Economists often measure technological and knowledge spillovers in the increasingly globalized innovation economy by the transfer of products, level of trade, and foreign direct investment (i.e. MNCs setting up overseas R&D centers or entering collaborative development agreements with local firms). A recent paper adds to the international literature the finding that patents provide a strong channel for diffusion of technological knowledge across countries. International Patent Pattern and Technology Diffusion, Kurt A. Hafner, Univ of Bamberg, Germany. (August 2005)

The author looks at patterns of international patenting for paths of technological diffusion. The importance of diffusion is the indication of where ideas come from and where they go, and consequently how and where technology and knowledge transfer between nations. These "spillovers" can affect domestic and foreign business related R&D spending. The paper analyzes the impact of diffusion on technological and knowledge spillovers between G7 and non-G7 OECD countries.

The main findings help explain why some patents are not filed overseas, suggesting that only technologically superior or strategic patents figure into international diffusion. Firms may deciden ot to file patents in foreign jurisdictions because of the overseas technological landscape and level of IPR protecton.

Further, the paper finds concrete evidence that patents help foreign adoption of technological knowledge. These patent spillovers can increase foreign labor productivity by 7-14% per 1% increase in domestic R&D. This stands in contrast to diffusion by trade in products alone not affecting foreign labor productivity, and is consistent with economists' view that foreign direct investment, of which patent licensing is a subset, supports such productivity.

The approach of Hafner to study spillovers through patents provides another approach to the literature of how countries become involved in the innovation economy. Given the fluidity of foreign licensing of patents compared to selling products or undertaking overseas business activity, patents may be an important channel to induce innovation paths across economies.

posted by Noel Le @ 4:46 PM | Academia, International, Patents

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