Abstract
Motivated by differences in innovation intensity across advanced economies, this paper presents an empirical examination
of the determinants of country-level production of international patents. We introduce a novel framework based on the concept
of national innovative capacity. National innovative capacity is the ability of a country to produce and commercialize a flow of
innovative technology over the long term. National innovative capacity depends on the strength of a nation’s common innovation
infrastructure (cross-cutting factors which contribute broadly to innovativeness throughout the economy), the environment
for innovation in a nation’s industrial clusters, and the strength of linkages between these two. We use this framework to guide
an empirical exploration into the determinants of country-level differences in innovation intensity, examining the relationship
between international patenting (patenting by foreign countries in United States) and variables associated with the national
innovative capacity framework. While there are important measurement issues arising from the use of patent data, the results
suggest that the production function for international patents is well-characterized by a small but nuanced set of observable
factors. We find that while a great deal of variation across countries is due to differences in the level of inputs devoted to
innovation (R&D manpower and spending), an extremely important role is played by factors associated with differences in
R&D productivity (policy choices such as the extent of IP protection and openness to international trade, the share of research
performed by the academic sector and funded by the private sector, the degree of technological specialization, and each
individual country’s knowledge “stock”). Further, national innovative capacity influences downstream commercialization,
such as achieving a high market share of high-technology export markets. Finally, there has been convergence among OECD
countries in terms of the estimated level of innovative capacity over the past quarter century. Journal of Economic Literature
classification: technological change (O3); technological change: choices and consequences (O33); economic growth and
aggregate productivity: comparative studies (O57). © 2002 Published by Elsevier Science B.V.