This paper investigates the determinants of international technology licensing using data for 50 countries during 1996-2012. A multi-country model of innovation and international technology licensing yields a dynamic structural gravity equation for royalty payments as a function of fundamentals, including imperfect intellectual property protection and differences in corporate taxation. The gravity equation is estimated with nonlinear methods. The model's fundamentals account for about 60% of the variation in royalty payments. A quantitative analysis sheds light on the impact of global taxation reforms on both international technology licensing and innovation. The findings highlight the crucial role of taxation in shaping cross-border flows of technology and the potential consequences of profit-shifting strategies.
https://doi.org/10.20955/wp.2019.031
follow @stlouisfed