Channels of international technology diffusion: Evidence from South Korean industries

The endogenous growth theory has inspired empirical research into relations between trade and growth in general and international technology diffusion in particular. A strand of recent empirical works focused on seeking possible channels of the latter. This paper takes the question seriously, using some unique Korean industry-level data set. This paper first estimates the magnitude of contribution of domestic research and development (R&D) to productivity and then studies relative contributions of three candidate channels of international technology diffusion, trade, foreign direct investment (FDI) and foreign technology purchase (FTP). I estimate strong and significant productivity effect from domestic R&D capital stock, but mixed effects from the variables capturing foreign R&D capital stock transmitted through different channels. Productivity effects from trade and FDI are found to be heterogeneous among industries. Significant results from FTP-related foreign R&D variable imply only negative contribution of FTP to industrial productivity. However, foreign R&D capital is found to indirectly contribute TFP growth in a complementary way with domestic R&D, at least in the case of trade and FTP.