International RD spillovers: the role of financial markets

This article examines the role of financial markets as a catalyst for international technology diffusion using a panel data set on 72 countries over the period 1981 to 2005. The results suggest that countries with better developed financial markets benefit more from foreign RD stocks to promote domestic productivity growth. This finding is robust to the inclusion of proxies for human capital and domestic RD stocks as alternative measures of absorptive capacity.