International R&D spillovers and business service innovation

A major international transmission channel of productivity increases is trade in intermediate products and services. This paper analyses international spillovers at the industry level and for the first time investigates effects from the services sector in this framework. The analysis makes use of newly available data on international input-output linkages between industries. Our results using this novel approach indicate significant positive productivity effects from innovation in knowledge intensive, high technology business services and confirm the productivity effects from international manufacturing spillovers found in the recent literature.

Keywords: Productivity, Research and Development, Business Services, Spillovers, Offshoring, Wages, Institutions

JEL Classification: F14, F43, O31, O43