Does knowledge spill over across borders and technology regimes?

Summary This paper investigates whether technology spills over across national borders and technology regimes. We advocate a modeling strategy where improvements in technical efficiency capture technology spillovers as industries absorb and implement the best-practice technology. Dynamic panel-based techniques are used to determine whether efficiency series move together in the long run (cointegrate) and/or move closer together over time (converge). We control for technological heterogeneity and for cross-sectional dependence in the data. For a panel of manufacturing industries in six EU countries, we find evidence of technology spillovers and convergence among industries’ efficiency levels across countries and mainly across adjacent technology regimes.