Examining US productivity: Knowledge flows from industry and country sources

This paper examines Total Factor Productivity (TFP) and knowledge flows, using international patent data. The result is a measure of technology that isolates sources of innovation and their contributions to domestic TFP. Within-industry innovation enhances domestic productivity, and domestic between industry innovations are productivity enhancing. However, foreign-sourced between-industry innovation has a negative effect on domestic productivity. This highlights the dual aspect of patents as a measure of innovation. However, when controlling for domestic market structure, foreign-owned firm employment, or imports, foreign-sourced knowledge flows have potentially positive effects on domestic TFP. Overall results are sensitive to sectors and country of origin.