and growth by providing access to foreign technology? (2) How important are FDI inflows and IPRs in these processes? and (3) Are the effects different for developed
and developing countries? This study complements the literature by including a more
representative sample of developing countries and by focusing on high-technology trade.
The empirical analysis is conducted using a unique panel data set of 47 developed and
developing countries from 1970 to 1990, in which patent data is used as a proxy for
innovation. Various studies investigating the determinants of innovation and technological
diffusion use micro-data sets.4 While these studies have produced important and
interesting results, this paper uses data aggregated at the country level. This approach
clearly leads to loss of some information, but generates the benefit of allowing me to focus
on the dynamics of innovation and growth across countries and country groupings. By
contrasting empirical specifications for innovation and per capita GDP growth, the results
in this paper suggest that traditional growth regressions might not be able to capture the
impact of factors like IPR protection. By estimating the regressions for separate groups of
countries, the results also suggest that pooling together developed and developing
countries in studies like this might lead to misleading conclusions, and consequently to
inadequate policy recommendations.