Abstract
This study examines embodied technology flows through intermediate good transactions between industries
 in various economies and focuses on the ambiguity about their link to innovation. The model consists
 of two equations measuring labor productivity and knowledge production, and knowledge production
 is measured as the explanatory variable of productivity. We compare direct effect of embodied research
 transfer on labor productivity through intermediate good transactions between industries and its indirect
 effect via knowledge creation. We use input-output tables as a proximity mechanism for research capital
 and utilize production function approach. Simultaneous equations results support the system we introduce,
 indicating that both channels of embodied technology spillovers are significant. We observe that labor
 productivity soars with direct and indirect utilization of technology transfer via knowledge production.
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