IMF Working Papers

External Knowledge, R&D, and Innovation: Mapping the Market for Technology Across European Industries

By Christoph Grimpe, Fuad Hasanov, Wolfgang Sofka, Geoffrey Borchardt, Philip Schulz

January 17, 2025

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Christoph Grimpe, Fuad Hasanov, Wolfgang Sofka, Geoffrey Borchardt, and Philip Schulz. "External Knowledge, R&D, and Innovation: Mapping the Market for Technology Across European Industries", IMF Working Papers 2025, 020 (2025), accessed February 19, 2025, https://0-doi-org.library.svsu.edu/10.5089/9798400297915.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

A well-functioning market for technology, or ideas, is an important determinant for the type, scope, and distribution of innovation activities. We use a panel of 20 industries across 24 European countries to study the key determinants driving the market for technology. We explore whether the expenditures on external knowledge depends on the sectoral pattern of innovation and an industry’s distance to the global technological frontier. Disseminating knowledge and technology within the industry, bringing it closer to the global technological frontier, tends to reduce the expenditures for external knowledge except in supplier-dominated industries. We also find important complementarity effects in the market for external knowledge. Industries with high R&D spending, with increasingly large firms, and with large investments in machinery and software foster growth of the market for technology. Our findings suggest tailoring innovation policies to help expand both the size of the market for technology and the use of these markets in specific industries.

Subject: Emerging technologies, Expenditure, Technological innovation, Technology, Total expenditures

Keywords: Emerging technologies, Europe, External knowledge, Global, IMF working paper 25/20, Industrial policy, Industry studies, Innovation activity, Innovation policy, Market size, Markets for technology, Patterns of innovation, R&D, Software foster growth of the market, Technological innovation, Total expenditures

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