International technology Diffusion: A Gravity Approach

RePEc Short ID: psa547
ORCID iD: 0000-0002-3788-4511

Santacreu, Ana Maria

doi:10.20955/wp.2019.031

Working Paper Revision

International technology Diffusion: A Gravity Approach

Abstract: This paper investigates, empirically, the determinants of international technology diffusion using data on technology licensing fees for 61 countries during 1995-2012. A multi-country model of innovation and diffusion yields a gravity equation for bilateral royalty payments as a function of economic fundamentals. The gravity equation is estimated using nonlinear methods. I then investigate discrepancies between the model's predictions and observed royalty payments to identify the role of fundamentals vs. other factors such as imperfect IPR protection, the production structure and tax regulations. An accounting decomposition exercise shows that fundamentals account for most of the variation in royalty payments, whereas imperfect IPR protection and other factors are important in accounting for discrepancies between the model and the data.

Keywords: royalty payments; intellectual property rights; Technology diffusion;

JEL Classification: F12; O33; O41; O47;

https://doi.org/10.20955/wp.2019.031