On "Indirect" Trade-Related R&D Spillovers

Abstract

Influential literature argues that trade promotes knowledge flows and technology transmission between trading partners. This literature focuses on 'direct' research and development (R&D) spillovers which are related to the levels of R&D produced by the trading partners. In this paper the authors argue that 'indirect' trade-related R&D spillovers also take place between countries, even if they do not trade with each other. These 'indirect' spillovers are associated with available rather than with produced levels of R&D. The empirical results suggest that these 'indirect' trade-related spillovers are at least as important as the 'direct' ones, and strengthen the view that trade does matter for the international transmission of R&D. The empirical results also suggest that, due to the existence of these 'indirect' effects, bilateral trade patterns are relatively less important as determinants of the level of foreign R&D spillovers acquired through trade.