Heterogeneous Firms Trading In Ideas: An Application to Energy Technologies

Notwithstanding the central role attributed to technology transfer (TT) and the effort to promote it through the creation of permanent international bodies such as the Subsidiary Body for Scientific and Technological Advice of the UNFCCC, very little is known about the determinants of this process with respect to energy technologies. This paper marries the literature on international trade with that on innovation and TT in carbon efficient technologies, making a number of
contributions. First, a model of monopolistic competition shows how the decision to export a blueprint/technology depends on market and institutional characteristics of the receiving country, on the distance between the sending and the receiving countries, on the quality of the innovator’s ideas and on variable and fixed costs of production. Asymmetry of TT is the result of differences in innovation levels and ideas productivity. Second, we empirically test the model using carefully selected patent data for both developed and developing countries as a proxy of technology transfer. We show that knowledge transfer through patent duplication increases with the level of Intellectual Property Rights (IPR) protection. The effect is slightly stronger in the case of non-OECD recipients. Moreover, environmental policy increases the incentives for patent duplication from top inventor countries. In this case, the effect is stronger for OECD recipients.