The impact of domestic and foreign public green R&D on domestic green innovation

This study examines the effect of both domestic and foreign publicly funded R&D in environmentally friendly technologies on domestic green innovation. Using panel data for 24 countries over the period 1994–2019 and a variety of cointegration methods, which assume non-stationary variables, we find that both domestic and foreign public R&D in environmentally friendly technologies have a significant positive effect on domestic green innovation. The evidence from the panel cointegration analysis also suggests that while foreign government-funded green R&D does not affect domestic innovation in environmental technologies through disembodied, non-trade-related spillovers, and while many imported goods are not a channel for international spillovers of public R&D in environmental technologies, international spillovers from public green R&D occur through imports of environmental goods. In addition, we find no evidence that domestic and foreign publicly funded R&D in environmentally friendly technologies crowd out non-green innovation. Our two main findings – that both domestic and foreign public environmental R&D expenditures have positive effects on domestic green innovation and that international spillovers from government-funded green R&D occur through imports of environmental goods – are robust to the application of a variety of stationary panel methods to a shorter sample that starts in 2008.