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.