Chapter 19. International Trade, Foreign Direct Investment, and Technology Spillovers

This chapter examines how international flows of technological knowledge affect economic performance across industries and firms across different countries. Motivated by the large share of the world's technology investments made by firms that are active across country borders, we focus on international trade and multinational enterprise activity as conduits for technological externalities, or spillovers. In addition to a review of recent empirical research on technology spillovers through trade and foreign direct investment, the discussion guided by a model of foreign direct investment, trade, and endogenous technology transfer. There is evidence for technology spillovers from both international trade and the activity of multinational enterprises. The analysis highlights challenges for future empirical research, as well as the need for additional data on technology and innovation.