Globalization Helps Spread Knowledge and Technology Across Borders

IMF Blog, April 9, 2018

Source details

Canonical URL: Globalization Helps Spread Knowledge and Technology Across Borders

Authors: AQIB ASLAM, Johannes Eugster, Giang Ho, Florence Jaumotte, Roberto Piazza
Published: April 9, 2018

Authors: AQIB ASLAM, Johannes Eugster, Giang Ho, Florence Jaumotte, Roberto Piazza
Date: April 9, 2018
Central message: Globalization has intensified the spread of knowledge and technology across borders, accelerating the diffusion of innovations and helping emerging market economies boost innovation capacity and labor productivity.

During 1995–2014, the United States, Japan, Germany, France, and the United Kingdom (the G5) produced three-fourths of all patented innovations globally.
China and Korea have started to make significant contributions to the global stock of knowledge in recent years, joining the top five leaders in a number of sectors.
Two descriptive features of patent-citation–based knowledge links:
- In 1995 the United States, Europe, and Japan were dominating global patent citations; China and Korea (depicted together as “other Asia”) have made increasingly large use of the global knowledge stock as measured by their patent citations.
- Knowledge links have intensified over time, both within (red arrows) and across (blue arrows) regions.
Alternative measure considered: the intensity of international trade with technology leaders as an indicator of foreign knowledge availability for domestic use.

Over 2004–14, knowledge flows from the technology leaders may have generated, for an average country-sector, about 0.7 percentage point of labor productivity growth per year.
That 0.7 percentage point amounts to about 40 percent of the observed average productivity growth over 2004–14.
The increased transfer of knowledge and technology to emerging market economies has partly offset the effects of the recent slowdown in innovation at the technology frontier and helped drive income convergence for many emerging economies.
Advanced economies have been more affected by the technology slowdown at the frontier.

Globalization increases access to foreign knowledge.
Globalization enhances international competition, including through the rise of emerging market firms, strengthening firms’ incentives to innovate and adopt foreign technologies.
Growing participation of emerging market economies in global supply chains with multinational companies has been an important factor behind the build-up of innovation capacity, although multinationals sometimes reallocate some innovation activity to other parts of the global value chain.

The study finds evidence that technology leaders benefit from each other’s innovation, implying two-way spillovers.
With the growing contribution of China and Korea to the expansion of the technology frontier, there may be scope for positive spillovers from these new innovators to traditional innovators.

Investing in education, human capital, and domestic research and development is essential to build the capacity to absorb and efficiently use foreign knowledge.
An appropriate degree of protection and respect of intellectual property rights—both domestically and internationally—is required to preserve innovators’ ability to recover costs while ensuring new knowledge supports growth globally.
Policymakers must ensure that the positive growth benefits from globalization and technological innovation are shared widely across the population, including by preventing innovating firms from exploiting newly acquired technology to gain excessive market control to the detriment of consumers.

Globalization Helps Spread Knowledge and Technology Across Borders — IMF blog, April 9, 2018 (AQIB ASLAM et al.).