The Quality of Innovation and the Extent of the Market

Innovation and Economic Growth

Article Snapshot


Daniel Spulber


Journal of International Economics, Vol. 80, pp. 260-279, 2010


This paper analyzes the economic effects of international technology trade.

Policy Relevance

Nations can garner many benefits through policies that favor international technology trade.

Main Points

  • Countries benefit from international trade in technology because they obtain the best invention from a larger pool of inventions.

  • International trade in technology increases the extent of the market for inventions and thereby improves the quality of innovation.

  • Technology trade lowers prices, increases outputs, and increases the volume of trade in differentiated products.

  • When traded products are not close substitutes, international markets for technology generate gains from trade.

  • The results of the analysis were valid whether the technology transfer happened either through expropriation or imitation.

  • Protection of intellectual property rights preserves incentives for entry of inventors and improves the quality of innovation.

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