International Patenting and Technology Diffusion

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International Patenting and Technology Diffusion

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Jonathan Eaton
Samuel Kortum

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Abstract

We model the invention of new technologies and their diffusion across countries. Our model predicts that, eventually, all countries will grow at the same rate, with each country's productivity ranking determined by how rapidly it adopts inventions. The common growth rate depends on research efforts in all countries, while research effort is determined by how much inventions earn at home and abroad. Patents affect the return to invention. We relate the decision to patent an invention internationally to the cost of patenting in a country and to the expected value of patent protection in that country. We can thus infer the direction and magnitude of the international diffusion of technology from data on international patenting, productivity, and research. We fit the model to data from the five leading research economies. The parameters indicate how much technology flows between these countries and how much each country earns from its inventions domestically and elsewhere. Our results imply that foreign countries are important sources of technology even though countries earn most of their return to innovation at home. For example, about half of U.S. productivity growth derives from foreign technology yet U.S. inventors earn 98 per cent of the revenue from their inventions domestically.

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Paper provided by Boston University, Institute for Economic Development in its series Boston University - Institute for Economic Development with number 50.

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Date of creation: Nov 1994
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Handle: RePEc:fth:bosecd:50

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Paper
- Jonathan Eaton & Samuel Kortum, 1994. "International patenting and technology diffusion," Finance and Economics Discussion Series 94-35, Board of Governors of the Federal Reserve System (U.S.).
- Jonathan Eaton & Samuel Kortum, 1994. "International Patenting and Technology Diffusion," NBER Working Papers 4931, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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- Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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- Wolfgang Keller & Stephen R. Yeaple, 2003. "Multinational Enterprises, International Trade, and Productivity Growth: Firm-Level Evidence from the United States," IMF Working Papers 03/248, International Monetary Fund.
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Other versions:
- Samuel S. Kortum & Jonathan Eaton, 1995. "Trade in ideas: patenting and productivity in the OECD," Finance and Economics Discussion Series 95-9, Board of Governors of the Federal Reserve System (U.S.).
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Other versions:
- Samuel S. Kortum & Jonathan Eaton, 1995. "Engines of growth: domestic and foreign sources of innovation," Finance and Economics Discussion Series 95-35, Board of Governors of the Federal Reserve System (U.S.).
- Jonathan Eaton & Samuel Kortum, 1995. "Engines of Growth: Domestic and Foreign Sources of Innovation," Boston University - Institute for Economic Development 63, Boston University, Institute for Economic Development.
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Lööf, Hans & Heshmati, Almas & Asplund, Rita & Nåås, Svein-Olav, 2001. "Innovation and Performance in Manufacturing Industries: A Comparison of the Nordic Countries," Working Paper Series in Economics and Finance 0457, Stockholm School of Economics. [Downloadable!]

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