Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper investigates whether domestic firms’ productivity is an increasing function of imports from the most knowledge intensive economies in the world, i.e. the G7 countries. Using Swedish firm-level data, we confirm an instantaneous causality going from imports to productivity. We also show that productivity is increasing in the G7-fraction of total imports. Our results highlight the importance of import flows from R&D and knowledge intensive economies for productivity and are consistent with imports being a vehicle for technology diffusion. Tests of the sensitivity of the results suggest that G7 imports are particularly important for firms in high-technology sectors and for firms belonging to multinationals and domestic corporations.

Keywords: Technology diffusion; productivity; imports; panel data; GMM

JEL-codes: C81; F14; L10; L60; O33

29 pages, October 13, 2008

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