| Abstract: |
While it is well known that managers prefer in-person meetings for negotiating
deals and selling their products, face-to-face communication may be
particularly important for the transfer of technology because technology is
best explained and demonstrated in person. This paper studies the role of
short-term cross-border labor movements for innovation by estimating the
recent impact of U.S. business travel to foreign countries on their patenting
rates. Business travel is shown to have a significant effect up and beyond
technology transfer through the channels of international trade and foreign
direct investment. On average, a 10% increase in business travel leads to an
increase in patenting by about 0.3%. We show that the technological knowledge
of each business traveler matters by estimating a higher impact for travelers
that originate in U.S. states with substantial innovation, such as California.
Moreover, the business traveler effect on innovation also varies across
industries. This study provides initial evidence that international air travel
may be an important channel through which cross-country income differences can
be reduced. We also discuss a number of policy issues in the context of
short-term cross-border labor movements. |