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Technology, Geopolitics, and Trade

Author

Listed:
  • Leo C.H. Lam

  • Ana Maria Santacreu

Abstract

We study how geopolitical fragmentation shapes cross-border technology licensing and innovation incentives. We show that bilateral royalty flows vary with geopolitical distance differently from goods trade, and that this relationship depends on intellectual property enforcement. To interpret these facts, we develop a growth-trade model in which geopolitical risk weakens licensing enforceability when intellectual property rights are poorly protected. Royalty payments reflect both technology adoption and licensing prices: weaker enforcement can reduce diffusion while inducing firms to reprice contracts. Reduced market size lowers returns to frontier technologies, whereas repricing can redirect innovation toward the technological leader, generating asymmetric welfare effects.

Suggested Citation

  • Leo C.H. Lam & Ana Maria Santacreu, 2025. "Technology, Geopolitics, and Trade," Working Papers 2025-029, Federal Reserve Bank of St. Louis, revised 09 Jul 2026.
    • Handle: RePEc:fip:fedlwp:101980
    DOI: 10.20955/wp.2025.029
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    References listed on IDEAS

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    1. Thomas J. Holmes & Ellen R. McGrattan & Edward C. Prescott, 2015. "Quid Pro Quo: Technology Capital Transfers for Market Access in China," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 1154-1193.
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    Keywords

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    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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