ABSTRACT
To analyze the volume, direction and impact of technological transfer empirically, researchers traditionally rely on international data about bilateral trade flows or FDI. 1 A new approach suggested by Eaton and Kortum, Hafner or Kotabe measures the direction of technological transfer by patenting activities in foreign markets. 2 Given the existence of the respective national patent laws, an inventor can apply for a patent not only in his home country, but also in foreign countries. Getting a patent at home or abroad, however, is not cost-free, but incurs not only the fees of filing and renewing the patent, but also the disclosure of the underlying technological knowledge. Weighing the costs and benefits of foreign patenting, most inventors decide to file a patent only in their home country. Only the most promising inventions will also be patented abroad. Even so, firms will seek patent protection only in those foreign countries where two conditions hold: the potential market for their innovation is large, and the probability of imitation is high. Hence, a foreign patent indicates not only the country of origin, but also the destination of the technological transfer.
