International Patenting and Technology Diffusion

Posted: 2 Sep 1999

See all articles by Jonathan Eaton

Jonathan Eaton

Leonard N. Stern School of Business - Department of Economics; National Bureau of Economic Research (NBER)

Samuel S. Kortum

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER)

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Abstract

We model the invention of new technologies and their diffusion across countries. Our model predicts that, eventually, all countries will grow at the same rate, with each country's productivity ranking determined by how rapidly it adopts inventions. The common growth rate depends on research efforts in all countries, while research effort is determined by how much inventions earn at home and abroad. Patents affect the return to invention. We relate the decision to patent an invention internationally to the cost of patenting in a country and to the expected value of patent protection in that country. We can thus infer the direction and magnitude of the international diffusion of technology from data on international patenting, productivity, and research. We fit the model to data from the five leading research economies. The parameters indicate how much technology flows between these countries and how much each country earns from its inventions domestically and elsewhere. Our results imply that foreign countries are important sources of technology even though countries earn most of their return to innovation at home. For example, about half of U.S. productivity growth derives form foreign technology yet U.S. inventors earn 98 per cent of the revenue from their inventions domestically.

JEL Classification: F43, O14, O31, O34, O40

Suggested Citation

Eaton, Jonathan and Kortum, Samuel S., International Patenting and Technology Diffusion. Available at SSRN: https://ssrn.com/abstract=5988

Jonathan Eaton

Leonard N. Stern School of Business - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
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212-998-8951 (Phone)
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HOME PAGE: http://www.econ.nyu.edu/user/eatonj/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Samuel S. Kortum (Contact Author)

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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