Inter-sectoral and international R&D spillovers

It has been well established in the literature that there are intra- and inter-sectoral knowledge spillovers, national as well as cross-border, that make the social rate of return to R&D exceed the private rate of return. Taking such spillovers into account is essential to examine the impact of R&D policies. This paper reviews the literature on (international) R&D spillovers and the various ways that have been proposed to measure such spillovers. Although distinctions have been made between knowledge spillovers due to the public good nature of knowledge on the one hand, and 'rent' or 'pecuniary' spillovers between suppliers and buyers due to the incomplete translation of R&D-induced quality improvements into the price of intermediates on the other hand, this distinction is difficult to make empirically. The variety of potential transmission channels and transmission effects - all with their measurement problems, suggests calculating spillover matrices that are sufficiently broad to capture their correlated effects. The paper proceeds by discussing the advantages and disadvantages of different spillover measures. It subsequently describes two matrices of inter-sectoral and international spillover weights based on patent citation data. It concludes with suggestions for future work.