Direct versus indirect international R&D spillovers

Using a newly constructed panel dataset and up-to-date econometric approaches, this paper shows that consideration of the role of direct knowledge spillovers through telecommunications networks is crucial in empirical studies of international R&D spillovers. The paper uses data on line penetration rates as well as international patent citations to estimate the direct spillover effect. The robust indirect effect through intermediate goods imports asserted by previous studies proves fragile when the estimation controls for the direct effect. Instead, the direct effect is robust and significant. Estimation results also show that the direct effect has increased with widespread use of the Internet.