DP2871 On 'Indirect' Trade-Related R&D Spillovers
An influential literature argues that trade promotes knowledge flows and technology transmission between trading partners. This literature focuses on ?direct? R&D spillovers which are related to the levels of R&D produced by the trading partners. In this paper we 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. Our 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. They 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.