Foreign R&D spillovers to the USA and strategic reactions

Research output: Working paper / PreprintWorking paper


We re-consider the traditional result of zero or negative foreign R&D spillovers or strategic reactions to the USA using accumulated shocks in a vector-error-correction model (VECM) for the period 1963-2017. Foreign private and public R&D stocks have a positive and statistically significant effect on US public R&D and labour-augmenting technical change (LATC). US private R&D reacts positively to foreign private R&D and negatively to foreign public R&D shocks. Foreign public and private R&D react positively to US public R&D. All variables react positively to US private R&D. From the time profile of the simulated VECM, we calculate the sum of discounted (at 4%) net gains for (i) additional private and public US R&D, and (ii) for policies reacting to foreign private and public R&D shocks with additional domestic private and public R&D. Additional private and public US R&D expenditures have very high internal rates of return. R&D investments in reaction to shocks from foreign R&D are profitable. All LATC reactions are transitional suggesting semi-endogenous growth for the USA.
Original languageEnglish
Place of PublicationMaastricht
Publication statusPublished - 2021

Publication series

SeriesUNU-MERIT Working Papers

JEL classifications

  • c51 - Model Construction and Estimation
  • o30 - "Technological Change; Research and Development; Intellectual Property Rights: General"
  • o38 - Technological Change: Government Policy
  • o47 - "Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence"
  • o51 - "Economywide Country Studies: U.S.; Canada"


  • growth
  • productivity
  • R&D
  • reaction functions
  • spillovers
  • CVAR

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