The International Dynamics of R&D and Innovation in the Short and in the Long Run

Laura Bottazzi, Giovanni Peri

NBER Working Paper No. 11524
Issued in August 2005
NBER Program(s):International Trade and Investment, Productivity, Innovation, and Entrepreneurship

In this paper we estimate the dynamic relationship between employment in R&D and generation of knowledge as measured by patent applications across OECD countries. In several recently developed models, known as `idea-based' models of growth, the afore mentioned "idea-generating" process is the engine of productivity growth. Moreover, in real business cycle models technological shocks are an important source of fluctuations. Our empirical strategy is able to test whether knowledge spillovers are strong enough to generate sustained endogenous growth and to estimate the quantitative impact of international knowledge on technological innovation of a country in the short and in the long run. We find that a country's stock of knowledge, its R&D resources and the stock of international knowledge move together in the long run. International knowledge has a very significant impact on innovation. As a consequence, a positive shock to R&D in the US (the largest world innovator) has a significant positive effect on the innovation of all other countries. Such a shock produces its largest effect on domestic and international innovation after five to ten years from its occurrence.

download in pdf format
   (478 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w11524

Published: Peri, Giovanni and Laura Bottazzi. “The Dynamics of R&D and Innovation in the Short Run and in the Long Run." Economic Journal (March 2007).

Users who downloaded this paper also downloaded* these:
Mansfield R&D and Innovation: Some Empirical Findings
Mairesse and Mohnen w10897 The Importance of R&D for Innovation: A Reassessment Using French Survey Data
Hall w17178 Innovation and Productivity
Shea w6632 What Do Technology Shocks Do?
Peri w10893 Catching-Up to Foreign Technology? Evidence on the "Veblen-Gerschenkron" Effect of Foreign Investments
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us