Seek foreign funds or technology? Relative impacts of different spillover modes on innovation

This paper identifies channels of influence of foreign linkages on innovative activity in nations and it compares the relative effects of aggregate innovation linkages, FDIs, high-tech imports, and ICT imports, on patenting across a large sample of nations. Whereas various drivers of the international innovative activity have been studied in the literature, our understanding of the contributions of different linkages to innovation deserves more attention. We ask: Are the different innovation linkages equally complementary to research inputs in fostering innovation? We find that a broader index of innovation linkages shows positive and significant spillovers on innovation. We also find some support for the positive link between FDIs and innovation; however, high-tech imports and ICT imports have opposite effects on innovation, with the former effect being negative. These spillovers are reinforced by the positive and expected impacts of R&D spending. In other results, greater venture capital investments boost innovation in most cases. The findings are somewhat sensitive across two alternative measures of patenting and there are some nonlinearities in the influence of FDIs and imports on innovation.