International Technology Di¤usion and Economic Growth: Explaining the Spillover Benets to Developing Countries

Technology spillovers o¤er great opportunities for economic growth to developing countries that do little, if any, R&D activity. This paper explores the extent to which these countries bene…t from foreign technology, the di¤usion mechanisms involved, the factors that shape their absorption capabilities, and the sources of heterogeneity in the spillover gains. Results based on a non-stationary panel of 47 developing countries and covering the period 1980-2006 …rst indicate that the gains in terms of increased aggregate productivity are quite substantial, and the import channel appears to be more conducive to knowledge spillover than the FDI channel. In addition, developing countries that enjoy larger bene…ts tend to have larger stock of human capital, more openness to international trade, as well as stronger institutions. Furthermore, the results do not provide a clear answer as of the type of R&D which is assciated with more spillover bene…ts. JEL Classi…cation Numbers: O31; O33; O40.