Knowledge Spillovers across Developing Economies

Abstract

Globalization has dramatically transformed the world economy during the last quarter of 20th century and more vigorously in the first decade and a half in the 21st century. The most important characteristic of this phase of globalization is the rise of cross border flows of trade, investment, finance and technological knowledge. The rising investment in technological knowledge drives increasingly the long term growth process of the developing economies. It is increasingly realized that the level of trade and FDI across borders effects the knowledge generation and dissemination across countries. In this study an attempt is made to examine the relationship between economic growth measured through total factor productivity and knowledge economy variables such as domestic and foreign R&D covering the period of 2001-2012 across 19 developing countries. The regression analysis used in this study is based on panel data analysis using fixed effects models. The results of the study reveals that domestic knowledge stock, openness and the interaction terms of foreign R&D spillovers with openness, human capital and FDI have shown positive impact on total factor productivity of selected 19 developing economies. Further, the impact of foreign knowledge spillovers channeled through the imports of total goods and services are found to be positive and significant while it has been found negative in case of capital goods. An important policy implication that results from this analysis is that the higher level of human capital and international trade results into higher level of productivity growth via knowledge spillovers.