The international diffusion of technological knowledge: Industry-level evidence from ten developing economies

When investment in research and development (R&D) occurs in one country, and a portion of the subsequent benefits of that investment accrue to other countries, those benefits are termed international R&D spillovers. The benefit of acquiring R&D spillovers for developing countries is that spillovers lead to improved efficiency of existing factors of production. This study assesses R&D spillovers' impact on the manufacturing industry of 10 developing economies. The manufacturing sector is considered the modernization leader for developing economies due to the relatively high amount of capital inputs utilized. Therefore, it is the most fundamental recipient of trade-based positive R&D spillovers.;This study was undertaken to provide trade- and industry-oriented policymakers in developing nations with a framework for considering how to integrate foreign technological knowledge into their domestic production structure. Given the linkages between policy and productivity growth, such considerations and the appropriate policy responses will likely result in the efficient absorption of foreign R&D, improved labor and capital productivity, and sustainable economic growth.;In today's global marketplace, the problem of successfully adapting to the enormous level of information and capital flows that define the global economy is one that many nations face. The success of technological diffusion to developing countries hinges on whether the transfer of innovative knowledge results in innovative processes being implemented domestically.;Estimation results from this study show that foreign R&D generally has a significant and positive impact on the manufacturing sectors under examination. This impact is particularly strong when foreign R&D is imported into manufacturing sectors that are more productive with respect to their current levels capital and labor inputs. It was also determined that the level of a country's openness alone is not a sufficient factor to enhance productivity growth.;A major finding highlights the fact that when nations are grouped according to the development of their technological infrastructures, the impact of foreign R&D fluctuates. Results showed that nations with relatively stronger technological infrastructures are more effective at utilizing foreign R&D. Finally, absorptive capacity tended to be a strongly positive and significant correlate with domestic productivity under certain conditions.