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Abstract
How easily do knowledge and technology flow across countries? Has this relationship changed over the past decades, a period when the world has become economically more integrated and the international competition landscape transformed? And did this help productivity growth, both at the country and the global level? These questions are important because technology tends to advance at different speeds across countries. As a consequence, making new technologies more widely available creates opportunities for raising productivity and incomes. Against this backdrop, the chapter offers new empirical evidence on the evolution of international technology diffusion and its impact on productivity. Using a rich data set on patents, cross-patent citations, research and development spending, and productivity, it finds that globalization has indeed intensified the global diffusion of knowledge and technology and helped spread growth potential across countries. The positive impact has been particularly strong for emerging market economies, fostering cross-country income convergence, thanks to their increased use of the available foreign knowledge. But technology leaders can also benefit from the innovation of others. The right set of policies maximizes benefits for all involved, including policies to enhance inter-connectedness and build absorptive capacity. An appropriate degree of protection for intellectual property rights is key to preserve the ability of innovators to recover costs while ensuring that new knowledge supports growth globally.
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