International R&D and Industrial Competitiveness: Intra-Organization Spillovers for the OECD
Date Issued
2012
Date
2012
Author(s)
Huang, Szu-Chi
Abstract
In the theory of economic development, technological progress has always been an important factor in explaining the income gap between countries. Since international spillover is closely related to the growth of total factor productivity (TFP), most past literature emphasizes the importance of R&D activities of G5 countries (United States, Japan, Germany, United Kingdom, and France). During the last two decades, international technology spillover transmitted through trade has become the major focus of empirical studies. Among them, several recent studies propose the notion of indirect technology spillover which might be as important as direct spillovers from major R&D countries. By trading with other countries, indirect technological spillover implies that any country can benefit from major R&D country’s available stock even if they do not trade with each other.
Most empirical studies concluded international spillover impact productivity positively, but there are some observed a negative effect, which infer the negative spillover effect is related to the industrial competitiveness. Therefore, in addition to examining international spillovers between the OECD countries during 1990-2009, this study also links productivity growth to industrial competitiveness while attempting to explain the change in TFP growth and industrial competitiveness by direct and indirect technology spillovers.
Assuming G5 plus two (United States, Japan, Germany, United Kingdom, France, Korea and China) as the major R&D countries and these seven countries are the only sources of technology spillover, three-stage least squares method is used in this study to analyze the impact of international technology spillovers on productivity growth and industrial competitiveness of OECD countries. Empirical model in this study consists of three identification strategy. In the basic model, the OECD countries are divided into two groups including major R&D countries and other OECD countries to observe the effect of direct and indirect spillover. Secondly, to take into account possible differences between spillovers from the traditional R&D countries (the G5) and emerging R&D countries (China and Korea), this study further divides the source of technology spillover into two groups (G5 and East Asian NICs). Finally, according to the growth rate and national income, in the third model we divide other OECD countries into 3 groups to investigate if the magnitude and sign of international spillovers will be different for different groups of countries.
The empirical results of this study indicate that the indirect spillover effects are greater than direct spillovers and both the direct and indirect technology spillovers can produce negative effects. When the observed group’s R&D stock takes a smaller proportion in gross national product, the spillover effect is not only smaller but also negative in sign. In contrast, when the other OECD countries actively engage in R&D activities, technology spillover received from the major R&D countries will improve their TFP growth and industrial competitiveness. It is also found that although the spillover effect from G5 countries is much greater, R&D spillovers originated from emerging R&D countries should be explicitly taken into account.
In conclusion, the empirical results of this study demonstrated that both direct and indirect technology spillover effects are major determinants of OECD country’s TFP growth and industrial competitiveness, and countries pursuing active R&D activities usually benefit more from international technology spillover. Moreover, even though trade-related spillover effects from G5 countries is stronger, spillover effects from China and South Korea are still influential factors for the productivity growth and industrial competitiveness in the OECD countries. This study, therefore, provides further evidence supporting the view that trade is an important channel for international transmission of R&D.
Subjects
direct technology spillover
indirect technology spillover
G5 plus two
total factor productivity
industrial competitiveness
SDGs
Type
thesis
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