The U.S. Technological Competition and the Global Economy: Evidence from Innovation Spillovers

Abstract

The technological hegemony of the United States is a key driver of world economic development, distribution of innovation, and capital movements, but the nature and the extent of these spillovers is remain underexplored. As the United States remains a powerhouse in innovation on the global stage in terms of R&D investment, patent activity, and export of high-tech products, this paper empirically tests the influence of such technological leadership on major global economic indicators. By applying annual data provided by World Bank and WIPO and applying the ARDL framework to three distinct channels (knowledge spillover, investment flow and trade), the paper examines the impacts of U.S. innovation on the global GDP, foreign direct investment, and global research and development activity. The findings support the good long-run cointegration, with U.S. R&D and high-tech exports contributing to positive spillovers and patents and ICT services having mixed impacts (which may enhance knowledge diffusion). The multifaceted nature of the process of international economic outcomes influenced by U.S. technological progress can be traced through the varying level of sensitivities displayed by the global indicators in short-run dynamics. It is important that policymakers strike a balance between IP protections and open innovation systems so that they can reap global technological synergies to the maximum.