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
(1991a) 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 spill-
overs, whereby research experience in each coun-
try 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 that an increase in
the extent of spillovers from an arbitrary country
to any other raises long-run growth rates every-
where in a many-country world economy.
In much of the literature, the scope for inter-
national knowledge spillovers is taken as exog-
enous. But trade and foreign direct investment
(FDI) may be conduits for knowledge transmis-
sion. 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 prod-
uct 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 bilat-
eral trade volume with a particular partner helps
to explain the extent to which R&D productivity
in the country benefits from the partner’s prior
research experience. Baldwin, Braconier, and
Forslid (2005) and Keller (2010) find similarly
for FDI.