Research shows that international trade is an important channel for the transfer of technology. Building on this evidence, this paper examines the effects of inter- and intraindustry trade on technology transfer. The paper develops and tests the hypothesis that intraindustry trade stimulates more technology transfer than interindustry trade because countries are likely to absorb foreign technologies more easily when their imports are from the same sectors as their production and export sectors. The results of empirical tests for 87 countries during 1970–93 support this hypothesis.

This authoritative new collection presents a selection of previously published seminal articles that have led to the development of intra-industry trade theory and empirical research. Parts I and II cover the pioneering research in the 1960s and a number of models of intra-industry trade that were developed from 1979 to the present day. Parts III and IV look at the empirical research problems in the choice of measure of intra-industry trade and empirical studies that seek to identify the nature of this trade. Part V deals with the role of the multinational corporation and part VI completes the collection with articles that look at extensions to asset markets and applications to other problems such as the geography of trade and rules of origin. Intra-Industry Trade will be an invaluable source of reference to all international trade economists and libraries specialising in this area.

New technologies generate positive externalities -- non-innovators can benefit through the adoption or imitation of the new technologies. International trade serves as a major channel for technology diffusion, allowing importing countries to acquire technical knowledge that they can potentially internalize. To empirically test the effects of trade on technology diffusion, the previous literature typically considers the effects of direct (bilateral) trade on indirect measures of technologies (e.g., TFP). We conjecture that the impact of trade on technology diffusion would be more accurately measured by taking into account both the direct and indirect network effects and by using direct measures of technologies (e.g., intensity levels). The international trade system can be considered as a weighted network. Technology may be diffused, not only bilaterally between countries, but also through the network effects, i.e., indirectly by trading with intermediate countries. We find that the network effects of trade play a significant role in technology diffusion. In most cases, countries better-connected on the trade network have higher technology intensities. Further support for the importance of trade is provided by our finding that for “outdated” technologies, better-connected countries have lower technology intensities.

I discuss the concept and empirical importance of international technology diffusion from the point of view of recent work on endogenous technological change. In this literature, technology is viewed as technological knowledge. I first review the major concepts, and how international technology diffusion relates to other factors affecting economic growth in open economies. The following main section of the paper provides a review of recent empirical results on (i) basic results in international technology diffusion; (ii) the importance of specific channels of diffusion, in particular trade and foreign direct investment; (iii) the spatial distribution of technological knowledge, and (iv) other issues.