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Trade in ideas: outsourcing and knowledge spillovers

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Abstract

Inspired by the theory of variety-expanding product innovation we derive a testable relationship of outsourcing on the growth rate of knowledge. We estimate this relationship with a firm-level dataset, which is a unique match of PATSTAT patent data and the Amadeus dataset. We find evidence that forward spillovers are stronger than backward spillovers, where forward spillovers are defined as spillovers going down the value chain from producers to users of intermediate inputs. Moreover, we conclude that inter-industry spillovers are stronger than intra-industry spillovers. This holds when considering only the more important forward spillovers as well as when considering both directions of knowledge flows.

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Notes

  1. The traditional hypothesis in the KPF literature would state that firms are more innovative if they are in or close to a region with many other innovative firms or institutions.

  2. Good representations of these so called product variety endogenous growth models can be found in Aghion and Howitt (2009, Ch. 3) or in Acemoglu (2009, Ch. 15).

  3. The use of patents as a proxy for innovative knowledge comes with a number of difficulties. These difficulties are, amongst others, that the values of patents show a large variance, patenting can be due to other incentives than purely economical ones, and patents do not completely capture the innovative knowledge in a firm. For a discussion of these issues see Griliches (1990) and Basberg (1987). Nevertheless, we see patent statistics as useful indicators for our analysis.

  4. One might argue that the past patent stock and current patent activity in one period are determined jointly if sectoral research effort and input-output linkages remain sufficiently constant over the years. However, there is a high degree of variance over time in these variables.

  5. A detailed derivation of this type of estimation equation can be found in Eaton and Kortum (1996) or in the technical appendix of Bottazzi and Peri (2002).

  6. Results are available from the authors upon request.

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Acknowledgments

We thank an anonymous referee for helpful comments.We gratefully acknowledge funding from the Bavarian Ministry of Economic Affairs, Infrastructure, Transport and Technology under project “Innovationsspillovers in Deutschland”. Sebastian Benz also gratefully acknowledges financial support from a DAAD PhD research grant. Peter Eppinger provided excellent research assistance.

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Authors and Affiliations

  1. Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, Poschingerstr. 5, 81679, München, Germany

    Sebastian Benz, Mario Larch & Markus Zimmer

  2. University of Bayreuth, Universitätsstr. 30, 95447, Bayreuth, Germany

    Mario Larch

  3. CESifo, Universitätsstr. 30, 95447, Bayreuth, Germany

    Mario Larch

  4. GEP at University of Nottingham, Universitätsstr. 30, 95447, Bayreuth, Germany

    Mario Larch

Authors
  1. Sebastian Benz
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  2. Mario Larch
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  3. Markus Zimmer
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Correspondence to Sebastian Benz.

Appendix

Appendix

1.1 Sectoral patenting activity

Table 5 List of sectors, firms, and their patenting activity
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Benz, S., Larch, M. & Zimmer, M. Trade in ideas: outsourcing and knowledge spillovers. Int Econ Econ Policy 12, 221–237 (2015). https://doi.org/10.1007/s10368-014-0271-1

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