International Technology Trade and Innovation Efficiency: A Cross-Country Study Show-Ling Jang Che-Jung Hsu Tzu-Ti Lin Department of Economics, National Taiwan University Dar-Zen Chen Department of Economics, National Taiwan University Mu-Hsuan Huang Department of Economics, National Taiwan University Annual Paris Conference on “Money, Economy and Management” July 2011

1. Introduction 2

Innovation Technology Improvement TFP Shock Economic Growth Crucial For Every Nation! 3

Conventional Policy Making Technological Improvement Depends On R&D Expenditure Researchers Technicians R&D Expenditure Researchers Technicians Reference: Wang and Huang (2007); Sharma and Thomas (2008) This neglects EXTERNAL sourcing! 4

Measurement of External Sourcing: Technology Balance of Payment (TBP) TBP payments capture the firm’s activities of importing the disembodied technology, while TBP receipts enable us to measure the exportation of disembodied technology through export Reference: TBP Manual (1990); Hollanders (2008) 5

Reasonably Using TBP Data However, TBP data has its limitations, and sometimes can be misused. Ex: Some policy makers tend to merely consider surplus or deficit of technological trade when proposing new policies 6

Our Research Purpose Proposing a reasonably framework for policy makers to utilizing TBP data I Conducting an innovation efficiency measurement encompassing both internal and external indicators II 7

2. Technology Balance of Payment 8

Table1 TBP in 32 Countries Note: * Original data are missing and have been filled in by linear interpolation of the closest years’ observations. Source: OECD(2010) Note: * Original data are missing and have been filled in by linear interpolation of the closest years’ observations. Source: OECD(2010) 9

TBP Analyses Conventional Surplus Or Deficit Total Quantity Suggested Input Share TBP Flow 10

Table2 Ratio of TBP Receipts to Payments Source: OECD(2010) 11

Table 3a Top 5 Import Sources of Selected Countries Source: International Economic Accounts; BEA; Indicators of S&T in Japan; MEXT. 12

Table 3b Top 5 Export Destinations of Selected Countries Source: International Economic Accounts; BEA; Indicators of S&T in Japan; MEXT. 13

3. Innovation Efficiency 14

Data Envelopment Analysis (DEA) DEA is a widely acknowledged linear programming model for calculating efficiency, even in cross-country studies. Ex: Rousseau and Rousseau (1997) Wang and Huang (2007) Sharma and Thomas (2008) Reference: Charnes et al.(1994); Farrel(1957); Banker et al.(1984) 15

Chosen Variables R&D Expenditure TBP Payments Input Patent Counts H-index for Patents Research Publications TBP Receipts Output 16

Table 6 Descriptive Statistics of Variables in DEA 17

Empirical Results Canada, the US, Singapore, and Taiwan are seen as nations which most efficiently allocate their research resources in terms of innovation. I After taking technological trade into consideration, we have more accurate results. II 18

Table 7 Innovation Efficiency Scores in DEA 19

4. Conclusion 20

Concluding Remarks TBP is a both practical and convenient indicator, on condition that we analyze and interpret it properly I Both internal and external indicators should be taken into consideration when analyzing national innovation efficiency II 21

THANK YOU! 22