Coastal Education & Research Foundation, Inc.

The Impact of Intellectual Capital Spillover on Total Factor Productivity An Empirical

Study in Coastal Regions of China
Author(s): Fan Tian and Liu Liu
Source: Journal of Coastal Research, Special Issue No. 94: Selected Topics in Coastal
Research: Engineering, Industry, Economy, and Sustainable Development (SUMMER 2019),
pp. 920-925
Published by: Coastal Education & Research Foundation, Inc.
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 Journal of Coastal Research SI 94 920–925 Coconut Creek, Florida 2019

The Impact of Intellectual Capital Spillover on Total Factor

Productivity: An Empirical Study in Coastal Regions of
China
Fan Tian†* and Liu Liu††
† ††
Institute of Social Development Department of Public Administration
Chinese Academy of Macroeconomic Research Chinese Communist Party School of Nan Jing, China
Beijing 100044, China Beijing 100044, China

ABSTRACT
Tian, F. and Liu, L. 2019. The impact of intellectual capital spillover on total factor productivity: An empirical study in
coastal regions of China. In: Gong, D.; Zhu, H., and Liu, R. (eds.), Selected Topics in Coastal Research: Engineering,
Industry, Economy, and Sustainable Development. Journal of Coastal Research, Special Issue No. 94, pp. 576–583.
Coconut Creek (Florida), ISSN 0749-0208. Journal of Coastal Research, Special Issue No. 94, pp. 920–925. Coconut
Creek (Florida), ISSN 0749-0208.

This article incorporates foreign intellectual capital in trade channels and in foreign direct investment channels into the
unified analysis framework, using 1990–2015 transnational panel data to calculate the effects of domestic, especially in
coastal regions and foreign intellectual capital spillover on total factor productivity of host countries. It is found that
domestic intellectual capital investment is the main source of technological progress in host countries, and from the
whole sample, foreign direct investment is the main channel for cross-border overflow of intellectual capital, while import
trade has no significant impact on total factor productivity. According to the grouping, only developing countries will
experience intellectual capital overflow through import trade with developed countries, while foreign direct investment
between various types of countries will promote growth of total factor productivity.

ADDITIONAL INDEX WORDS: Intellectual capital, foreign direct investment, import trade, spillover, total factor
productivity.

INTRODUCTION spillover effect of social return of enterprise R&D investment

The research on the connotation and classification of
intellectual capital has been developing ever since the
American economist John Kenneth Galbraith put forward the
concept in 1969 (Huifang et al., 2014). Since the 1980s, the
world economy stepped into a period of industrial restructuring
as the pattern of economic development began to shift from
investment-driven to innovation-driven, and economic devel-
opment entered the era of intellectual economy. In the process,
intellectual capital separated from other factors of production
to become the engine for technological progress and economic
growth.
In 1981, Griliches proposed a measurement model of R&D
capital and the production function of intellectual capital. In
1986, he studied the measurement method of intellectual
capital, proposed that the enterprise stock market value was
determined by tangible capital (labour force, material capital)
and intangible intellectual capital, and proposed to use the
R&D capital stock and the number of authorised patents as the
variable to measure intellectual capital (Griliches et al., 1986).
In 1999, Hall made a systematic evaluation of the literature
on measurement of R&D investment returns and measured the
spillover effect of enterprise R&D investment, and the results
showed that the return of enterprise R&D investment was
higher than that of other material capital investment, and the
DOI: 10.2112/SI94-181.1 received 20 March 2019; accepted in
revision 3 May 2019.
*
Corresponding Author: njdxliuliu@foxmail.com
Ó
Coastal Education and Research Foundation, Inc. 2019
was higher (Hall et al., 1999).
The improvement of a country’s technology level is not only
attributed to the input of domestic intellectual capital but also
to the transnational spread of foreign intellectual capital.
Studies show this even in the United States, which has the
highest productivity where the contribution of foreign intellec-
tual capital has reached 40% (Eaton et al., 1999). For most
developing countries, the foreign source of technological
progress has even accounted for 90% of the productivity growth
(Keller W., 2004); therefore, the pattern of technological
advancement in the world is, to a great extent, influenced by
the degree of international intellectual capital spillover.
The knowledge transferred to others can be divided into
‘embodied knowledge’ and ‘disembodied knowledge’ (Gholami
et al., 2009). A large amount of evidence indicates that
international intellectual capital spillover generated from
imports and FDI has become the main determinant of global
technological progress (Keller, 2009).
Import trade can promote knowledge spillover and technol-
ogy diffusion among trading partners and interrelate produc-
tivity levels of different countries. Theoretical research shows
that, through the import trade, a country can import more
diversified or higher-quality intermediate and capital goods,
imitate and study more advanced production methods and
management experiences from abroad, encourage local com-
panies to pursue more novel ideas and technologies, allocate
various domestic resources more effectively and reduce R&D
rehandling to lift a country’s technical level (Grossman et al.,
1991). By taking developed countries as research samples, Coe

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 The Impact of Intellectual Capital Spillover on Total Factor Productivity: An Empirical Study in Coastal Regions of China
and Helpman (1993) and Coe et al. (2008) confirmed that
positive R&D spillover effects exist among trading partners
and import trade can promote the total factor productivity in
developed countries (Coe et al., 1993; Coe et al., 2008).
However, the import and export trade in China is mainly in
the coastal areas due to the natural resource advantages. So,
the research samples in this paper are mainly concentrated in
the coastal areas.
Since MacDougall proposed the spillover effect of foreign
direct investment in the 1960s, FDI has become an increasingly
important channel for countries around the world, especially
developing countries, to acquire advanced foreign technologies.
In 2000, Xu studied 20 developed countries and 20 developing
countries and found that the R&D of multinational companies
in the United States had a significant promoting effect on the
technological progress of host countries (Xu B, 2000).
Some scholars have included import trade and FDI in the
same measurement framework, analysed and compared the
intellectual capital spillover effects from the two channels. One
interesting thing about these studies is different empirical
studies have some inconsistent conclusions. Hejazi et al. (1999)
studied 22 OECD countries and found that foreign R&D capital
spillover through FDI as the channel significantly promoted
technological progress in developed countries, while import as
the channel had no significant impact on total factor produc-
tivity (Hejazi et al., 1999). Wang Jianhua et al. (2014) studied
27 developed countries and 15 developing countries and found
that FDI had significant effect on international R&D spillover,
while import had insignificant R&D spillover effect (Jianhua et
al., 2014).
Based on the previous studies, this paper makes important
contributions to the existing literature from two aspects.
First, this paper reviews the international spillover of
intellectual capital and verifies whether the previous re-
search results are still applicable when the data set is
updated. Second, in view of the different conclusions
mentioned above, this paper further subdivides the model
analysis. We will subdivide the foreign intellectual capital of
the two sample groups according to the source again and
calculate the impact of foreign intellectual capital on the total
factor productivity from other developed countries in devel-
oped countries, from developing countries in the developed
countries, from the developed countries in developing
countries, and from other developing countries in developing
countries. In addition, this study will also have important
practical policy significance because if international intellec-
tual spillovers do occur, this paper will support a greater
degree of opening up to the outside world and may even
encourage more investment and imports from knowledge-
intensive economies.
MODELLING AND RESEARCH HYPOTHESIS
Based on the endogenous growth model driven by innovation,
this paper uses the regression framework of international R&D
spillover analysed by Coe and Helpman (1993, referred to as
CH) and Xu (1999) for reference;( Gholami R.; Guo X. and Lee
S., 2009), to assume that the total production function has the
form of Cobb-Douglas:
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921
 
Yit ¼ Aðkit ; Eit ; SEit ÞF Lit bL ; Kit bK ð1Þ
In the equation, Y represents real GDP, L represents labour
input, K represents capital stock, b represents the elasticity of
each factor of production, and A denotes the technology
transfer parameter, which in turn is the function of the
unobserved technical change parameter. The parameter is
obtained according to D ln kit ¼ ai þ gt þ tit, national specific
(intellectual) capital E and spillover effect. After taking the
logarithm of equation (1) and adjusting it, equation (2) can be
obtained:
ln Yit ¼ bi Lit þ bk Kit þ be Eit þ bse SEit þ kit ð2Þ
According to the growth accounting method, we assume
competitive input market (labour and traditional capital are
provided by marginal output) and input depletion (all income is
used to pay for factors). This forms the equilibrium condition
that the input factor shares (a) are equal to their output
elasticity (b). With this hypothesis, we can obtain the TFP
growth rate measurement indicators in the following equation:
ln TPFit ¼ ln Yit  bl ln Lit  bk ln Kit ð3Þ
As in the previous studies, we have replaced national
intellectual capital with R&D capital R. In terms of the spill
over intellectual capital, it is assumed that the spill over capital
is determined by FDI SEfdi and import trade SEim, and thus
equations (4) and (5) can be obtained:
E ¼ R; ð4Þ
 b  b
SE ¼ SEim im SEfdi fdi ð5Þ
After the integration of equations (2), (3), (4) and (5), the
regression model equation (6) used in this paper is finally
obtained:
ln TFPij ¼ br ln Rit þ bim ln SEim it þ bfdi ln SEfdi it þ kit ð6Þ
In accordance with equation (6), the first hypothesis of this
paper is proposed:
Hypothesis 1: Intellectual capital has spillover effect inter-
nationally, and there is a significant positive correlation
between domestic TFP growth and foreign intellectual capital.
Since this paper examines the influence of foreign intellec-
tual capital through FDI as the channel as well as trade as the
channel on TFP in the meantime, Hypothesis 1 should be
disassembled into the following two hypotheses:
Hypothesis 1-1: There is a significant positive correlation
between domestic TFP growth and foreign intellectual capital
spillover through FDI.
Hypothesis 1-1: There is a significant positive correlation
between domestic TFP growth and foreign intellectual capital
spill over through FDI.
Hypothesis 1-2: There is a significant positive correlation
between domestic TFP growth and foreign intellectual capital
spillover through trade.
Hypothesis 1-2: There is a significant positive correlation
between domestic TFP growth and foreign intellectual capital
spill over through trade.
922
The literature on international spill overs highlights the fact
that countries differ in how they benefit from foreign spillovers.
Previous studies have suggested that the TFP of an industri-
alized country is more responsive to the domestic intellectual
capital, because the larger the economy is, the more extensive
the intellectual activities it launches. Coe et al. (1993) also said
that developing economies with low intellectual capital would
benefit from intellectual activities in developed countries (Coe
et al., 1993). To understand the spill over phenomenon better,
this paper divides the spill over countries into two categories,
developed and developing countries, and measures variables
and makes regression analysis for the two types of countries
according to the same method. By comparing the results of the
regression analysis, we intend to explore the second hypothe-
sis:
Hypothesis 2: For recipient countries, intellectual capital
spill over from developed countries is stronger than from
developing countries.
Similarly, Hypothesis 2 is disassembled into the following
four hypotheses:
Hypothesis 2-1: For developed countries, the impact of
foreign intellectual capital spill over from other developed
countries through FDI on domestic TFP is greater than that
from developing countries through FDI.
Hypothesis 2-2: For developing countries, the impact of
foreign intellectual capital spill over from developed countries
through FDI on domestic TFP is greater than that from other
developing countries through FDI.
Hypothesis 2-3: For developed countries, the impact of
foreign intellectual capital spillover from other developed
countries through trade on domestic TFP is greater than that
from developing countries through trade.
Hypothesis 2-4: For developing countries, the impact of
foreign intellectual capital spill over from developed countries
through trade on domestic TFP is greater than that from other
developing countries through trade
EMPIRICAL ANALYSIS
For the sake of clarity, it is assumed that there are two port-
property companies in the same area that use the same
technology to produce homogeneous products, which have the
same marginal social costs (MSC). Quantitatively, the margin-
al social cost is equal to the sum of the marginal production cost
of the port-property company (MC) and the marginal external
cost (MEC) of the environmental pollution, that is:
MSC ¼ MC þ MEC. Under the condition that the production
scale, the input factors proportion, and the technology level are
fixed, for most companies, the marginal social cost is tilted
upwards because the marginal cost of production rises with the
increase in the production of port-property companies, and
with the increase of the pollution, the harm to the environment
has also increased. However, due to the different emission
reduction technologies used, there are differences in the
marginal abatement costs (MCA) of the two companies, which
are MCA1, MCA2respectively. In the short term, the marginal
abatement costs of port-property companies should be tilted
downwards due to the fixed level of emission reductions.
Because emission reductions require the installation of specific
emission reduction equipment, the unit cost will be higher if
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Tian and Liu
the emission reduction is small. When the emission reduction is
high, the unit cost will be reduced accordingly.
Data Source and Description
Before introducing the data sources and processing methods
of each variable, two points need to be noted. First, since some
national data can only be traced back to 1990, in order to
maintain the data integrity, the period span examined in this
paper is confined from 1990 to 2015. Second, we selected 36
countries as sample economies after referencing the article by
Gholami (2009), in which the developed countries include
Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Japan, Italy, South Korea, the
Netherlands, New Zealand, Norway, Portugal, Spain, Britain
and the United States, while the developing countries include
Argentina, Brazil, Bulgaria, Chile, China, Czech Republic,
Hungary, India, Malaysia, Mexico, Poland, Romania, Russia,
Slovakia, Thailand, Turkey and Venezuela (Gholami et al.,
2014).
The method of calculating the R&D capital stock is the same
as that of the physical capital stock. The R&D capital stock of
each economy over the years is calculated by the perpetual
inventory method: Rt¼ (1-d) RCt-1þ RDt, in which t stands for
year, d for depreciation rate, RC for R&D capital stock, and RD
for R&D expenditure fixed price which with the data obtained
in this paper by multiplying the fixed price of GDP in each year
by the total amount of R&D expenditure in each year. This
paper sets the depreciation rate of R&D capital stock at 15%,
considering that the economic lifecycle of knowledge is shorter
than that of physical capital, and the depreciation rate of R&D
capital stock is usually higher than that of physical capital
stock . R0 stands for base period R&D capital stock. This paper
takes 1990 as the base period and uses the method of Griliches
(1979) to calculate R0: R1990¼RD1990/(g þ d)( Griliches. et al.,
1979.), in which R1990 represents the R&D capital stock in
1985, RD1990 is the fixed price of R&D expenditure in 1985, g
is the average growth rate of the fixed price of R&D
expenditure from 1985 to 2016, and d is depreciation rate
(15% in the paper).
The key to measure the foreign intellectual capital through
trade spillover lies in the selection of the weighting method.
Currently, the CH weighting method and LP weighting method
are relatively common. The CH weighting method takes the
bilateral import share of the native country and the trading
partner as the weight, which presents the problem of
aggregation bias, while the LP weighting method takes the
ratio of bilateral import volume to the GDP of the trading
partner as the weight coefficient, which presents the problem of
crowding effect. Regarding these deficiencies, Kwark and Shyn
(2006) proposed to take the export share of the country of origin
as the weight coefficient to calculate the R&D capital stock
spillover through import as the channel (i.e., KS weighting
method), which can not only solve the problem of aggregated
bias but also is not bound by the trade model of country of origin
(Kwark and Shyn et al.,2006). Based on this, KS weighting
method used by Chen Chao et al. (2016) is adopted in this paper
to calculate foreign R&D capital spillover through trade (Chen
P
Chao et al., 2016). The formula of KCim: KCimit¼ (Xjit/
Xjt)KCjt(i„j) can be obtained after the appropriate modifica-
 The Impact of Intellectual Capital Spillover on Total Factor Productivity: An Empirical Study in Coastal Regions of China
Table 1. Correlation coefficient matrix of each variable
Variable lnR lnSEim lnSEfdi
lnRC 1 lnTFP
lnSEim 0.684 1 1
lnSEfdi 0.792 0.384 1 lnR
tion for KS weighting method, in which i and j represent
economy, t represents the year, im represents the import
symbol, KCim is foreign intellectual capital spillover that
economy i obtains through import as the channel in year t, KCjt
is economy j’s domestic intellectual capital in year t, Xjt is the
total exports of economy j to trading partners in year t, and Xjit
is economy j’s exports to economy i in year t.
In this paper, the method used by Ciruelos et al. (2005) is
adopted to calculate the foreign intellectual capital variable
SEfdi spillover from FDI, which is also calculation method
based on KS weighting method(Ciruelos et al., 2005). The
P
formula is: SEfdi¼ (OFDIjit/OFDIjt) SEjt(i„j), in which
SEfdi refers to the foreign intellectual capital spillover of
economy i through FDI in year t, and OFDIjit refers to the total
stock of direct investment of economy j to investment partners
in year t. As for data sources, since the stock data of FDI from
1990 to 2015 of the sample countries selected in this paper
cannot be obtained completely, in order to maintain the
consistency and integrity of the data, this paper takes reference
of Tang et al. (2008) and Chen (2016), to select the G7 countries
(the United States, Japan, Britain, Canada, Germany, France
and Italy) and the BRICS countries (China, Russia, India and
Brazil) as the source of FDI(Tang et al. , 2008. Chen Chao et al.,
2016 ).
The data used in this paper are from the UN as well as the
websites of the OECD, World Bank and the Conference Board,
which provides the data on total factor productivity. Regarding
some missing data in some countries, this paper estimates the
trend of these data varying with the year.
Test on Time Series
In this paper, a correlation coefficient matrix is used to test
the multicollinearity of the model, and the severity of multi-
collinearity is judged through the method used by Chen Chao
(2016), that is, if the correlation coefficient between two
variables is greater than 0.85, the model is considered to have
severe multicollinearity(Chen Chao et al., 2016). On the other
hand, if the correlation coefficient between two variables is less
than 0.85, the existence of multicollinearity has no significant
influence on the estimated results. As can be seen from the
results in Table 1, none of the correlation coefficient between
the explanatory variables in pairs exceeds 0.85; therefore, it
can be judged that the multicollinearity problem will not affect
the accuracy of the estimated results.
To avoid false regression, the panel unit root should be used
to test the stationarity of each variable. To improve the
reliability of test results, the panel unit root test of each
variable would be conducted by using the widely-used Levin-
Lin-Chu (LLC) Test, Im-Pesaran-Shin (IPS) Test, Breitung (B)
Test and Fisher-ADF (F) Test, as shown in Table 2. In the
stationarity test, the p value of each test method is above 0.1,
indicating that all variables are non-stationary. In the first-
order test, all the test methods except lnTFP and lnR are still
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923
Table 2. Results of unit root test
Variable Order LLC B IPS F
0 0.18 (0.62) 4.03 (0.98) -0.31 (0.32) 56.40 (0.52)
20.64 (0.04) 4.63 (0.97) 4.12 (0.00) 164.71 (0.00)
0 1.06 (0.12) 0.32 (0.62) 37.00 (0.32) 70.03 (0.18)
1 13.21 (0.00) 0.12 (0.48) 3.87 (0.00) 115.82 (0.00)
lnSEfdi 0 2.75 (0.96) 1.03 (0.87) 5.42 (0.75) 25.12 (0.96)
1 25.19 (0.00) 1.76 (0.03) 3.76 (0.00) 137.87 (0.00)
lnSEim 0 6.01 (0.98) 10.45 (0.99) 5.54 (0.98) 8.26 (0.98)
1 8.26 (0.00) 1.82 (0.94) 6.14 (0.00) 78.12 (0.04)
not stable in the Breitung (B) Test, indicating that each
variable is stable under the condition of the first-order
difference; therefore, it can be judged that the variables used
in the model are of the same order. Since all variables in the
model are non-stationary homogeneous variables through the
panel unit root test, the Pedroni Test was used in this paper to
conduct the panel co-integration test. To save space, as shown
in Table 3, all models passed the co-integration test at a
significance level of 5%.
Analysis of Regression
Model 1 in the second column of Table 3 is the total sample
model. The regression results show that the R2 of Model 1 is
0.893 and the overall fitting degree is good. According to the
model results, every 1% increase in lnSEfdi leads to a 0.203%
increase in lnTFP, and every 1% increase in lnR leads to a
0.314% increase in lnTFP. lnR (coefficient 0.203, 1% significant
level) has a significantly greater influence on total factor
productivity than lnSEfdi (coefficient 0.203, 1% significant
level), while lnSEim has no significant influence on total factor
productivity. In general, the contribution of domestic intellec-
tual capital to total factor productivity is greater than that of
foreign intellectual capital to total factor productivity. Mean-
while, the impact of foreign intellectual capital on TFP in the
case of total sample mainly comes from the spill over from FDI.
According to the regression results of Model 1, Hypothesis 1 is
preliminarily verified.
Model 2 in the second column and Model 3 in the third
column of Table 3 show the regression analysis results of the
influence of foreign intellectual capital from developing
countries and foreign intellectual capital from developed
countries on the total factor production of developing countries
respectively. According to the results of Model 2, every 1%
increase in lnSEfdi leads to a 0.198% increase in lnTFP, and
every 1% increase in lnR leads to a 0.321% increase in lnTFP;
therefore, lnSEfdi has no significant impact on total factor
productivity. According to the results of Model 3, every 1%
increase in lnSEfdi leads to a 0.201% increase in lnTFP, every
1% increase in lnSEim leads to a 0.127% increase in lnTFP, and
every 1% increase in lnR leads to a 0.291% increase in lnTFP.
In developing countries, in addition to the imports from other
developing countries, the foreign intellectual capital spillovers
from other channels have made significant contribution to the
total factor productivity, and meanwhile the contribution of
foreign intellectual capital spillover from developed countries
to TFP is greater than that from developing countries.
Model 4 in the fifth column and Model 5 in the sixth column of
Table 3 respectively show the regression analysis results of the
influence of foreign intellectual capital from developing
924 Tian and Liu

Table 3. Results of Regression Analysis

Developing Country Developed Country

Foreign Foreign
Foreign Foreign intellectual capital intellectual capital
intellectual capital from intellectual capital from spill over from spill over from
Total Sample developing countries developed countries developing countries developed countries
Variable Model One Model Two Model Three Model Four Model Five
lnSEfdi 0.203*** 0.198*** 0.201*** 0.052* 0.187***
(4.213) (5.307) (19.412) (9.697) (12.339)
lnSEim 0.051 0.047 0.127*** 0.021 0.102
(1.032) (0.809) (18.513) (1.018) (0.987)
lnR 0.314*** 0.321*** 0.291*** 0.325*** 0.394***
(10.412) (8.741) (9.124) (11.819) (16.542)
R2 0.893 0.861 0.913 0.721 0.895
Co-integration or not Yes*** Yes*** Yes*** Yes*** Yes***

countries and foreign intellectual capital from developed
countries on the total factor production of developed countries.
According to the results of Model 4, every 1% increase in
lnSEfdi leads to a 0.102% increase in lnTFP, and every 1%
increase in lnR leads to a 0.325% increase in lnTFP; therefore,
lnSEfdi has no significant impact on total factor productivity.
According to the results of Model 5, every 1% increase in
lnSEfdi leads to a 0.187% increase in lnTFP, every 1% increase
in lnSEim leads to a 0.102% increase in lnTFP, and every 1%
increase in lnR leads to a 0.394% increase in lnTFP. For
developed countries, the spillover of foreign intellectual capital
from import can hardly make a significant contribution to the
total factor productivity, and it can be found that the spillover
of foreign intellectual capital from FDI of developed countries
contributes more to TFP than foreign intellectual capital from
FDI of developing countries.
From the results of each model, Hypothesis 1-1 is verified,
while Hypothesis 1-2 depends on specific conditions. Hypoth-
esis 2-1, 2-2 and 2-4 have been verified, while Hypothesis 2-3
has not. For developed countries, the spillover of foreign
intellectual capital generated by import trade is difficult to
make a significant contribution to TFP.
CONCLUSION
This paper shows that when the foreign intellectual capital
brought by FDI and that brought by import trade are analysed
together in the same model, the foreign intellectual capital
brought by FDI has a significant promoting effect on a country’s
TFP, although this effect is not as obvious as the domestic
intellectual capital has made. Meanwhile, this study also
shows that overall, foreign intellectual capital brought by trade
has no significant promoting effect on a country’s TFP,
consistent with the conclusions of Hejazi et al. (1999) and
Wang Jianhua (2014) et al. (Hejazi et al.,1999; Wang Jianhua
et al.,2014).
The results of further subdivision show that FDI of any
source can promote a country’s TFP growth, in which
developing countries can benefit more related to TFP growth
by absorbing FDI from developed countries, while developed
countries benefit relatively less related to TFP growth by
absorbing FDI from developing countries. The conclusion is no
matter whether in developed countries or developing countries,
only when trading with developed countries can foreign
intellectual capital be generated to promote TFP growth at
home, and in the process of trading with developed countries,
developing countries have gained more.
As developed countries have higher levels of intellectual
capital and are also better informed about new technologies
and how they can be implemented successfully, the intellectual
capital gained by developing countries through importing trade
with or attracting FDI from developed countries can better
boost economic growth.
It can also be speculated from the empirical results of this
paper that, for countries with different economic levels, the
extent and scope of the impact of foreign intellectual capital
spill over on TFP will differ.
From a practical perspective, the conclusion of this paper
supports the existence of international intellectual capital spill
over, which means that an economy can benefit from the
intellectual capital of other economies. From the conclusions of
this paper alone, it is reasonable to support greater economic
integration, as developing countries will increase their poten-
tial to absorb knowledge spill overs from other countries by
attracting investment or importing from knowledge-intensive
economies to a larger extent. Although the international
situation has increased in complexity, more open foreign
policies and measures to facilitate knowledge exchange will
still have important practical value for developing countries
planning to catch up with the frontrunners for some time to
come.
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