Relative Backwardness or Absorptive Capacity: How Does Knowledge Spill Over Across Borders?

Abstract

In this paper we search for evidence of North-South trade-related knowledge spillovers from a sample of five major OECD countries to 45 developing countries using panel data. We then extend the analysis to examine whether the impact of domestic factors affects the extent of knowledge spillovers. In particular, we investigate whether knowledge spillovers are stronger, the further a country is behind the technological leader, or whether they are stronger in countries with higher levels of absorptive capacity. Our results suggest that the impact of trade-related knowledge spillovers on growth does not depend upon how far a country is behind the technological leader, but that knowledge spillovers are stronger in countries with higher levels of absorptive capacity.