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Knowledge Spillovers, absorptive capacity and growth: An Industry-level Analysis for OECD Countries

Listed author(s):
  • Ioannis Bournakis
  • Dimitris Christopoulos
  • Sushanta Mallick

Given the decline in growth momentum in the manufacturing sector in many OECD countries, the role of knowledge-based capital has emerged as a key driver for sustained growth. While empirical studies on estimating knowledge spillovers have usually been undertaken at the country level, the spillover effects can be more definitive only if the analysis is conducted at the industry-level. The effectiveness of international spillovers is conditional on recipient country’s absorptive capacity and this is an important component of the spillover mechanism that has not attracted significant attention so far. This paper therefore assesses the effect of spillovers in driving per capita output growth taking into account the role of absorptive capacity. Our main findings are first, that there is evidence for a robust positive relationship between human capital and output growth across these countries at industry level. Second, the potential of international spillover gains is greater in countries with higher human capital and a more protective environment as far as intellectual property rights are concerned. Countries that improve their absorptive capacity can potentially increase gains from spillovers either via trade or FDI (including vertical FDI). Finally, significant heterogeneity is found between high and low-tech industries with high-tech group displaying greater knowledge spillovers, suggesting that low-tech industries need to be more innovative in order to absorb the technological advancements of domestic and international rivals.

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Paper provided by Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research in its series Working Papers with number 57.

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Date of creation: Apr 2015
Handle: RePEc:cgs:wpaper:57
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