How much does US-based R&D benefit other countries and through what mechanisms? We test the "technologysourcing" hypothesis that foreign research labs located on US soil tap into US R&D spillovers and improvehome country productivity. Using panels of UK and US firms matched to patent data we show that UK firmswho had established a high proportion of US-based inventors by 1990 benefited disproportionately from thegrowth of the US R&D stock over the next 10 years. We estimate that UK firms' Total Factor Productivitywould have been at least 5% lower in 2000 (about $14bn) in the absence of the US R&D growth in the 1990s.We also find that technology sourcing is more important for countries and industries who have "most to learn".Within the UK, the benefits of technology sourcing were larger in industries whose TFP gap with the US wasgreater. Between countries, the growth of the UK R&D stock did not appear to have a major benefit for USfirms who located R&D labs in the UK. The "special relationship" between the UK and the US appearsdistinctly asymmetric.
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number
dp0659.
Find related papers by JEL classification: O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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