We study the global innovation and diffusion of ideas by introducing trade into the model in Eaton and Kortum (1999 … intensity of innovation within countries over time and diffusion rates across countries. We find significant specialization … across the globe: some countries have high innovation rates, while other countries rely on diffusion. Although innovation is …

, the forces of innovation and diffusion combine to shape trade substitution patterns. Innovation makes a country … technological similarity and increases head-to-head competition. In the special case of an innovation-only model where countries do … observable trade flows and the dynamics of innovation and knowledge diffusion …

). We present models in the literature that extend the EK model of trade to innovation, diffusion, and multinational firms …