Capital goods trade and R&D spillovers in the OECD

In this paper the significance of capital goods trade as conduit for R&D spillovers is investigated and the impact of international R&D spillovers on OECD countries is quantitatively assessed. Capital goods trade is tested against non-capital goods trade, and knowledge embodied in trade flows is evaluated vis-a-vis R&D spillovers in disembodied form. Our estimation indicates that about half of the return on R&D investment in a G7 country spilled over to other OECD countries. Trade in capital goods was found to be a significant channel of R&D spillovers, although the majority of the R&D spillovers in the OECD were transmitted through other channels.